Economics of the $.80 Hong Kong cable places.

(I am posting this in IMHO rather than GQ since unless someone here actually works for Mr. Lee’s Greater Hong Kong Export Company, I doubt we can really determine what the deal is.)

A while back I needed a little USB adapter cable. Not available at the giant electronics place nearby. So I go to Amazon and one of their affiliates has it for 80 cents, including shipping. I check their rating. Over 50,000 items shipped, good rating, etc. So I take a chance plus I’m really, really curious. They can ship this to me and make money?

The estimated delivery time was 25+ days. Got it in 22. I checked the postage, just a class/category given. Had to go to HK post and convert currency. It cost 32 cents to ship it to me.

How on Earth are they making money doing this? If it’s to build up sales/ratings I could see it, but they’ve made plenty of sales.

While working out of industrial warehouse out of Guangzhou is cheap, HK isn’t. Just a small office, some staff to keep the Amazon stuff current and stuff packages is going to really add up.

(I’ve tracked the price of the item. It hit .79 once. I was ripped off! And sometimes goes up to around 1.72. But still amazingly cheap.)

What is going on? Even if it fails in 2 months, a bad adapter shipped halfway across the world isn’t 80 cents.

And if you check around on Amazon and eBay, there are hundreds of these companies. How do they do it?

They probably don’t make that much on any one item that cheap, but if you sell 1000/day, you might be able to manage a profit.

My WAG would be it’s a combination of a small profit coupled with policies that incentivize export.

  1. When you ship something internationally, each country keeps the postage costs. So when they ship from HK, the US doesn’t see any money from that AFAICT. Since China (and HK) heavily subsidize their international postage rates, they can ship things for basically nothing. In essence, the US and Chinese government are partially footing the bill.

  2. The items are often knock offs and rejects. So the ipod cable they sell might actually come from a legit factory that rejected x number of cables for being the wrong length, color, etc. Many of these companies scoop up those rejects basically at cost. Keep in mind that those costs don’t include warranties, intellectual property, branding, quality control, etc. Apple could sell a cable much cheaper if they weren’t trying to recoup the costs of designing and servicing the phone.

  3. Many times, the item doesn’t arrive

  4. I think a lot of times, the item will be made in mainland China, and shipped from HK for a few reasons. Labor can be cheap in both places, but is still cheaper in China. But, for businesses in HK, foreign profits are not taxes. I would imagine it’s more complicated than just that, but I would bet there is some benefit to incorporating in HK, and “shipping” from there.

  5. I would bet another reason companies do this is mild form of currency speculation. I remember reading something a while back about how high-priced art was growing in popularity in China because people there saw it as a hedge against their volatile currency, and because the investment opportunities there were chewed up by currency inflation. By selling in America, even at a small loss, they can get paid in US dollars that are far more utile and stable than their currency.

I would not be surprised if these sellers were mainly subsidiaries of the legitimate manufacturers of these goods branded with American companies’ names. I could see many of these factories building the cost of these goods they resell into the cost they charge the US companies, then shipping it to the US via HK to avoid taxes, and ultimately get US dollars. That said, it’s still a WAG. Pretty amazing either way.

I’ve wondered about this too. One theory - does HK have an “unlimited shipping” option?

I don’t know what you mean by this. The “package” (a small padded envelope) was sent 2nd class air mail and was (just barely) under 20 grams, which is how I figured the postage.

I know some PRC companies bundle shipments. Put a lot of packed and labeled items in a container, ship it to the US where someone then puts them in the mail/UPS/whatever from there. Don’t expect to get your item fast if they’re doing this. But mine was HK Post.

Thanks for the post brickbacon.

I strongly suspect a lot of the eBay HK sellers are take the money and run types with a few fake happy buyers to lure in people. So I was careful to check Amazon’s ratings of my seller. Like I said, over 50k sales and climbing. So I don’t think there was going to be a problem like that.

I had assumed that the parts are made in the PRC proper and shipped to HK for distribution. The part itself is practically nothing: I would be amazed if it cost a nickel to make and send to HK. The main cost, beside postage, has to be plain office overhead and the like.

The idea of these being rejects and the like is interesting. But almost everyone seems happy with theirs. And this is far from the only company doing this. There just can’t be that many seconds and whatnot being tossed that account for the volume.

As for being knockoffs, almost everything coming out of the PRC can be assumed to be a knockoff. But even overhead on making and handling knockoffs can’t be zero.

That the main goal is to acquire US dollars in a simple, legitimate way is interesting.

Your bill companies don’t pay for each bill they send. They pay one lump sum for X bills, or unlimited bills. Maybe HK has the same, for international mail.

I’ve ordered through them a few times, companies like that, and never been disappointed. Most recently for some screen protectors. Paid like 2 bucks for them plus 2 bucks shipping. Took several weeks to get to my place but it was worth it!

I’ve bought lots of cheap Chinese cables, adapters, and notebook power supplies and they all arrived just fine.

I recently had a drive enclosure that I ordered from China fail to arrive.
When I complained, they shipped me another one without any questions.

What Astro said. I’ve bought dozens of items this way. They pretty much always arrive and the one time one didn’t they just sent me another.

It costs pennies to make these cables etc. We in the west have just got used to paying ridiculous markups on this sort of stuff. My conclusion is they just buy cables for $0.10, post them for $0.32 and sell a massive number of them using very cheap chinese labour. Really, how many items an hour can you receive an order for on ebay or amazon, grab, put it in a bag, slap a label on and add to the stack you will post at the end of the day? At least probably ten, I think. On an $0.80 cent item you will earn $3.80 an hour that way. That would be a solid wage for many HK people. I know I’m simplifying and ignoring a lot of overheads etc but the gist of the business model stacks up.

I have used them with no issues, i generally use monoprice though.

I noticed when I could only find a few “unusual parts” for my system, I would order from Brazil and it’d ship from China, usually Hong Kong or what was known as Canton.

The more expensive items I took a chance on, also arrived in good time, and working order but they always used DHL.

I don’t believe that is true in the US, at least when using the USPS. Even bulk pre-sorted mail is charged by the piece (just at lower rates). How to Save Postage with USPS "Marketing Mail" Bulk Mail
I know when I worked at a smaller insurance company we paid by the piece, and we sent out mail in the thousands of pieces per day.