Did you know most consumer electronics are cheaper in America than in China?
When I first came to China I was thinking I was going to save tons of money on my computers and other gear, but turns out I had to pay more.
Well, pay more one way or the other.
Today, let’s discuss why US electronics are cheaper in America than where they are made in China.
Quality, Branded Goods Are Cheaper in America
If you are looking to buy a new laptop, say a Mac Air, it’s better you buy it when you’re in USA. I try to pick up all my gear in America when I’m there about once a year or so.
Same with clothing and luxury goods. The taxes are lower, and the volume of sale is higher.
No Brand Items Are Cheaper in China
So I have to add this in here, you can buy a product for lower price in China. A no brand computer or laptop. But in the end, you’ll spend more money than buying the branded product because the thing will most likely fall apart in a short amount of time.
This is something as an American consumer I had to adapt to. In USA, everything goes through such rigorous quality standards that it all is pretty functional for quite some time. In China, these rigorous quality standards are not as well implemented, let’s put it nicely. So really any factory can make a product, slap a logo on it and sell it. In China’s defense, it hasn’t had the time to catch up with the rapid growth and it is getting better quite fast.
Many of my Chinese friends even claim that the goods sold in China are those rejected from US buyers, so the factory liquidates them in the Chinese market. Ouch.
So once you spend some time in China buying goods that fall apart quite quickly, you’ll go back to brands quite quickly. Spend more money upfront, but the product will live much longer. It will save you time and headache as well. Plus, it won’t pollute the Earth as much – many complain that all this low quality plastic and electronic junk being made is filling up the dumps all around the world.
Reason 1 – High Volume in a Mature Market
The US market is still the biggest consumer market in the world. Sure, Chinese consumers are buying more and more, but the American consumer is spending a ton of cash on stuff!
So, brands and manufacturers are so focused on making this market work, and get the lion’s share of this market that they need to keep the quality top notch and the price competitive.
Full containers are being shipped out from Chinese factories to get sold quickly in the USA market. The quality control is very strict, the brands are hiring the best QC experts to check the goods and reject anything that isn’t acceptable. What happens to those rejects, hmm, up to the factory maybe. If the USA buyer is smart, he’ll ask that these goods be destroyed so that no fakes or low quality goods enter ANY market, USA, China, or Middle East for example.
Shipping costs are so low from China to USA, the routes are so well established and liquid, that dividing the shipping cost of an ocean container by the volume of goods in side is almost negligible.
Lower Taxes in USA
So here is the really big one. VAT (Fa piao) in China is the equivalent of sales tax in USA. But it is built in to every good from the time is manufactured and rebated until it ends up at the end consumer.
This built in tax is refunded to exports. So if you’re buying from a Chinese factory, you (or they) will get a VAT refund because those end goods are not being sold to Chinese consumers. Then the taxes in the receiving country, for example America, are handled. There is the import tax, and then there is the sales tax. Sales tax depends on which state, it’s not flat rate across America. The import duty depends on which type of good.
But these taxes are still much lower than the VAT tax in China.
So even though a product is made in China, the cost is higher. Because this tax is refunded to exports, but kept on for those sold inside China.
Make sense? Ya, taxes, a big headache.
Simple Dealing in English
The great thing about selling in America is everything is assumed to be in English. No need to have 20 different languages in the packaging and the instruction guides.
The sheer size of the land mass as well as the population, a brand owner and manufacturer can focus all their energy in a single language package.
Compare that to most other places in the world where you’ll have to ensure that your packaging and training materials satisfy the different languages and cultures in the market. Southeast Asia is so complex, people have an average of 3 mobile phones to deal with all the different plans, carriers, and roaming issues.
So because of this simplicity, selling in USA is a bit less of a headache for the preparation and marketing team. These savings are passed onto the consumer.
Also Less Power Adapters
When I buy an electronic in America, it only comes with one plug! But in Asia, it has a Hong Kong plug, a Chinese / USA plug, and sometimes even a EU adapter. It takes up a ton of space in the packaging as well.
This just adds more complexity to the product, the packaging, and the cost of goods.
Sure, these adapters can be purchased on the third party market pretty cheap – but this extra overhead has to be passed to the end consumer.
USA First Market Strategy
So many manufacturers dream to sell in America. Those who know how to do it focus all their attention on it first, and once they are comfortable with their positioning move onto other secondary markets.
