What is a Buyer's Consolidation?
A buyer’s consolidation is a way of cutting costs if you’re an importer with two or more suppliers that are relatively close together. (We include this nod to geography as a lot of people request consolidation from China, forgetting that the land mass of China is only a little less than that of Europe and getting goods from a factory at one end to another is just not going to save anyone money.) It allows you to group your multiple shipments together and import them as one instead of having to ship them all separately.
As an importer, there are many reasons that you may want to do this. If you’re buying stock and different suppliers offer competitive rates on different products, you may shop in different places to get the lowest deal. If you’re importing parts of a product as opposed to entire products, certain suppliers may specialise in different products and you’ll need to use more than one. (An example of this being instead of importing handbags you may import straps, zips, buckles and material.) As you expand, you may start to import more goods and branch out to different suppliers; whatever your reasoning, we can help you with buyer’s consolidations.
How Much Can I Save?
As with everything in shipping, the answer to that is entirely dependent on a few variables – but we’ve included an example to show you how it works and give you an idea as to how much you could save.
In this example, the importer was importing 3 products from different factories relatively near to each other. His suppliers all offer FOB Shenzhen shipping terms and he imports 1 carton from each supplier – so his individual packages cost him £290 + UK Duty & VAT each. (Assuming his cartons are the same size and weight.) This totals to £870 on sea freight.
With a buyer’s consolidation, the importer’s goods are collated into one shipment – which only costs £380 in sea freight + UK Duty and VAT. This is a massive saving and is far more efficient for importers with multiple suppliers.
LCL, FCL and Buyer's Consolidations
A common misconception when talking about consolidations (especially if you’re crawling Google for answers) is that they’re LCL shipments. Allow us to clear this up for you.
A consolidation is a grouped shipment where there are different consignments, normally from multiple suppliers. LCL (less than container load) shipping is an example of consolidation as a group of consignments are shipped together for importers, none of whom can fill a container with their individual shipment making a FCL (full container load) shipment.
However, buyer’s consolidation is different. Buyer’s consolidation is when you create a consolidated shipment using only your own goods bought from multiple suppliers.
In regards to FCL – when using a buyer’s consolidation, sometimes your goods grouped together are enough to fill a container and you can ship via FCL.
Beware - Exw Shipping Terms & Small Shipments
Although buyer’s consolidations can save you big money, be aware that importing small shipments on Exworks shipping terms (where you pay all the Chinese/local costs too) can be expensive. If you want to buy ‘a box of goods from here’ and ‘a couple of cartons from there’ the local costs can add up to nullify the savings of a consolidation,
We generally recommend consolidation if you’re buying goods on FOB shipping terms and the port is the same (or pretty close) as it’s your supplier’s duty to pay all the Chinese charges – if you are interested in consolidating on EXW terms then be wary of the costs you’ll run into. On EXW terms, you pay for everything – including getting your goods to the point of consolidation and all the export licenses – which can eat at the money you’re saving by consolidating if the supplier’s are well distributed in the country.
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This is just one thing we’d recommend importers considering to cut costs. If you found this helpful, don’t forget to share and pass on the knowledge – and follow us on social media!