If you’ve ever wondered why there is so many cheap items on eBay from Chinese sellers, you are not alone. How can they possibly be making any money on an item that only costs a few dollars with no shipping charge? You couldn’t even ship the same thing to your neighbor’s house for that amount, forget about a completely different country.
Here we have a listing for an Iphone case. Do you see this? The price is $3.88 with FREE SHIPPING from Guangzhou China! Wanna pour salt on that wound? Take look at how many have sold. 5,538.
Now take a look at this. USB wall adapters from Hong Kong for $1.99 and free shipping. Yep. And 8,633 of them have sold. I don’t mean to sound crass, but you’re thinking it too. WTF is going on here?
The answer comes in two parts. The first is no secret. China has dirt cheap manufacturing. The second part is much harder to understand though. The explanation broken down into its simplest terms goes something like this.
The United States Post Office intentionally looses money to make shipping from China inexpensive.
No really. Pick your jaw up off the floor. The difficult part here is understanding why. There is a whole lot of speculation on discussion forums and tons of misinformation. Almost nowhere has the correct facts. The truth is that several decades ago we signed a treaty that was chartered by the United Nations agreeing that all the participating countries would provide forwarding for the domestic leg of small international shipments for free. At that time it made sense because it applied almost entirely to letters and the paperwork to track all of the penny fees would have cost more than the actual postage. Nobody was doing international ecommerce back then.
The treaty was updated in 1969 as things began to change. Each country began to charge “terminal fees” for the domestic portion of international postage. Those fees have continued to be adjusted to the present day.
However the obvious question still remains. Even after charging terminal fees, why is China charged so little for shipping? Why don’t we charge them an appropriate terminal fee? Well, because it’s not up to us. It’s up to the regulatory body that was created by that treaty way back when. That group is called the UPU, or Universal Postal Union. And this is what their website has to say about it.
At the 2004 Bucharest Congress, member countries adopted a system aimed at covering their actual mail processing costs. Moreover, a link was established between the remuneration received and the quality of service provided.
Not all countries are at the same stage of development and there are significant variations in their mail volumes, postal tariffs and cost absorption. The aim is thus to progressively incorporate the developing and least developed countries into a target system that already applies to industrialized countries.
So I guess what they’re saying is that China doesn’t have the “cost absorption” capacity to have to pay a decent terminal fee to the US.
That might actually be true if they base the numbers on the wage of the average factory worker in china. It would be more cost prohibitive for them to send international mail as compared to their American counterparts. But they’re not taking into account the much wealthier ecommerce companies. Their figures seem to reflect numbers derived from the average income of the population, not revenue from the ecommerce companies themselves.
That approach has created a huge loophole for Chinese manufacturers to exploit. First they use the workers for cheap goods, then they abuse a system created to help those very same workers save money on postage. And that is why Chinese sellers get an unfair advantage over the US sellers on eBay.