This is frustrating for consumers in other markets! They often ask friends and family to purchase goods in America and ship over to them. They want to get in on the action of this new product release.
To penetrate the market, brands will often have big special offers and even giveaways to get attention in the market. Or bundle with other electronics or service providers. A good example is US cell phone carriers – they do anything to get consumers to sign long term contracts, and often give away phones in exchange for contracts.
This kind of thing is unheard of in most parts of the world, but they do hear about it on the US news. By the brand focusing on the US market, it is also reaching the global audience. America is still the center of the universe, and bloggers and tech news sites are scouring the newest tech gadgets here. So as the brands target America, they get an awesome bonus of the rest of the world hearing about it and wanting to get in on the action too.
Shipping Cheap Electronics
Electronics are one of the top export products of China. Mobile devices, mobile accessories, computer-related goods, electronic parts, car accessories, etc., are just examples of these cheap electronics that are most frequently exported by China. In fact, China’s share of the global electronic exports market increased over 34% in 2016, despite a downturn in global trade. People source products from China not only because the products are cheaper, but also because shipping cheap electronics from China is inexpensive and cost-efficient for sellers.
How can China ship to the US so cheap?
These are some interesting questions. Why is shipping to the US from China so cheap? Why is it so easy for Chinese suppliers to offer free shipping? Is there a catch or hidden charges?
Here are four reasons why it is so easy and cheap for Chinese manufacturers to export their products.
1. The Chinese government subsidizes international shipping to encourage exports – with China’s booming e-commerce industry, the US Postal Service (USPS) signed a deal in May 2010 with eBay Greater China & Southeast Asia (eBay GC) and China Post Express & Logistics Corporation. The agreement creates a new, simplified shipping platform for international tracking and delivery of lightweight goods ordered by consumers in the US from eBay sellers in China. (Source) For a small fee, consumers get tracking and delivery confirmation from USPS, which is a vital feature for online retailers.
2. Cut-throat Competition – Chinese manufacturers are okay with low profit margins as long as it can bring them a higher sales volume.
3. The Product Is Cheaper than the Price – More often than not, free shipping isn’t always free. Products from China are incredibly cheap due to low labor costs and mass production. Basically, the products from China may be a lot cheaper than you imagine.
4. Bulk Shipping – Because there are so many sellers who import their products from China, over the years China has developed intricate bulk shipping systems. This means those products you ordered most probably were exported with hundreds or thousands of other items going to the US.
So, what’s the catch with cheap shipping? One obvious catch is that it can take as long as a month to get your products delivered. Moreover, beware of customs taxes.
There are four logistics methods you can choose from when sourcing electronics from China – via air or sea, or through a courier or regular China Post.
For small items such as mobile/computer accessories, regular post may save you bucks. It is the cheapest method and takes 2 to 3 weeks to arrive, depending on the location.
For faster delivery, shipping through a courier such as DHL, UPS or FedEx is the best option. Shipping can take 3 to 5 days to arrive, and you can track your product online. The only drawback would be the fees, as it costs more than regular post.
For electronics weighing a hundred kg or more, shipping by air is more likely ideal. Delivery takes about 1 to 2 weeks. In fact, air cargo is the most preferred logistics method for electronics such as computer parts and accessories.
Around 40% of air freight shipped from China to the US is comprised of consumer goods, and 29% is high-tech products such as computer electronics. China is now the second largest air freight market after the US, and increasingly depends on air cargo to get its high tech goods to market. (Source)
The only drawback I see to shipping by air is the customs clearance and documentation you need at the airport.
If you’re shipping large bulky purchases of electronics and are not willing to spend much money on logistics, then shipping by sea can be your option. However, note that this method takes the longest time, sometimes as long as 3 months. Just like shipping by air, you will also have to face documentation and customs clearance at the port.
Shopping for Electronics, Look to USA first!
So there you have it, even though the world’s electronics are manufactured in China, the best place to buy them is in good ol’ USA. The high volume of goods being shipped there, the lower taxes, and the focus of brands to penetrate the market all add up to the best savings for the end consumer.
Many buy on Amazon USA, ship to a friend’s place in America, and then have forwarded to China. That is my story a lot of times.
How about you, where do you normally end up buying your big ticket items? I’m thinking laptops, cameras, mobile phones. Would love to hear your comments in the section below!