200 million yuan worth of goods evaporated overnight! Multiple overseas warehouses collapse in succession.

The cross-border logistics industry has recently been in complete turmoil.

According to multiple industry media reports, more than five overseas warehouses in the Long Beach area of Los Angeles, USA, which mainly focused on low-priced drop shipping, have collapsed one after another, resulting in a "chain reaction".

It has been revealed that warehouse owners have gone missing, warehouses have been seized by landlords, and goods have been sealed up or even illegally sold. More than 2,000 Chinese sellers have been caught in the trap, with the total value of goods involved exceeding 200 million yuan. The highest single loss exceeded 10 million yuan, and losses of tens of thousands to hundreds of thousands of yuan are commonplace for small and medium-sized sellers.

The warehouse was deserted, and the seller lost both money and goods.

This collapse of the Los Angeles overseas warehouse came suddenly and left no room for recovery.

Starting in early March, the person in charge of the warehouses involved cut off all communication channels, including telephone and WeChat. Within a few days, many warehouses were deserted, with locks changed and court seals affixed to the doors.

The seller group was flooded with related information:

"We can't get in touch with the warehouse, and the locks have been changed."

"All my goods at Long Beach Port have been sealed off."

“I have a container worth over 8 million yuan, but I can’t find the warehouse owner, and the landlord won’t open the door.”

“A 3C seller had its goods from eight warehouses sold off.”

...

What drove the sellers to despair was that local U.S. law stipulated that if a warehouse was in arrears with rent, the landlord had the right to dispose of all goods inside the warehouse in accordance with the law.

That means that after the landlord forcibly takes over the warehouse, he can sell the goods inside!

If a seller wants to get the goods back, they must prepare a complete set of documents, including purchase invoices, bills of lading, and customs clearance documents, to prove ownership of the goods.

Even if all the materials are complete, the rights protection process can easily drag on for half a year, during which time the goods may be auctioned off at a low price.

Most small and medium-sized sellers cannot afford the time and energy, and in the end they have no choice but to give up, resulting in losing both money and goods.

Low-price competition is a fatal factor.

What appears to be a sudden wave of collapses is actually the inevitable result of the overseas warehouse industry's cutthroat competition and illegal operations.

The core tactic of these failed warehouses is to attract sellers with prices far below market value. The standard dropshipping fee is .5 per item, but they directly reduce it to 这些暴雷仓库，核心套路就是用远低于市场价的报价吸引卖家，常规一件代发费用1.5美元/件，他们直接压到0.5-0.7美元，甚至低至0.38美元，还搭配超长免租期、零附加费等噱头；.5-这些暴雷仓库，核心套路就是用远低于市场价的报价吸引卖家，常规一件代发费用1.5美元/件，他们直接压到0.5-0.7美元，甚至低至0.38美元，还搭配超长免租期、零附加费等噱头；.7, or even as low as 这些暴雷仓库，核心套路就是用远低于市场价的报价吸引卖家，常规一件代发费用1.5美元/件，他们直接压到0.5-0.7美元，甚至低至0.38美元，还搭配超长免租期、零附加费等噱头；.38, and also offer gimmicks such as extended rent-free periods and zero additional fees.

What appears to be a concession is actually a deadly trap.

Industry insiders have done the math: in Los Angeles, USA, warehouse rent, labor, utilities, and system maintenance are all fixed costs;

The reasonable cost for dropshipping from a legitimate overseas warehouse is at least .2-.5, and even the largest directly operated warehouses rarely fall below .

Image source: Feikua

Those warehouses offering extremely low prices are not operating normally; they are playing the "robbing Peter to pay Paul" trick—using prepayments from new customers to cover the logistics costs and warehouse rent of old customers.

Once new customers decrease and orders decline, the cash flow breaks instantly, and running away becomes the only option.

In addition, two major factors accelerated the process of the collapse.

On the one hand, during the pandemic, many overseas warehouses blindly expanded with high leverage, borrowing money to rent warehouses and signing long-term, high-priced leases. In the post-pandemic era, consumer demand cooled down, freight volume plummeted, revenue decreased sharply but fixed costs remained high, and the gap between income and expenditure widened.

On the other hand, starting in the second half of 2025, the United States will tighten compliance supervision of logistics waybills, strictly investigate customs clearance qualifications and illegal waybills, and block the gray-area practices on which these low-price warehouses depend for survival.

Many sellers who "lose more than they gain" have become accomplices in the low-price trap.

The current cross-border e-commerce platform is highly competitive, and profits are constantly being squeezed. Sellers always try to squeeze profits from logistics costs, blindly follow the trend when they see low prices, ignore qualification verification, and hold the mentality that "nothing will go wrong" in order to fall into the trap set by others.

Sellers need to be vigilant

The Los Angeles overseas warehouse collapse serves as a lesson for all cross-border sellers: logistics is the lifeline of cross-border operations; if the wrong overseas warehouse is chosen, all previous operational efforts may be in vain.

Rather than seeking redress after the fact, avoiding pitfalls beforehand is key.

First, abandon the sole focus on price and stay away from ridiculously low prices.

Always remember, overseas warehouses offering prices far below the market average always carry risks. "There's no such thing as a free lunch." Don't gamble the safety of your entire shipment just to save a few dollars on handling fees.

Secondly, we rigorously verify qualifications and only select legitimate directly operated warehouses.

Before cooperating, be sure to verify the qualifications of the overseas warehouse, and require the other party to provide local legal registration documents, warehouse lease, operating qualifications, etc.; reject shell warehouses with unclear backgrounds and "middleman" warehouses that cannot be verified on-site. Prioritize established direct-operated warehouses that have been operating for more than 5 years, have fixed locations, and have a stable reputation. These warehouses will not take risks for short-term gains.

The most important thing is to sign a formal contract and keep all the relevant documents.

Cooperation must be based on a legally binding formal contract that clearly defines core terms such as ownership of the goods, responsibility for safekeeping, standards for compensation for breach of contract, and procedures for handling abnormal situations. Do not rely on verbal promises.

After the goods are put into storage, all documents, including purchase contracts, payment vouchers, logistics bills of lading, and warehouse receipts, should be kept. These documents will serve as the core evidence for protecting your rights in case of any risks.

Finally, diversify inventory to avoid single-source risks.

No matter how reliable the overseas warehouse you partner with seems, never concentrate all your goods in one place. It is recommended to distribute your inventory to 2-3 unrelated, legitimate overseas warehouses. Even if one of them encounters problems, it will not lead to the risk of a complete stockout and total loss.

Low-price competition will only destroy the industry ecosystem, and illegal operations will not last long. For sellers, rather than simply cutting costs, adhering to compliance and controlling supply chain security are the core of long-term operation.

The biggest risk is never the lack of orders, but the loss of control over the supply chain.

There are no shortcuts on the road to cross-border trade. Being tempted by cheap prices in the short term may ultimately lead to financial ruin.