Bargain Shopping Sites Build Up Shipping Networks As Costs, Obstacles Grow

Chinese firms and other companies that hawk consumer bargains are looking to save cash on shipping. As mailing costs have risen and bottlenecks have mushroomed, more companies are looking to be like Amazon and provide their own logistics.

The reason? The Financial Times reports that the coronavirus pandemic and new U.S. shipping rules are driving up costs and throwing up obstacles to packages from China arriving on time for Christmas. “Logistics has become paramount,” said San Francisco-based Wish, which has Chinese sellers.

Wish has become known as an online dollar store as eCommerce has exploded during the pandemic. The company raised about $1.1 billion in its initial public offering (IPO) of stock this month.

Part of the rise in shipping costs has been due to a new postage deal struck between the U.S. and the United Nations’ postal body.

As the FT reported, the Trump administration threatened to quit the U.N.’s postal organization, arguing that current postal rates meant Chinese companies were getting subsidized. Until July, the international postal agreement stipulated that China be treated as a developing nation, resulting in lower global shipping fees for the manufacturing powerhouse.

The U.S. estimated that it cost $300 million every year to subsidize parcels shipped from China, but that has all changed now.

Katherine Muth of the U.S.-based International Mailers Advisory Group said the USPS raised its inbound rates on average by about 50 percent, causing a “huge drop-off in volume on inbound parcels.” This particularly affected China, which had sent out about half of all packages under the old rates.

Muth said that “eCommerce sites are finding new ways to ship to the United States.” Now, bargain sites such as Wish and AliExpress are investing heavily in logistics so as to handle more of their own shipping, the FT reports.

Wish now handles all shipping arrangements for almost half of its orders, up from zero four years ago, and logistics revenue rose from $6 million in 2018 to $152 million in the third quarter of this year.