ePacket. First Thing You Must Know for Cross-Border eCommerce
If you want to do Cross-Border eCommerce from Malaysia to Western Market such as US, UK, Europe and Australia, the first most crucial information you must know is about ePacket.
Before you continue, I will like to warn you in advance. It might create fear in you, and you felt like forgetting all about his. Please don't. The guy with the biggest gun does not necessary win! Everybody will have their own competitive advantages. The first is to know of your competitor advantages, so that you won't fight the him at his strongest point
I am currently trying my best to help Malaysia product owners or manufacturer to understand their competition. In my discussion with new sellers, their impression always started with disbelief, followed by beaten up the expression on their face.
What did I do? I just show them this listing in US eBay.
US$ 1.35 ! with FREE SHIPPING !! from Yiwu, China to US!!!
This must be a scam listing, right? I will have to disappoint you. This is definitely not a fake listing. More than 4k had been sold and this seller Positive ratings are 99.6%.
At this moment, you might think this must be losing money gimmick using a single SKUs to get Feedback and Ratings. There is such marketing tactics on eCommerce Marketplaces. However, I have to disappoint you again if you go to this store. you will find a lot of listings below 2 USD.
This is the BIG GUN from your China Sellers. This affect not only Malaysia, but anybody trying to do eCommerce Cross Border business to US market. In fact this also affected US local seller greatly/ If you thought that competition in Malaysia marketplaces with China Seller is too great, count your blessing as US Sellers situation is far more worse.
Bro, this is the power of China negotiation in International Trade and eCommerce which created the ePacket.
Before I explain what is ePacket, I am currently trying very hard to work with eBay Malaysia (notice it is not eBay) to help Malaysia product owner and manufacturers to sell in the US, UK, Europe and Australia markets.
Why eBay Malaysia? It is because I found the same person with had the same vision and mission - Bryan Ong. Fully aware of this situation, both of us are not interested in helping Malaysia Sellers drop shipping or exporting products from China.
The one thing we want to do is help Malaysia Product Owners or Manufacturers fight this battle.
Just some flashback before I continue:
My first eCommerce experience was not locally in Lazada or Shopee although the majority of my blogs are regarding these marketplaces. In fact, my first eCommerce experience was with eBay and subsequently Amazon.
After graduating from Strathclyde MBA with my thesis "Consumer Behavior in Mobile eCommerce", I was determined to come back to Ipoh for eCommerce. I did a blog regarding this. https://www.kkecommerce.com/single-post/2017/05/09/IPOH-is-the-Best-Location-for-Ecommerce
At the start, I am fully aware that I only had some theory during my thesis research in eCommerce. There was no practical experience to support it. I need to try it out, but starting from zero seems daunting (I am also human haha). Surprisingly I discovered a company in Ipoh doing eCommerce in eBay and Amazon. Thus even for an executive position, I applied for it.
Luckily the boss appreciated my past experience and allowed me to be responsible for the whole eCommerce team which was slightly more than 10 people. Till now I am very grateful for his decision at that time. During my first 12 months working with them, we increased the sales and gross profit by more than 300% and reached one million MYR sales per month.
Basically, this company performed market research in UK and Europe markets for eBay and Amazon. We then identified top sellers in these markets, and source for similar or better SKU in China Market. After procuring the product in bulk, we shipped the products thru 20ft or 40ft container by sea freight to our warehouse in UK.
From there, we supplied to the whole UK & Europe market. As we had our own fulfillment warehouse in UK, our key KPI is to ship out within 24 hours after delivery. Aside fulfillment, all operation was done in Ipoh, hence the cost savings in manpower and rentals. Our operation cost was only 1/6 of local UK sellers and our ability (as we are Chinese haha) to source in China gave us a good competitive advantage. In comparison to China Sellers, our proficiency in English also benefitted us in operation as well as customer services. A number of Malaysian sellers had become millionaires in this eCommerce golden age in the early 201+ The RED TIDE started to swarm the marketplaces after the introduction of 'ePacket' in 2011. Listings with lower and lower price position kept mushrooming over the marketplaces. Shipment included!
This is because of "ePacket"
In 2011, the U.S. Postal Service agreed with national postal carriers of China and Hong Kong to launched the parcel to US for extremely low rates. This is the Magical ePacket. The rates are so low that it's cheaper to ship small parcels from China to an American city than shipping it domestically!! Read this link to understand more. https://www.practicalecommerce.com/u-s-postal-service-subsidize-china-based-merchants
This is not solely for US market. ePacket is available in 35 countries including UK, Europe and Australia.
Before you get upset that this is not fair, understand business is never fair. My guess is US had gotten favorable terms in other markets such as allowing their Financial giants entering China Market or High Tech industry selling airplanes. In exchange for that, low tech consumer products advantage was given to China who needed it most at that time. Amazon and eBay is just riding on the trend and that is nothing wrong about it. If they are not doing it, others will.
