My friend Michael Michelini is an ecommerce expert. He was kind enough to answer a few questions about fulfillment and drop-shipping.
He runs a podcast and blog Global From Asia on China/Asia and services clients in the complex world of international ecommerce, logistics, fulfillment, SEO / internet marketing.
Q: Most importers purchase under FOB terms, and ship a whole order at once, out of the factory. What other options do they have?
A: The question to really ask, how much “control” of the product do you want?
You can dropship from China direct, 1 piece at a time, direct to customers… but these will be items produced by the factories themselves, non-branded, or branded with the factory information.
There is also the emergence of service providers who allow companies to warehouse and fulfill directly from Shenzhen, China. JMwant is currently in Chinese only, but we are consulting them to create an English platform where importers in other countries can instead leave inventory in China and have it fulfilled directly to the end-customer. They have some items there the factories place on consignment (factory is paid when it’s sold) and importers (sellers/distributors) can access this inventory.
Another option is many Chinese factories are making their own brand. you can “partner” or ally with them, and they will carry the burden of inventory financing.
Q: Importers naturally want more flexibility, but only if their costs remain low. Would this “warehouse and fulfill from China” model be much more expensive than shipping in bulk and delivering from a central domestic warehouse?
A: Domestic you mean in their Western country’s facility, right? Its depends on their business model, if they already have internal warehousing with their office space… but if they are outsourcing their warehousing then the costs in China would be considerably lower, and they also have the chance to better sell in Asia / China.
Q: Chinese manufacturers usually hate the idea of carrying inventory. Most of them only make to order. What are the benefits to them of placing products on consignment?
A: They may want to put their own brand on the product. This is something that is up for bargaining, but many are interested in building their own brand and this is something that should be made clear when discussing this type of arrangement.
Q: What types of products are most suitable for this “warehouse and fulfill from China” model?
A: Light products with higher value, such as mobile phones and electronics. A perfect is example is Apple’s iPhone – many were “backordered and on order from Shenzhen, China” when they were tracking their order status.
If you have questions, you can contact Michael by email at: mm [at] shadstone.com