Why is AliExpress so Cheap?
AliExpress is well-known for offering cheap-priced products in a wide range of categories such as clothing, electronics, and home decor. It is an excellent online retail platform for budget-conscious customers and drop shippers who are searching for a good deal. But how can AliExpress maintain such cheap prices all the time? In this blog article, we’ll look into the 7 explanations for the question: why is AliExpress so cheap?
Economies of scale
The economies of scale can answer the question of why is AliExpress so cheap.
Thousands of sellers on AliExpress operate factories by themselves or have access to huge production facilities in China. This enables them to make products in quantity, lowering manufacturing costs per unit.
Furthermore, the majority of the factories are located in an industry agglomeration. Companies in an industrial agglomeration can share essential infrastructure, resulting in cheaper production costs for individual companies since they do not have to carry the whole expense of these resources alone.
For example, Yiwu has about 100,000 small and medium-sized firms that create over 400,000 different types of small commodities. These factory clusters share massive warehouses and trade centers, which is saving production costs and distribution costs for every single manufacturer.
In addition, the cheap price is also related to Chinese people’s business philosophy. Chinese domestic market is already very huge, so Chinese businessmen are intrigued by any “one-cent-profit” business idea.
For example, the profit from one sewing needle is around 1/10 cent RMB. However, if you can sell a container of them in a month, you can still make a decent profit.
Low labor cost and material cost
China has abundant human resources with a population of over 1.4 billion people. Among the population, a significant portion is working age. This large pool of labor helped the labor cost keep low and factories readily hire workers at low wages. It also helped to ensure a steady supply of workers.
And the Chinese government has been making significant investments in vocational training programs, which has resulted in a huge number of skilled workers.
China’s low labor expenses have contributed to the low price of products since labor is an important component of the production process of most products on Aliexpress. Low work wages allow corporations to make things at a lower total cost, benefiting the end customer with very competitive product prices.
On the other hand, abundant low-cost raw materials also contribute to the low product price. China has an abundant and diverse supply of raw materials, which can be used in the production of a wide range of cheap products.
For example, China is by far the world’s largest manufacturer of plastic, according to Statista. Plastics is one of the major materials in the manufacturing sector
The low material cost helps to keep the cost of production low, and it reduced the need for companies to import these materials from other countries.
Some sellers on AliExpress use even cheaper materials in order to offer much lower prices.
Low labor costs and low martial costs in China answer the question of why is AliExpress so cheap.
Low shipping cost
Let’s also look at its amazingly low shipping cost. We can see even for less than $1 products; they can offer free shipping for their customers. How is that even possible?
Aliexpress uses a variety of couriers to deliver packages to clients. They work with big carriers like DHL, FedEx, and UPS, as well as local carriers in many areas and Cainiao shipping.
Cainiao is Alibaba’s in-house shipping fulfillment service, and it is typically the cheapest choice on the platform. Cainiao shipping is cheap because they use package combination strategies.
For example, when an order is placed, the products are not immediately dispatched to the customer. Instead, the product is kept in the dispatch center while it waits for additional orders to be shipped out together to the same destination.
The package is not shipped from China to the target country when the shipping route is picked. Instead, the package’s path may cross through several countries. That is why Aliexpress delivery times are so slow in general.
Package delivery times on AliExpress range from 30 to 50 days, and shipping is usually free. It is important to know that Super Economy and Super Economy Global shipping do not allow for package tracking. Shipping without a tracking number is often less expensive since the service is less expensive.
Moreover, Bulk shipment reduces shipping costs significantly. When a shipping company handles a big volume of parcels, economies of scale allow it to provide reduced prices. This is because the company can spread the fixed costs of running its operation, such as the cost of maintaining its fleet of trucks or planes, across a greater number of packages.
Factory to customer
As we mentioned above, many AliExpress sellers operate on a direct-to-consumer model, which allows them to avoid any markups associated with middlemen. This also answers the question of why Aliexpress is so cheap.
Products supplied through traditional retail channels pass through several middlemen, each of which adds a markup to the price. This can dramatically raise the consumer’s ultimate cost. It implies the cost of manufacturing is closer to the price paid by the client.
On the other hand, Factory-to-customer sales, on the other hand, provide direct pricing, which means the buyer pays almost the same price as the production cost. That is the reason why is AliExpress so cheap.
Moreover, with factory-to-customer sales, factories have greater control over the production and sales process to adjust pricing. By selling directly to the consumer, factories can collect data on their customers, including purchasing patterns, preferences, and demographics. This can help them to better understand their target market and produce more products in high demand at a cheaper price.
Competition
The intense competition among vendors is another factor that contributes to the reason why is AliExpress so cheap. With hundreds of vendors providing similar items, sellers are always under pressure to give the greatest price discount to attract shoppers. As a result, there is a race all the way to the bottom, with vendors cutting their prices to outperform their competitors.
Competition pressure usually results in a price war, with companies continuing to decrease their prices in order to stay competitive. As a result, the product price is finally close to the production cost. This kind of competition is also seen in the airline industry.
In addition, competition also motivates businesses to become more efficient in order to save costs and provide lower prices to customers. Companies invest more in new technology and innovation to cut expenses and provide an affordable product than competitors.
Furthermore, in a competitive market, consumers make better-informed purchase decisions, putting further pressure on businesses to compete to offer the most competitive prices.
Lower quality
Products on AliExpress are cheaper because they may be of lower quality. Even though many of the items available on the platform are of great quality, some may be of inferior quality to similar substitutes in other retail outlets like amazon.
This is because some AliExpress vendors may take shortcuts in order to provide lower prices. This might include using lower-cost materials or low-cost production techniques, which can result in lower-quality items.
Low-quality products are very common on AliExpress, and there have been a lot of reported cases that they are selling defective or hazardous products on the platform.
It is important to remember that you get what you pay for. The quality of items on AliExpress may vary greatly. However, some sellers still go beyond and offer high-quality products at an affordable price to the customer, while others may sacrifice quality to give a low price.
Before making a purchase on any online shopping site, it is important to do your own research and read reviews. You should do the same on AliExpress to ensure that you get high-quality goods.
Limited customer service
Providing customer service can be very expensive. AliExpress may have limited resources to develop this section. It also can answer the question of why is AliExpress so cheap.
While AliExpress has consumer protection regulations and procedures in place, it might be more difficult to address issues on the platform than on other merchant platforms that have more extensive customer protection policies.
For example, if you have a problem with one of your AliExpress orders, the first thing you should do is contact the seller.
Sometimes, language barriers may make it difficult to communicate with sellers directly since not all sellers speak English. And there is a significant time difference between the customer’s location and the vendor’s location. So, it may take longer for the customer to receive a response to their inquiries from buyers.
The advantage of limited customer service, on the other hand, is that you can buy things at a low price. A company may be able to decrease labor and operating expenses by limiting the availability of customer service. That is why we can expect even cheaper prices from AliExpress.
Conclusion
In conclusion, there are several factors that contribute to why is AliExpress so cheap. When purchasing on AliExpress, keep these points in mind and do your homework to ensure that you’re buying a decent quality item for a reasonable price. While AliExpress may be a wonderful resource for discovering deals, it’s important to be cautious and aware of the platform’s potential risks and limitations.
