Business isn’t actually as complicated as many think it is. The barrage of jargons might be the culprit but once you take time to read about it, the subject starts to look more interesting. Nowadays, the most common query from people planning to start a business is this: which is better, drop shipping or wholesale? Both options are great ways to earn money but you have to be careful as not all people grow with one of these.
Drop shipping is probably one of the most convenient options if you have a low capital. It includes a person collaborating with a supplier so he no longer has to keep a stock of the product. Also, a drop shipper no longer needs to keep an inventory of the sales. The supplier ships the product directly to the buyer without the drop shipper having to go through the process of packaging or inspecting the order. A drop shipper is only responsible for the marketing aspect and forwarding orders to the supplier.
Wholesale is a different concept. In this setup, you purchase the products in bulk even before an order is placed. The person is responsible for the storage and inventory of the products as well as the shipping of every order. In this case, the products are already manufactured and only awaiting purchase that largely depends on your marketing.
So what’s best between the two? Here, we will provide you with pros and cons for you to weigh the two options. Both are good for those looking for a low-capital e-commerce business. It’s just important to choose what works for you.
One biggest advantage of investing in drop shipping is you no longer have to manage the products on your own. It’s up to your supplier and logistics provider to handle the delivery and inventory of the product. Usually, the products are made as the orders are placed but it still depends on the supplier who is responsible for keeping the products. So which is better, drop shipping or wholesale? If you want a convenient choice, drop shipping could be best.
Of the two choices, drop shipping has a lower risk of losing money as you only need to pay for the products from actual orders. Product returns and replacements might only be the thing you should dread about but this depends on your internal arrangement with the supplier. Anyway, the return of your low-capital investment is quick and big as retail prices can sometimes double the wholesale price.
For those who are planning to delve into e-commerce, drop shipping is the hassle-free choice. Why? You don’t have to rent storage space, worry about inventory, and manage customer queries.
The biggest risk of drop shipping is the quality of the supplier’s service. Since you don’t have control over delivery and inventory, you can’t have a solid answer to the buyer when the order will arrive. Delays and products in poor quality could also jeopardize your selling platform so it’s important that you scrutinize the supplier you will have a partnership with.
Which is better, drop shipping or wholesale? There’s also smaller profit in drop shipping compared to wholesale as the supplier will charge you extras for the delivery and inventory of the orders. The processing cost could sometimes affect the wholesale price much more than the product itself.
This isn’t to mislead a possible drop shipper as many suppliers maintain their processing cost at a certain low range. However, wholesaling offers a lot lower charges. It could still be costly to drop ship as the supplier has the prerogative to impose higher rates depending on their internal rates.
Marketing is also a great challenge. You need to have an effective strategy to sell your products as you don’t have the privilege of contacting your buyers one by one.
Wholesaling isn’t a goner. The best advantage here is that you get to stock products right away in case a surge of orders arrives on your platform. You will also have the privilege of checking the quality of the products before buying it and storing it on your own care. This way, you can assure of the good track record on the purchase and delivery from your end.
So, which is better, drop shipping or wholesale? If the product is selling like hotcakes on other platforms, it’s likely that you’ll have a targeted market already. The good thing here is that you can control your inventory and bulk orders depending on the frequency of purchases you’re receiving.
You also enjoy the benefit of packaging and processing your products. This will decrease the prices a notch as you would not be charged with extra fees by a supplier. That way, you’ll have higher revenue as you are processing the orders yourself.
One important thing about wholesaling is you can fulfill orders in the soonest possible time as you have control over the inventory. You also get to handle customer concerns directly and communicate with them for possible future purchases.
At the other side of the coin, ordering large amounts of products will expose you to some risk. You have no assurance that you can sell all of it. This is true even if the product is in high demand during your purchase. Marketing will play an important factor here since you’ll have to make your way through the tight market competition.
Another disadvantage is that you’ll have to store the goods on rented space. You are responsible for any damage that it may sustain before shipment. Also, processing the orders are in your own hands so you have to allot a serious amount of time if you’re investing in this business.
You will have to hire additional manpower to handle the orders for you which equates to more expenses and managing responsibilities.
So which is better, drop shipping or wholesale? It depends on what you want to achieve on your business? Do you want higher profit? Might as well invest on wholesaling, but if you want to skip the hassle of managing the products, drop shipping would be the convenient choice.