Some people look at Alibaba’s unbelievable prices and think that it’s some kind of get-rich-quick scheme. They think that they can invest a tiny amount of money, buy a couple of items dirt cheap and sell them on Ebay or Amazon for an amazing profit. We’ve seen people think that they can start up an entire business with as low as £50!
Unfortunately, this is not the case. To help start-ups avoid a nasty shock – or worse, land themselves in hot water – today we’re going to be talking about the true cost of sourcing your stock overseas from Alibaba.
1. Minimum Order Quantities (MOQ)
Many people see Alibaba’s low unit cost and are blinded. What they don’t look at is the minimum order quantity (MOQ). The MOQ is the least amount of goods that a supplier is willing to sell to you; if the MOQ is 20 items, you would need to buy a minimum of 20 items. When buying on Alibaba, the minimum order quantities are typically a lot higher than 20, too – think in the 1,000s.
Even if something only costs you 10p, needing to buy 10,000 of those items will set you back £1,000.
To explain this: the reason that Alibaba prices are so low is that Alibaba sells goods at wholesale. Wholesale means you buy bulk quantities of products for a low price per product as opposed to one item at a time for a higher cost. It’s a business to business (B2B) marketplace, not business to consumer (B2C), so the expectation is that you’re a business that can afford to buy large quantities of goods.
If you do want to buy one item at a time, you can purchase from Alibaba’s retail branch Aliexpress (for a higher price).
Read more about Alibaba Vs. Aliexpress.
2. Shipping Costs
Most first time buyers are completely unaware of how the shipping process works. They assume it will be the same as when buying any products over the internet – and, while that is understandable, it is also absolutely wrong.
Buying in bulk (freight) is a much lengthier and more difficult process. You even need to be registered as a business before you’re allowed to. If you’re using a freight method as opposed to a courier, you’ll need an EORI number or you won’t be able to receive your goods – and, unless you’ve hired a freight forwarder, nobody tells you these things.
Due to this, the entire process is much more expensive than your typical £5.99 next day delivery.
When you are buying your goods overseas, there are two different ways that your shipping can go:
If you’re using a courier service, then you’ll be in for a much more familiar process. Services like UPS, Hermes, etc are all courier services; they pick your goods up, drop them at your doorstep and that’s that. Even better, this will usually be done within a week. It’s quick and it’s easy . . . . what it’s not is cheap. If you’re importing smaller items, and you only have a box of goods to get to your doorstep, then couriers may be a good fit for you – but if you’re importing a larger amount then the price will rise exponentially.
Freight, however, is a method of transport that is specifically designed for larger cargo. This means that if your goods are bigger, or if you have a larger quantity of them, then you’ll be shipping via freight. Freight is far cheaper than a courier service, but comes with a lot more difficulty.
There are two main methods of freight – sea and air.
A quick rundown of sea and air freight is this:
- Air freight is much quicker, but can also be 4-8 times more expensive
- Sea freight is incredibly cheap, but can take a lot longer to reach you
Read our full comparison of sea freight and air freight.
Here at Shippo, we specialise in sea freight (although we can help out with air freight too!), so if you are interested in saving get in contact with us at firstname.lastname@example.org or 0203 384 0498.
3. Duties and Taxes
A large percentage of our website is dedicated to just talking about UK Duty and Tax. This is for good reason – duty and tax is not only massively important . . . UK Duties and Taxes can just be plain massive.
Certain goods have high duty ratings, or even anti-dumping duties, which will add a large cost onto your goods. On top of this, you’ll be charged an additional VAT of 20% of the entire process (20% of: your goods + shipping and insurance costs + UK duty) – which is not an insignificant amount.
Unfortunately, UK Duties and Taxes are unavoidable. There’s no magic way to get out of paying them and you’ll need to pay up to allow your goods to enter the country. That being said, there are workarounds such as being VAT registered and being able to claim money back.
Read more about UK Duties and Taxes.
If you can’t quite afford Alibaba, but you still want to dip your toe into the E-Commerce pool and start your own business selling goods you’ve sourced overseas then you may want to try sourcing a smaller amount of goods from Aliexpress.
Likewise, it may be worthwhile looking into drop-shipping – drop-shipping has no up-front cost as you don’t need to buy and physically stock products.
The key take-home here is that, while sourcing in China can save you money and there are many bargains to be had, there’s no such thing as a free lunch. Be aware of the costs before you get involved.
We hope that this post was helpful and provided you with a realistic overview of the costs that are involved when buying from Alibaba. If you enjoyed it, don’t forget to share – and, if we can help you, don’t forget to get in contact.