If you are starting off an importing business, expenses are a huge deal. In order to stay afloat, you want to save money on shipping costs—and it’s a great idea! We have compiled this guide to help you manage your finances when shipping with Alibaba. Below are 13 tips to make shipping a less stressful and less expensive enterprise!
What Influences Your Alibaba Shipping Costs?
Firstly, let’s talk about what determines your shipping costs. Here is a list of the main factors:
- Net product weight
- Size of shipment
- Delivery time
- Packaging (e.g. boxes, tape, stickers, labels)
- Human labor of processing your shipment
- Courier services
- Import/export fees and taxes
Targeting any one of these factors will result in a reduced Alibaba shipping cost. Now, let’s discuss the different shipping methods available.
Alibaba Shipping Methods
There are 4 common ways of sending your shipment:
- Regular Post
- Air Express
- Air Freight
- Sea Freight
Air express is the fastest shipping method that will take 3-5 business days, while sea freight may take months. In terms of cost, sea freight is the cheapest, while air express costs the most.
Regular post is common for drop-shipping from Alibaba, but it is possible that your package will get lost along the way or not tracked properly. However, this option is cheapest if you want to ship samples or small quantities of product. In this case, China Post will handle the shipment, and it will arrive in 15-35 days.
Air express is shipping via DHL, FedEx, or UPS. Such courier services are reliable and fast, but they are extremely expensive, prices at $5-10 per kilogram.
Air freight is great if you need 10-day delivery and have over 100 kg of cargo. This is when the difference in price compared to air express becomes significant; you will have to pay $4-8 per kilogram.
Sea freight will take a long time because it is shipped by the ocean–up to 60 days. However, large containers and heavy shipments can be moved for cheap this way. Another advantage of sea freight is that you can choose between full-container load (FCL) and less-than-container load (LCL) shipments.
FCL means that the entire container is taken up by your cargo alone. LCL means that some part of the container is taken up by your cargo, and some of the same containers hold cargo from other importers. Typically, LCL tends to be cheaper, especially if you do not have enough cargo to completely fill FCL. FCL, however, becomes cheaper by weight and volumetric units.
The type of shipment you choose plays a crucial role in your Alibaba shipping costs—and this starts off our discussion on how to reduce them!
1. Find Suitable Shipping Method From China
As mentioned above, the delivery time, volume, and weight of your Alibaba shipment will help you decide on the best method of transporting your goods.
Sea freight is the cheapest option, but it will take a long time to ship. Train freight is another cheap option, but the price per kilogram starts to rise once the weight reaches 500kg. The same thing happens with air freight. Air express shipping can be cheaper than sea freight as long as the net weight is less than 100kg.
Although it seems like sea freight is cheaper in any case, it is only so for large and heavy shipments. The margin between sea freight and air freight costs decreases as the weight of the shipment decreases.
Some importers use a combination strategy to reduce Alibaba shipping costs. This strategy involves dividing your shipment into unequal parts and using different methods of shipping for each. For instance, you can ship 5-10% of your cargo using air express or air freight, while the rest is shipping using sea freight.
That way, you can receive more urgent shipments, as well as start making money while the rest of your cargo is in transit. Also, you can thus develop your own formula for minimizing your Alibaba shipping costs in this flexible way.
2. Optimize Packaging Volume
Changing your packaging can greatly affect your Alibaba shipping costs in 3 main ways: size, weight, and safety.
Firstly, make sure that your packaging does not have unnecessary empty space. For example, sometimes Amazon sends small items like nail polish in large boxes—don’t do that. You are paying for that empty space, and reducing your profits. Alibaba charges shipping costs based on the weight and volume of your shipment, so reduce the volume.
You can reduce the box sizes so that your items fit snugly in a full box. You can also choose a more fitting shipping container.
For FCL, there are normally 4 types of containers for your options.
- FCL 20 feet
- FCL 40 feet
- FCL 40 feet HQ
- FCL 45 feet HQ
The containers labeled with HQ are 1 foot taller than standard containers. Standard containers are designed for heavy items, such as sheet metal, machinery, steel appliances, metal enclosures, etc. On the other hand, HQ containers are designed for voluminous, irregularly shaped, or oversized items. These largely include furniture.
You can choose the right container option for your shipment. Also, you can calculate how many items would fit into 1 container, and adjust your order accordingly. This will help ensure that you do not have to pay for a half-filled FCL. Alternatively, you can organize your shipment into an FCL and an LCL to save on costs.
