This article is going to explore the pros and cons of dropshipping and wholesaling.
When you want to get started selling online, there are two main ways you can get the stuff to sell.
You can buy a bulk-load of the goods from a wholesaler, get them shipped to your house (or warehouse/storage, if you want to get fancy), and then sell individual units separately…
… Or you can buy the goods from a dropshipper, and have them send them directly to your customer once you’ve made the sale.
There are definite pros and cons for each method — largely coming down to how much money you have up-front, and how much you’re prepared to risk. In this article I’ll walk you through the advantages and disadvantages so you can decide which one is best for you right now.
Pros and Cons of Dropshipping
- You don’t need any start-up money. Because you only have to buy the items once you make a sale, you can get started even if you don’t have two pennies to rub together as long as you have a credit card! This makes it great if you’re just starting out.
- There is less risk of losing money. Because you don’t have to buy stock in advance, there’s no chance of being stuck with goods you can’t sell. (Wastage!)
- No storage headaches. With dropshipping you’re not restricted by the size of your apartment or garage, because you don’t actually have to store anything. It all ships straight from the supplier.
- No trips to the post office. You don’t have to worry about packaging the item, working out postage charges, bubble wrap, boxes, styrofoam or making regular trips to the post office. The supplier does all that for you.
- Lower profit margins. Dropshipping usually has lower profit margins than products you purchase wholesale, because you’re only selling one item at a time. You don’t get a bulk discount. To overcome this you need to find the right items with high profit margins.
- Your supplier can destroy your business. There’s always the possibility of meeting a scammy supplier who will take your money and run, regardless of whether you’re dropshipping or buying wholesale. The difference with dropshipping is that you’ve got a short space of time to get the product to your customer before they write YOU a negative review. Too many disgruntled customers and nobody will buy from you ever again. This is why it’s extremely important to make sure you’re using genuine, reliable dropshippers.
Pro’s and Con’s of Wholesale Selling
- Higher profits. Buying goods in bulk from a wholesaler will usually give you higher profit margins than dropshipping, because you get the bulk discount price.
- More choice. There are more wholesale suppliers than dropshippers, meaning you have a wider range of items available to you.
- More control. Because you pack and send the items to your customer from your own house or storage facility, you have total control over the process from start to finish. You can make sure the items are packed well and shipped promptly, instead of just hoping the dropshipper does a good job.
- It is a lot riskier than dropshipping. if you purchase items in bulk and no one buys them, then you lose money on stock you didn’t sell. (And you have a whole lot of really awkward Christmas presents for your friends and family.)
- You need start-up money to purchase stock outright. A lot of wholesale suppliers will have minimum orders of $500, $1000 or more. If you don’t have the cash, expect to pay a LOT more, or just get ignored by the wholesaler.
- You have to ship the item to your customers yourself. This can take a lot of time and running around, so you need to make sure the money is actually worth it.
So which should you choose?
After weighing up the pro’s and con’s of dropshipping and wholesale selling, I’d recommend you try dropshipping first if you’re just starting out. It requires less start-up money since you don’t need to purchase inventory in-advance… which makes it less riskier too!
If you’re a more experienced seller, and you have money to play with, then there’s great money to be made wholesaling. You have more control over the process, and more choice of goods.
And you can even combine the two together. Start out by dropshipping items, and if you find a hot-selling item through that – purchase it in bulk, send it into a fulfillment warehouse, and make even more money!