Have you been scrolling through AliExpress, looking at the low prices, and wondering, "How can everything be so cheap?"
You're not alone!
This is actually a super common question.
Quick Answer: Why is AliExpress so cheap?
The main reasons why AliExpress is so cheap include the low production costs in China, subsidized postal rates, and high competition among sellers.
In this article, we'll dive into the 13 reasons that make AliExpress products so cheap.
For instance, did you know that shipping from China to the US is so cheap because it's subsidized by the US government?
Keep reading to learn more!
13 Reasons why AliExpress is so cheap
Here are the 13 reasons why AliExpress is so cheap:
- Mass production and economies of scale
- There are no middlemen
- Lower labor costs
- Less stringent regulations
- Copycat products and intellectual property issues
- Cheaper materials and components
- High competition among sellers
- Subsidized postal rates
- Lesser focus on customer service
- Cultural aspects of pricing
- Low operational costs
- Manipulation of the Chinese currency
- Welcome deals or selling remaining stock
Let's discuss them one by one:
1. Mass production and economies of scale
The first reason why AliExpress can offer such low prices is because of mass production and economies of scale.
This is a concept that's crucial to modern manufacturing.
Imagine walking into a factory where thousands of identical products are produced daily. This is mass production, and it's a common scene in many Chinese manufacturing plants.
By producing items on such a large scale, these manufacturers can significantly reduce the cost per unit.
It's like buying in bulk from a wholesaler; the more you buy, the cheaper each item becomes.
The same principle applies in manufacturing!
2. There are no middlemen
The absence of middlemen is another reason that makes AliExpress cheap.
In a typical retail chain, products pass through several hands before reaching the consumer.
There are manufacturers, wholesalers, distributors, and retailers, each adding their markup along the way.
By the time a product lands on a store shelf or a conventional online platform, its price has been marked up multiple times to cover the costs and profits of these middlemen.
However, many of the sellers on AliExpress are the manufacturers themselves.
This is why you often find items on AliExpress at a fraction of the cost compared to other stores.
Think of it like buying fruits directly from a farmer rather than a supermarket. By cutting out the grocery store, you avoid extra costs and get your produce at a lower price!
3. Lower labor costs
The third factor is the lower labor costs in China, where a significant portion of the products sold on AliExpress are manufactured.
Labor cost is a critical component in the price of any product, and in China, these costs are considerably lower than in many Western countries:
It isn't just about paying workers less; it simply reflects China's lower overall cost of living.
This allows these products to be sold at lower prices on AliExpress.
4. Less stringent regulations
In many Western countries, businesses face multiple regulations covering everything from product safety to environmental standards.
While these regulations ensure quality and protect consumer rights, they also add layers of complexity and cost to the manufacturing process.
Historically, China has more relaxed regulations in manufacturing.
These less stringent rules mean that manufacturers can operate with fewer restrictions and lower compliance costs.
5. Copycat products and intellectual property issues
Let's address a somewhat controversial question: Does AliExpress sell fake stuff?
Yes, AliExpress sellers can occasionally sell fake products. Copycat products and intellectual property (IP) issues are not uncommon.
You might have encountered products on AliExpress that look remarkably similar to well-known brands but at a fraction of the price:
These are often copycat products and are sold without permission from the original brand.
They're cheaper because they don't involve the same research, development, and marketing costs as genuine branded products.
Intellectual property laws in China have historically been less stringent compared to Western standards. This makes it easier for manufacturers to produce these look-alike items without facing legal charges.
6. Cheaper materials
When you buy a product, the cost of the materials that go into it is a big part of the price tag.
In many cases, AliExpress sellers use less expensive materials than those used in higher-priced items.
That means that really cheap AliExpress products are usually not high-quality.
For example, clothing items can be made using synthetic fabrics instead of natural ones:
The use of cheaper materials makes products more affordable. However, it can impact the durability and overall quality of the item.
For example, a T-shirt made from a less expensive fabric might not feel as soft or last as long as one made from premium material.
7. High competition among sellers
The next reason for low prices is the intense competition among AliExpress sellers.
Imagine a busy marketplace where every seller sells similar things. Each seller tries to lure customers with the best deals.
That's exactly what's happening on AliExpress.
With so many sellers offering the same products, they all try to attract you with the best prices possible:
This competition is great for shoppers like us because it means more options and better prices!
8. Subsidized postal rates
Have you ever wondered how shipping from China can be so affordable?
The answer lies in the Universal Postal Union (UPU), which is an agreement that countries will carry other countries' parcels for a small fee or even for free.
The UPU is set up so that rich countries pay a higher fee to get their international mail delivered while developing countries pay a much smaller fee.
For many years, China was seen as a developing country and benefitted from insanely low shipping rates.
According to the CBC, shipping a part from China to the US could cost less than $1, while shipping that same part within the US would cost $22.99.
The difference in cost is paid by the American taxpayers.
Of course, this agreement heavily benefits China, while it's a huge cost for the US.
So, in 2018, Donald Trump threatened to pull the country out of the UPU.
After some negotiations, the US was allowed to raise its fees, while Canada and other countries can raise their fees by about 16% annually.
So, the shipping cost from China has been rising and will be doing so in the coming years.
However, the shipping costs from China are still lower than what they cost in reality, and it's an important reason why AliExpress products are so cheap.
To give you an idea, a country like Canada would need a 200% to 400% increase to close the gap between domestic and international rates!
9. Lesser focus on customer service
In many Western countries, businesses invest a lot in customer service, offering easy returns, refunds, and responsive support teams.
These services are great for customers, but they also add to the business's operating costs, which can increase product prices.
On AliExpress, the approach to customer service is more hands-off.