3. Optimize Packaging Weight
Another way to optimize packaging is to reduce the packaging weight. You can do that by using corrugated boxes and lightweight packing materials.
Corrugated boxes are lighter and stronger than regular cardboard due to the small air-filled spaces between the layers of the box. As for lightweight packing material, you can use air pillows, bubble wrap, foam inserts, packing peanuts, and more. Although they add to the volume of your shipment, they increase safety and improve net weight values.
Lightweight packing practices may not seem helpful on each individual shipment, but over time, a few saved grams here and there would add up to significant savings in Alibaba shipping costs!
Lastly, you can alter your package resolution. Warning: this could be risky! Your Alibaba suppliers optimize packaging according to safety. They would not want to pay extra if your shipment gets damaged, so they sacrifice cost-efficiency.
You can contact your Alibaba suppliers to find a more balanced solution to packaging. For instance, you can take on some risks but ensure greater cost-efficiency.
Furthermore, if you are shipping very heavy items, you can check whether you can use carrier-provided Flat Rate shipping. It means that your rate will change depending on shipment volume, size, or weight. It is a great option to save money on large shipments.
4. Find the Right Partners
You can improve your Alibaba shipping costs by finding the right shipping provider or drop-shipping fulfillment company.
You can hire freight agents like Tj chinafreight to help you manage shipping, customs, and logistics most efficiently. This is especially important if you are inexperienced and are doing under 20 orders per day. In this case, the shipping could be higher than normal, so a drop-shipping company will help you.
Try not to leave shipping management to your supplier. Although it seems like a convenient option, it is possible for the supplier to take advantage of it and overcharge you.
Shipping costs on Alibaba and AliExpress can be disguised as item pricing by suppliers. When a supplier offers free shipping, it is possible that they are including shipping rates in the unit price. In other words, you think that you are not paying for shipment, but you are. In this case, you have no way of knowing and controlling Alibaba shipping costs, so be careful.
Finding an agency to take care of transport, door-to-door shipping, etc., is the most cost-effective option for small and medium businesses. You will have local support and a professionally supervised supply chain.
To choose the right partner, you will have to compare costs. Firstly, don’t choose a freight forwarder offering a particularly low price. This is because they could be lying to you or their shipping may involve illegal operations, which is always risky.
You can get a reference shipping cost quotation from Alibaba, and then contact freight forwarders about their rates. It is important to be consistent with your shipping conditions when comparing prices! You can even tell different companies the other quotations you have been given so that you can get the best deal.
5. Check Online Tools
You can check third-party online tools to get a reference on what shipping cost to expect. These have to be unconnected to freight forwarders or your Alibaba suppliers.
These tools can evaluate Alibaba shipping costs according to your needs and shipment requirements.
6. Optimize Route
There may be multiple routes to ship your cargo to its final destination. To reduce Alibaba shipping costs, you may have to find the most cost-effective route.
For example, if your shipping goes from China to the US east coast, you can ship it via the Pacific Ocean and the Panama Canal, or via the west coast with further trail freight. The shipping cost will vary largely.
Similarly, you can use different ports, different rail routes, different airports, and more.
You can ask your freight forwarder to handle this, or you can figure it out on your own. Like mixing different freight methods, this is all about balancing and calculating the best course of action.
7. Optimize Shipment Timing
There are a couple of tricks you can use to reduce Alibaba shipping costs that involve time. Generally, the more urgent your shipment is, the more expensive it will be.
One thing you can do is increase shipping lead time. Shipping lead time is the measure of how long it will take to transport your products from the shipping port to the port of destination. The longer is your lead time, the earlier you have to place your orders to your Alibaba suppliers. Also, shipping lead time includes:
- The time your cargo sits in the port before being loaded (up to 1 week)
- Administrative delays at both ports
- Other possible delays
If you increase your lead time, this will allow carriers to line up their resources to prepare to manage your shipment more efficiently. This increased handling efficiency translates into lower carrier costs. The longer you give a carrier to deliver a package, the cheaper it is for you. Also, you will be able to build a safety net in case of unplanned delays common at sea.
Another way to optimize shipment timing is to ship on off-peak days. Shipping on peak days results in delays and increased Alibaba shipping costs. Avoiding these days and altering your shipping schedule accordingly will save you a significant amount of money.
For instance, Friday is typically an off-peak day, while Tuesday is a peak day. Also, keep an eye on various holidays celebrated in China and in the countries that you ship to.
