Alibaba has become a popular choice for importers to source suppliers and products at affordable prices. However, many are left wondering why things are so cheap on Alibaba and whether these products are genuine. This post aims to address these common concerns.
Reason 1 -- Bulk Purchasing
The product’s wholesale price is cheaper than retail. And there’s a wholesale price range. The more you buy, the cheaper your purchase is. If your order is beyond the highest quantity, you can negotiate with suppliers for a lower price.
The shipping cost will also be reduced when you buy in bulk (more than 2 CBM cargo can be shipped by sea at a much lower cost than air shipping).
Reason 2 -- Lower Cost of Labor
The majority of Alibaba’s suppliers are in China. With a population of around 1.41 billion people, China holds the title of being the most populous nation in the world. The abundance of lower-wage workers available in the country brings down production costs.
In comparison to labor costs in Europe, America, etc., Chinese labor costs are much lower. According to data from ILO (International Labour Organization), the average cost of labor per hour worked can be around $8 in the USA. However, in China, this can be around $2.
Reason 3 -- Inexpensive raw materials and electricity
China has abundant natural resources, and most of the raw materials needed to manufacture products are available. Here are some examples for your reference.
China is one of the world’s largest forestry production countries, and abundant forest resources can be used to produce paper products such as tissues.
Rich ceramic raw material resources contribute to making China the largest ceramic and product manufacturer in the world.
With huge cotton production, the cost of cotton product manufacturing in China is relatively low.
Equipped with a large number of lithium mining areas, China is one of the world’s largest lithium resource producers. This greatly reduces battery production costs.
In addition, according to IEA (International Energy Agency) data, China’s electricity costs are below the global average. European electricity prices are known to be high.
Statistics data shows that household electricity prices in Germany, Denmark, and Italy are around $0.5 per kilowatt-hour, while in the US it is around $0.5 per kilowatt-hour. In China, it is $0.08 per kilowatt-hour. And factories require a large amount of electricity to operate production equipment and machinery, belonging to commercial electricity at a higher price than residential electricity price.
As you can see, China’s abundant, affordable raw materials as well as low-priced electricity greatly contribute to lower manufacturing costs.
Reason 4 -- Diverse and mature industrial chains
China is featured by diverse and mature industrial chains. Take watches and electronics for example. Manufacturers are concentrated in Shenzhen, China’s Silicon Valley. There is a robust supply chain ecosystem, from raw material suppliers, assembly suppliers, component manufacturers, etc. This significantly reduces production costs.
Tim Cook said that China has a combination of a skilled workforce and an electronics supply chain that is not found anywhere else in the world, and only China can manufacture the iPhones that Apple needs. Besides Apple, many other large international corporations such as Lego and Tesla take advantage of China’s supply chain efficiencies to maintain low costs and high margins.
Reason 5 -- Preferential government policies -- export tax refund
The Chinese government encourages exports and has implemented an export tax refund policy. This policy allows for a partial or complete refund of taxes paid on exported goods, including value-added tax, consumption tax, customs duties, and so on. The tax rates vary depending on the type of product and the destination country, ranging from 5% to 17%. Products in high demand receive higher tax refund rates.
The export tax refund policy helps suppliers reduce their costs and ensures competitive pricing for products on Alibaba.
These are the reasons why Alibaba products are cheap. Cheaper product pricing on Alibaba has attracted more people to buy from the platform. That, in turn, motivates more suppliers to enter Alibaba and drives price competition. So buyers can source products at a good price.
Alibaba products are so cheap, are they genuine?
Cheap products manufactured in China should not be the reason to think they are fake. In most cases, products are genuine as most Chinese suppliers are doing business seriously.
However, there are suppliers selling branded products at very low prices. For example, they claim to be OEM manufacturers of iPhones, selling the iPhone 14 Pro Max 512GB for just $500. While it is sold for $1,399 on the official website. Such incredibly cheap offerings are not genuine iPhones. Actually, there are many ways to make it, such as refurbished iPhones, which look entirely new but are assembled with some old iPhone components. Driven by huge profits, there will always be some people willing to take risks.
So for importers, you’d better buy branded products through official stores and distribution channels. Otherwise, you’ll get scammed.
Here I think the term “genuine” is more about “quality-assured”. To this end, you can’t blindly trust the “verified supplier“. This is just a member label of Alibaba and most of the suppliers are verified. Moreover, 70-80% of them are trading companies, not real factories. Although you spend time and energy evaluating suppliers, you may end up with unsatisfactory results. Because it’s hard to tell if suppliers are reliable before working together.
That’s where JingSourcing can help.
As a leading sourcing company, JingSourcing has helped 4000+ worldwide clients source a wide range of products with quality assured and at good prices.
We have our own database of suppliers specializing in different product categories and located in China’s industrial clusters. So we can offer you a competitive product price.
And all of our suppliers have passed strict factory audits and have collaborated with us multiple times. Therefore, you can rest assured when using JingSourcing.
Also, with long-term cooperative freight forwarders, we can help you acquire discounted agent prices, such as 20%-50% off the official Express prices. Furthermore, we can help you collect goods from suppliers located in different cities in China, and combine them together for shipping. This can reduce your shipping expenses, which are a major part of your overall sourcing costs.
In the whole product sourcing process, JingSourcing is always in your shoes and helps you reduce production, customization, packaging, and shipping costs as much as possible, as well as following up on production, inspecting, and shipping.