This means that you will usually talk to a chatbot, and if you're looking for human help, you will probably find that they can't help you as well, as they will advise you to contact the AliExpress seller directly:
While this can be a downside, it's also one of the reasons why sellers can keep their prices so low.
Think of it like dining at a self-service restaurant versus a full-service one.
At a self-service place, you might have to collect your meal, find a table, and clean up after yourself, but the food is often cheaper.
Similarly, on AliExpress, you're getting lower prices but with a different level of service than you might be used to.
10. Cultural aspects of pricing
In China, where most AliExpress sellers are based, there's a strong tradition of bargaining and offering competitive prices.
It's part of the business culture to attract customers with attractive deals and discounts.
It's similar to visiting a local market where vendors display their best prices to attract an audience.
Additionally, Chinese sellers are known for their focus on volume sales. They often prefer to sell more items at lower margins rather than fewer items at higher prices.
11. Low operational costs
Unlike traditional stores that have to pay for physical space, staff, and utilities, online marketplaces like AliExpress operate with far fewer overheads.
Most sellers on AliExpress don't have physical stores; they operate online and often directly from their manufacturing locations.
This setup significantly reduces costs like rent, shop maintenance, cashiers, and advertising.
These savings then allow sellers to offer products at lower prices.
12. Manipulation of the Chinese currency
The next reason is the manipulation of the Chinese currency, the Yuan.
Currency manipulation is a complex economic strategy that's about how a country manages its currency to gain a trade advantage.
China has kept the value of its currency artificially low since 1994.
Why does this matter for AliExpress prices?
Well, a lower value of the Chinese Yuan compared to other currencies makes Chinese exports cheaper.
For you, the buyer, this means that products from China cost less when you're paying in dollars, euros, or other currencies.
13. Welcome deals or selling remaining stock
AliExpress often offers special deals to new users:
These welcome deals offering significant discounts are a way to attract new customers.
It's a win-win: you get a great deal, and AliExpress gains a new customer.
In addition to welcome deals, sellers on AliExpress often sell remaining stock at discounted prices.
This is particularly common for items that are seasonal or related to trends.
Once the peak season or trend passes, sellers want to clear out their remaining inventory to make room for new products. These clearance sales result in some of the lowest prices on the platform!
Why is AliExpress so much cheaper than Amazon?
One question that often comes up in discussions about online shopping is: Why is AliExpress so much cheaper than Amazon?
For example, this dog ball launcher on AliExpress costs $59.55 with shipping:
Meanwhile, the same product is sold on Amazon for $71.99 with shipping:
The main reason why AliExpress is cheaper than Amazon is because Amazon products are stored in US warehouses and are delivered with fast shipping, which costs more. Plus, Amazon invests much more in its customer service.
This pricing difference is also there because Amazon doesn't have all these benefits that we outlined above.
Amazon sellers are often middlemen, are subjected to more stringent regulations, and have to pay Amazon seller fees, higher taxes, and higher shipping costs!
All of this causes prices on Amazon to be higher than on AliExpress.
Is it risky to buy on AliExpress?
Another common concern among new AliExpress shoppers is whether buying from this platform is risky.
Generally, buying products on AliExpress is safe.
However, there are a few things you should consider:
- Product quality. There are many different AliExpress sellers, each with different standards. So, check the customer reviews and look at the seller's ratings before purchasing.
- Counterfeit goods. As discussed earlier, AliExpress is known for having counterfeit or copycat products. If you're looking for brand-name goods, there's a high risk you might come across fakes.
- Shipping times. Long shipping times are standard on AliExpress. While most items do arrive eventually, the wait can be a downside if you need something quickly.
- Transaction security. AliExpress uses a system called 'Buyer Protection,' which holds your payment until you confirm that you've received your order and are satisfied with it. This greatly reduces the risk of buying on AliExpress.
- Returns. The return process on AliExpress can be challenging due to the cost of returning items internationally and communication with sellers. However, if there's an issue with your order, the Buyer Protection system can help in resolving disputes.
All in all, while there are downsides to using AliExpress, it's generally not risky to buy products on the platform.
Summary
Before we go to the conclusion, we've created a quick summary of this article for you, so you can easily remember it:
- AliExpress can offer low prices because Chinese manufacturers make many products at once (mass production) and benefit from economies of scale.
- Sellers on AliExpress are often the makers of the products themselves.
- Workers in China are paid less than in many Western countries.
- Less strict business rules in China mean it's cheaper to make things there.
- Some products on AliExpress look like famous brands but are actually copies.
- The use of less expensive materials in products on AliExpress also helps keep prices low.
- There's a lot of competition among sellers on AliExpress, which drives prices down.
- Shipping costs from China are low due to the international UPU agreement.
- AliExpress doesn't focus as much on customer service.
- In China, there's a culture of selling things cheaply and in large quantities.
- AliExpress sellers don't have physical stores.
- China keeps its currency value low, making its exports cheaper.
- Special deals for new customers keep prices low.
Conclusion
By now, you know that AliExpress is all about super affordable prices and a huge variety of products.
The low prices come from things like making lots of products at once (mass production) and cutting out middlemen.
But there's a flip side, like waiting longer for your package to arrive and figuring out which products are really worth your money.
So, the best thing is to be a smart shopper.
Check out what other buyers say in reviews, and don't be shy about asking questions to sellers.
Happy shopping!
Want to learn more about AliExpress?
Ready to move your knowledge about AliExpress to the next level? Check out the articles below:
- How to Get Faster Shipping on AliExpress (6 Amazing Tips)
- AliExpress Shipping Times: Everything You Should Know (2024)
- AliExpress Dropshipping In 2024: The Pros and Cons of This Model
Plus, don't forget to check out our in-depth guide on how AliExpress works here.
