Dropshipping Just Died (DEEP DIVE)
If you are in the dropshipping business or are thinking of jumping onboard this "easy money" train... think again. I want to take a minute and break down the potential impact of upcoming US government regulations on the AliExpress dropshipping business model. Current State of AliExpress dropshipping: - Low Barrier to Entry: AliExpress dropshipping offers a low-cost, low-risk entry point for aspiring entrepreneurs. This is due to the absence of upfront inventory costs and the ease of listing products from AliExpress on personal online stores. - Profitability through Price Discrepancies: Sellers capitalize on significantly lower prices in China compared to the US. This allows for substantial markups when selling to US customers. - ePacket Shipping Advantage: Cheap shipping rates from China to the US, facilitated by the ePacket system, further enhance profitability. - De Minimis Exemption: The De Minimis rule, which exempts packages valued under $800 from import duties and tariffs, has been a major advantage for dropshippers. - Technological Facilitation: Platforms like CJ Dropshipping and DSers offer integrations with popular e-commerce platforms, simplifying backend logistics. Emerging Threat: Changes to De Minimis Rule and Increased Scrutiny The rise of Chinese e-commerce platforms like Temu and Shein, which offer extremely low prices and direct shipping from China, has spurred the US government to take action. Their success, attributed in part to exploiting the De Minimis rule, is perceived as unfair competition. The proposed changes aim to level the playing field and protect US businesses. Three Major Changes: π₯1. Universal Application of Tariffs and Duties: Regardless of package value, all Chinese dropshipping sellers will be required to pay customs duties and tariffs. This reverses the previous De Minimis exemption and will significantly increase costs for dropshippers, especially those dealing with goods falling under Section 301 tariffs (electronics, textiles, machinery).