The physical location of your fulfillment provider is fundamental to the success or failure of your eCommerce business.
China-based warehousing and fulfillment has several advantages - some obvious, and some that most only learn by experience.
Several well-known eCommerce fulfillment and warehousing providers use Hong Kong as their warehousing hub.
Is Hong Kong the right choice for you? What are the differences between eCommerce fulfillment in China and Hong Kong? Read on for more information.
If you're not based in Asia, or haven't visited Hong Kong and China, it might be a natural conclusion that Hong Kong is a better solution for warehousing and dispatch, as it often thought as as "more modern", "more western friendly" and "higher quality".
Although there may be truth in these stereotypes, they do not translate to better business decisions.
There are several key differences:
Hong Kong has the most expensive real-estate in the world at over $11,000USD per square foot on average. If you're warehousing in Hong Kong, the vast majority of your costs are being sunk into rent and real-estate.
Furthermore, because real-estate is so prohibitive, most fulfilment companies do not run their own warehouses, but instead resell space in other warehouses. Shipwire, for example, resells out of Kerry Logistics. FloShip resells GeoDis.
Resold warehouse space means three things:
Operating costs in China are significantly lower than in Hong Kong - meaning that China based warehousing and fulfilment is dramatically cheaper for on-par or better service. Check out our Case Studies which have examples of a 65% savings in China vs Hong Kong.
Hong Kong enjoys a free-trade agreement with China, meaning goods from China can be imported into Hong Kong without any imposed tarifs. However, this agreement is one way - goods imported into China will have a 17% flat-rate tax applied.
This duty is applied even if your goods originated from China.
Imagine the following scenario:
You've just finished the production of 5000 widgets for $10 each, to be sold at $20 each. They're boxed and ready to ship to your customers. You dispatch them from your factory in China to your warehouse provider in Hong Kong. Your first customers complain that their product is missing a part - your factory forgot to include an item. Your factory agrees to rework the products for free. Your warehouse provider is forced to impose an extraction fee - as they don't run their warehouse - at $1 per item.
Your goods are sent back to China, and you're levied 17% on the shipment: $8500.
In a blink, your potential profit of $50,000 has been reduced to $36,500.
Warehousing where you manufacture is very, very important.
Hong Kong's Chek Lap Kok airport is the World's busiest cargo airport, but it only carries 1.6x more volume of Shenzen and Guangzhou.
In terms of what this means for your customer's delivery times: realistically, nothing. (..except that Hong Kong gets more typhoons than Shenzen)
English and Chinese (Cantonese) are official languages of Hong Kong. While it's certaintly true that Hong Kong is easier for English-speaking tourists, business support is another matter.
SPNS's management team are western-educated, meaning we are not only fluent in English, but also fluent in business English.
Fulfilment is a time-critical business. Our team is available 7 days a week via email, phone or Skype to solve any problems.
If you're manufacturing in China, it makes sense to warehouse and dispatch from China.