China dropshipping has enormous potential to expand on new e-commerce platforms, but needs to resolve localization and logistics adaptation challenges. Taking the Southeast Asian market as an example, TikTok Shop’s GMV in 2023 was 15 billion, of which 3.05 million, due to logistics delay (timeout rate of 25%), the return rate was as high as 18%, and the profit was compressed to 12% (industry average is 22%).
Cost structure is the biggest problem. Commission rates for new platforms tend to be lower than in existing channels: Temu’s North American station commission is 8% (15% for Amazon), but cross-border shipping is borne (c. 2.5/ order). If the domestic warehouse (i.e., Cainiao Malaysia warehouse) is used, the delivery time can be reduced to 3 days but with an added storage fee of 0.5/ m3 / day + the handling fee of $0.3/ order that adds 15%-20% to the cost. According to Statista’s estimate, on average, vendors’ ROI on new platforms China dropshipping in 2024 is 28% (35% on developed platforms such as Amazon), and the growth rate (45% year-on-year) is much greater than the latter (12%).
Local implementation determines success or failure. Mercado Libre, the Latin American e-commerce site, requires 100% Spanish product descriptions, while AI translation programs such as DeepL still have an 8% error rate and require proofreading by a human (cost 0.5 per item). Brazilian consumers prefer to pay in installments (602 million), but cultural alignment consumes 35% of the total marketing budget.
Policy dividends are arriving sooner. The RCEP (Regional Comprehensive Economic Partnership Agreement) reduced China-ASEAN tariffs from 5%-10% to 0-5%, which resulted in 55% year-on-year increase in China dropshipping orders. SHEIN will increase the unit price from 35 to 50 and re-purchase rate to 40% in 2024 through Thailand bonded warehouse mode (customs clearance time ≤24 hours). But regulations in new markets are lenient, such as the African marketplace Jumia fake complaints rate of 12%, and Chinese vendors have to pay $10,000+/ year to receive quality inspection certification (e.g., SGS) to offset the danger of removal.
Logistics innovation is the breakthrough. Polar Rabbit International’s “72-hour reach” network in Mexico covers 80% of the population, and the freight rate is 1.8/ order (600.8/ order less than DHL).
Payment risk management cannot be ignored. In 2023, Chinese sellers of Russian platform Wildberries experienced a 14% non-payment rate (due to the volatility of the ruble exchange rate), much higher than the 5% rate of local sellers. Having access to a third-party risk management system, such as Riskified, can increase the fraudulent order blocking rate to 92%, but the cost increases by 1.5% to 2% of the transaction amount. In addition, foreign exchange controls in emerging markets (e.g., the 90% annual devaluation of the peso in Argentina) have led to 30% of China dropshipping sellers adopting cryptocurrency settlement but taking on a 10% to 15% risk of foreign exchange loss.
Industry examples reveal opportunities and risks. PatPat entered the US market through the social e-commerce platform Pinduoduo, aiming at 10-20 maternal and children’s wear, with the help of platform traffic subsidies (CPC as low as 0.1) to achieve monthly sales of 3 million, but a return rate of 22% (due to size differences). And a little vendor testing the Middle East marketplace Noon, because it could not adapt to the Ramadan promotion rhythm (average daily traffic peak 300% of baseline), the server crash lost $500,000 orders.
To conclude, China dropshipping certainly has room to grow in promising e-commerce markets (growth rate ≥40% year-on-year), but in exchange, it will have to meet logistics timing (squeezed to 5 days), localization capital expenditure (25%-30% of the entire expense) and conformity expenses (certification + payment charges). According to McKinsey, in 2025, sellers that had successful experience in emerging economies will have 25%-32% profit margins, while their counterparts without will have less than 10%.