8. Get Insurance
Freight insurance refers to the insurance on what is being shipped. Freight insurance will pay for the loss or damage of your shipping items if there are any accidents during transit. You can discuss insurance requirements with your freight forwarder, and negotiate the best price with them.
Insurance is usually calculated by applying a certain percentage to the value of your items. Generally, the Incoterms will specify who is responsible for the insurance on the shipments.
Sometimes, insurance is already included with the Incoterms. For example, CIF (Cost Freight and Insurance) already has freight insurance included. However, if you are using other Incoterms such as DAT, you will have to negotiate insurance yourself.
Shipping insurance is cheap, and a typical cost is around US$50 to US$100.
Here is a rough equation that you can use to estimate the insurance cost by yourself.
Shipping insurance ≅ value of goods * 1.1* 0.1% – 0.3%.
Insurance will reduce your Alibaba shipping costs and other losses in case of emergency.
9. Get a Customs Agent
Customs fees are very important when dropshipping from Alibaba internationally. They can vary based on product, country of import, and a lot more. You can use extra online tools to calculate customs, but you can also hire a customs agent to handle it all.
A customs agent will not only help with taxes but also streamline customs procedures, improving your supply chain. Although shipping fees and customs fees are different, they are connected and both can be reduced with professional help.
10. Shipment Consolidation
Another great way to reduce Alibaba shipping costs is to combine smaller quantities of goods from different suppliers into 1 large consolidated shipment. You can arrange that with your local warehouse in China. The staff will store and assemble products from various suppliers into 1 place.
You can also ask your shipping agent to consolidate multiple Alibaba purchases into 1 shipment. Because you get charged for every shipment, combining domestic shipments into a single international one ensures that you only have to pay once.
Besides, large international shipments get reduced prices per kilogram or CBM. Consolidating your cargo helps drastically reduce Alibaba shipping costs.
If you need help, know that Tj chinafreight offers local warehouses with consolidation services.
11. Use Custom Shipping Zones
Shipping fees vary depending on the origin location and destination location. For example, shipping to the US will be cheaper than shipping to Canada. Different countries charge different entry fees, plus shipping fees depending on the distance.
This will help you optimize your shipping routes and develop a plan for selling your products to different countries. You can target the market of a certain country with lower shipping fees.
You should research how much it costs to ship to your countries of interest. Then, you can charge your customers the shipping fees accordingly. You can set up shipping zones with different rates to help reduce your out-of-pocket shipping costs.
You can also work with Alibaba suppliers that have a local warehouse in your country of destination. If your supplier’s company is large enough, they may own warehouses or warehouse space in your country.
This could save you a lot of money on Alibaba shipping, since you may be getting the products directly from their local warehouses, and only pay for domestic Alibaba shipping costs.
12. Know Your Incoterms
Incoterms provide a universal definition for a series of tasks, responsibilities, and decisions between you and your supplier concerning shipments. You may have seen or heard acronyms like FOB, CIF, DAT—these are Incoterms. Choosing the right one will help you balance risks and Alibaba shipping costs so that you can get the best deal possible.
By learning about each Incoterm, you can choose the one that is most suitable for your business arrangements.
All incoterms define:
- Cost: who pays for each part of shipping?
- Responsibility: who handles the operations for each part of shipping?
- Risk: when does the risk of cargo loss or damage transfer from the supplier to the buyer?
- Instructions: what information do forwarders, brokers, or other parties involved in the shipment need to know?
Generally, FOB (Free on Board) is recommended for Alibaba shipping, while CIF and DDP are uncommon. FOB Incoterm describes that the supplier handles costs and responsibilities up until the port of origin. This means that the supplier oversees a large portion of the shipment, but the client still has some level of control over shipping costs.
13. Offer Local Delivery or Pickup
One way to reduce Alibaba shipping costs is not to use a carrier at all. Local delivery lets customers buy your products online and have you deliver them to their homes. Alternatively, you could allow customers to come to pick up their online orders from your store. This can help you save costs on carrier services, as build a loyal customer pool for your business.
Offering local delivery services also helps you better connect with your community, improve customer satisfaction by minimizing shipment delays, and increase sales due to lower pricing for customers.
Pro-Tip
If you already have experience in shipping with Alibaba, you can try to handle it all yourself. This is the best way to lower Alibaba shipping rates.
This is recommended for large businesses that know their way around sales. You will be able to negotiate a fair sales quantity without making your inventory too expensive. You will have maximum control over shipping costs, allowing for a flexible and most effective approach.
