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Dropshipping vs Buying Wholesale

Updated on September 10, 2013

Assessing Your Abilities

Knowing when to use a dropshipper and when to buy bulk from a wholesaler and ship your own goods can mean the difference between success and failure when it comes to selling online. The first question you are going to want to ask yourself when deciding which route to choose involves determining your experience level. Before I started selling anything online I did a TON of research. The first thing I came across was the business of dropshipping. Dropshipping intrigued me because of the small initial investment required to start and the minimal effort needed to put forth. However, one thing I noticed right off the bat was that my profits were going to be smaller because I was essentially outsourcing a task - the task of shipping products to MY customers - to a third party.

I am pretty hardheaded when it comes to things like these and thought I could handle everything myself. After all I would be making more money. In my opinion, I made a big mistake here. To this day I regret the fact that I didn't start my online business with a dropshipper. Instead I began ordering light bulk wholesale right from the start and selling it on eBay and shipping it myself. I made a lot of mistakes in the beginning and my business was far from being considered smooth.

My honest suggestion to new online sellers is to seek out a dropshipper. When I say seek out a dropshipper I mean a real dropshipper. As you will learn on my site, dropshipcritic.com, I don't consider services like Doba and Shopster real dropshippers. These are middlemen that act as liaisons between their customers (you) and the real dropshippers. In turn for managing this relationship they charge fees here and there which tends to eat away at revenue. Services like these can be a good experience but you will struggle to turn a profit.

The reason I suggest seeking out a dropshipper is because the learning curve involved in selling products online is huge and you're going to want to take it one step at a time. When you're trying to create a site, manage inventory, respond to customers, and ship products and process returns you're going to struggle and your business will suffer as a result. Working with a dropshipper may not be the most profitable avenue but it will take a lot of stress of you and enable you to build your talents and ultimately your business.

Knowing When to Switch

After a short stint importing and stocking my own inventory and selling it online I moved to a drop shipper for about a year. As expected, my profits weren't humongous. However, working with a drop shipper allowed me plenty of time to work on other, more important things. During this year I set up my own website, learned all about PPC and SEO marketing, and began building a solid customer base.

After about a year of successful drop shipping, I decided to try my luck again at buying light bulk wholesale and stocking some inventory. Though, I did not stop using the drop shipping service altogether, and I never will. However, I did notice that there were certain things that I could stock and ship myself to give me higher profits. These were the items that seemed to sell better than others and more often than not they were also easy to ship. I would highly recommend following this strategy. Stock items that you sell in high volumes and items that are easy to ship. You don't want items that are going to sit stagnant in your inventory and take up space.

Pros and Cons

Drop shipping and buying from a wholesaler each have their own pros and cons. Obviously when you use a drop shipper you're removing the burden off yourself of shipping those items to customers. This includes taking the time to print a label, package the item, and get it to the shipping courier. However, you have to consider the cost that drop shippers factor into product costs to make up for this favor they're doing you. Sometimes they'll figure it directly into the product costs and other times they'll add a flat fee to all drop shipped items, either way it's never a free service.

On the same token, you have a lot to consider if you want to buy wholesale and stock inventory by yourself. You have to make room for that inventory and now you're burdening yourself with the responsibility of sending those items out. You've removed the drop shipping fee from the equation but you have to consider that you now have an extra shipping cost factored in. Instead of the product going directly from your supplier to the customer (1 cost) it's now going from your supplier to you and from you to your customer (2 costs). Although many times suppliers are able to alleviate these extra costs by sending items in bulk packaging, especially if the items are smaller.

To Sum it Up

As you can see, there are pros and cons to each route. It really depends heavily on your unique situation. Factors like how much time you have to devote to your business, what items you are selling, how frequently they're selling, how experienced you are selling online, and the fees that your supplier charges to drop ship are all things you must consider when making this decision. At the end of the day, I feel you'll find an appropriate mix of the two is the most logical and efficient decision for your business. The largest retailers in the world utilize both methods, why shouldn't you?

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