In the listing shown in eBay, it is using SpeedPak. It is an improved version of ePacket, launched this year. https://www.ecommercebytes.com/2018/03/11/ebay-speedpak-gets-chinese-goods-delivered-to-us-faster-with-tracking/
So, I guess by now you are dying to know what is SpeedPak Rate? Taa - daa.
From the table for shipment 100g and below, per kilo range is RMB 54. Thus 100g shipment fee is RMB 5.4. Add on RMB 6 processing fee, RMB 11.4
But wait a minute, there are additional gift points awarded during the promotional period. http://www.orangeconnex.com/customer/sellercommunication01.html
This points allowed you to further deduct the service charges so definitely large seller can even get lower cost! 1 point equals RMB 0.01. A 100g shipment will entitle 700 point = RMB 7. Thus the final cost is RMB 6.4 which translate to 0.96 USD to ship 100g from China to US!
Remember this is open public rates, downloadable from internet. In forwarding business, there is always confidential VIP rates for big sellers and the cost might go even lower!
How long it takes to arrive? Much faster than you think. 8 - 12 business days only! Below is the time frame extracted. https://www.ecommercebytes.com/2018/03/11/ebay-speedpak-gets-chinese-goods-delivered-to-us-faster-with-tracking/
Now comes the light at the end of this dark tunnel.
Is this going to last forever? This had been a topic in Trumps hammering on Amazon and indirectly eBay on ePacket https://www.recode.net/2018/4/3/17192600/president-trump-amazon-jeff-bezos-usps-epacket-china-subsidy-washington-post
If the trade war escalated and continue on its way, there is a possibility that such terms will be removed in near future. This will be a disruptive change for all Sellers which depend on ePacket advantages selling on cross-border marketplaces.
Looking at the developing trend of DFTZ in Malaysia perhaps is a backup plan to continue this shipment advantages thru Malaysia.
Thus I started pitching and working with eBay in anticipated to be ahead of the future. Let's do more eCommerce cross-border with Malaysia product owner and manufacturers to western market now!
What! Are you crazy? Malaysia shipment by far is far more expensive than China Shipment.
There are ways to minimize such disadvantages.
First, forget about the 100g shipment. Malaysia forwarder nomally set their minimum weight at 500g and it is expensive for cost per kg. A more economical option will be 1 kg and 2 kg and above.
This is the opposite for SpeedPack. If the product is lighter than 1kg, SpeedPack advantages increased. This advantages reduce when the product weighs 1 kg and above. In fact, the cost per kg increase for SpeedPak when the weight increase. The gift points also decreased when the kg increased.
1st. Avoid competing in light weight < 1 kg product! as Competition is strongest there！
The total cost for China shipment for 1kg is RMB 63 = RM38. Let's say if we can get RM70 thru Malaysia forwarder for 1kg. Then we are at disadvantage of RM32.
If your product values is RM10, you can also forget about it, because the disadvantage in shipment alone is 3X your product value! How do we reduce the impact of RM32 shipping advantage? Of course, it is by having a higher value of the product.
Product price which worth less than RM100 will have more than 32% disadvantage while a product with RM 400 will only have a 8% price disadvantage!
2nd. Avoid competing in Product Value lower than RM200 as Competition is strongest there！
Then responds sellers for this stage is. Still how to compete? China product is much cheaper, right?
Bro, China is not cheap anymore. Their salary and house prices in many regions is higher than Malaysian. Even their Big Mac is much more expensive compared to Malaysia. For common and cheap consumer goods, China products are cheaper because their tooling expertise are very good and they are able to mass produce and bring down the cost. In fact a lot of production had went to 3rd world countries like Cambodia and Vietnam.
For higher value products which need craftsmanship, creativity and "Soul Power", we can be better and cheaper because cost of this expertise in times are higher in China than Malaysia.
However this need to be a collaboration with all possible stakeholders. We need to produce not just good and higher value products, but also the ability to take great pictures with nice stories about our craftsmanship and details. Don't forget Malaysia are very active and had developed much expertise in Facebook and Instagram also.
Additionally, as a Commonwealth and small democratic country in Asia country, our position in a way is much stronger than China. Our recent change in Malaysia as one of the democratic forces also place us at a more favorable position with western countries. Many locals in western treat China as direct competition, thus there is very limited Alibaba and JD in those markets.
3rd. Compete in High Value, Good Quality and craftsmanship, infused with creativity and Soul Power, and compete with our strength, not weakness.
KK Eommerce want to do this. Its our mission to collaborate with various stakeholders to produce a solution for the Malaysian team. This solution cannot be just asking sellers to sign up on eBay and list on it. It must be comprehensive with support from various expertise to produce a strong competitive edge for Malaysian.
Please help and join us, especially eBay Malaysia and those stakeholders which we are approaching currently.
Thus when the times come and a disruptive change appear, We are ready. If we can compete even when we are now at a disadvantage position, We will be strong when we can gain a significant advantage or more level competition in the future.
The best time is NOW! and not react only when the developments happen!
It will be a worthy journey to take together. Let us shine together in this challenging times!