Choosing between buying wholesale products and dropshipping is often a dilemma for many that want to open an online store. Each of these online business models has advantages and disadvantages.
In this post, I will outline how each of these online business models works and the software you can use to get up and running with your own store quickly and easily.
Why Choose Between Selling Wholesale VS Dropshipping?
Many people have difficulty deciding between buying and selling wholesale versus opening a dropshipping store. There are many difference between the two, thus many pros and cons.
The primary difference is that with wholesale products you must buy your inventory up front. This can put a strain on your budget if you have limited funds.
Dropshipping, on the other hand, does not require you to buy any inventory up front. This is what makes it an ideal business model for beginners as it is extremely low-cost to get started.
What To Expect Selling Wholesale Products
Finding Wholesale Suppliers for Your Products
Before opening any eCommerce store, it is important to figure out what it is that you want to sell. You probably already have an idea about the niche that you want to be in.
Once you have an idea of what to sell, your next step is to find wholesale suppliers and choose shopping cart software. Finding suppliers is also a challenging part of opening an online store.
You can search for suppliers on your own using a search engine. However, this method can be a long and tedious process. Even if you find suppliers on your own, you will not have any idea if they are a legitimate and trustworthy resource.
A much faster and easier way to locate wholesale suppliers is by using a wholesale supplier directory such as SaleHoo.
A directory such as this has done all of the hard work for you. They’ve already done the research and vetted each supplier in their directory for legitimacy and quality products.
You can typically expect better pricing when dealing with wholesalers versus dropshipping suppliers. Often times, dropshipping suppliers do not offer the best wholesale pricing. Some dropshipping suppliers may only offer a discount and/or charge a fee per item that you sell.
When buying wholesale, you often get a better price when buying in bulk. Wholesale prices enable you to increase your profit margins while still offering a great deal to your customers.
Wholesale Suppliers May Require You To Have a Reseller License
There are many wholesale suppliers that will not do business with you unless you have a reseller license. This license can vary from state to state.
Essentially it is a way to provide wholesale suppliers with your tax ID. It is also a way for your state to collect sales tax on the items that you sell. You can easily do a web search for your state on how to apply for a reseller license.
More Control Over Your Inventory
Compared to dropshipping, you will have more control over your inventory since you must buy it and store it yourself.
You will immediately know how many items you have on hand and when it is time to reorder. Therefore, there is less worry about relying on a dropshipping supplier that may run out of products that you’re selling.
Another option that you have is to have your wholesale suppliers ship your inventory to a fulfillment center. These fulfillment center services will handle all of your shipping and handling for you.
Sell On Multiple Platforms
One plus about buying and selling wholesale products is that you can sell them on multiple platforms. If you want to open your own eCommerce store or sell on different platforms such as eBay, Amazon, Etsy, etc., you have that option.
You Will Need More Start-Up Cash
Compared to the dropship model, you will need more start-up cash to get your business going. Depending on how many items you wish to carry, you could easily spend thousands of dollars to stock your store.
You must also take into account the fees for shipping your inventory to you or to a fulfillment center. For many, the start-up costs are often the largest obstacle for getting started.
What To Expect as a Dropshipping Store Owner
The dropship model is different than buying wholesale because you do not have to buy your inventory up front to begin selling.
You rely on the dropshipping supplier to ship items directly to your customers when an order is placed in your store.
When a customer places an order with you, you then buy the product from your supplier and pass along the customer’s shipping details.
Your dropshipping supplier then ships the item to your customer and your profit is the difference in price between what you’ve charged the customer and what the dropshipping supplier charged you.
Locating Dropshipping Suppliers
Similar to finding wholesale suppliers, you can search for dropshipping suppliers on your own. However, I wouldn’t waste a lot of time doing so.
Finding reliable dropshipping suppliers often entails more work than finding wholesale suppliers. For one thing, some dropshipping suppliers may act as middle-men and are not true dropshippers.
An easier and safer option is to find dropshipping suppliers using a directory such as SaleHoo so that you are dealing with vetted suppliers that have already been researched.
Possible Dropshipping Fees
Some dropshipping suppliers charge a per sale fee. This can eat into your profit margins so it is important to find out if there are any additional fees.
You May Not Get Wholesale Pricing
Unlike buying wholesale, you may not always get wholesale pricing from dropshipping suppliers. Some of them only offer a discount which means your profit margins will be low.
One option is to source products from AliExpress. AliExpress is a large online retailer whose merchants are primarily based in China.
They have no requirements, fees, and offer wholesale pricing on a majority of their items.
You can buy one item at a time on AliExpress and enabling you to add as many products as you want to your store.
You Must Rely On Suppliers To Ship Your Items To Your Customers
As a dropshipping store owner, you must rely on your suppliers to ship items to your customers. This can be a worry, especially if you are dealing with multiple suppliers.
However, dropshipping has become quite popular and has also been around for years. Therefore, legitimate dropshipping suppliers are quite reliable and the incidence of not shipping out items to customers is relatively low.
Low-Cost and Easier to Get Started
One huge advantage of dropshipping versus buying and selling wholesale products is that your start-up costs are extremely low.
You can open your store for well under $100 depending on the shopping cart platform that you choose. You do not have to buy any inventory upfront and you don’t have to store it or pay storage fees.
Overall, dropshipping is a low-cost way for anyone to get started with their own eCommerce store.
Ideal Shopping Cart Software for Wholesale Products
There is a wide variety of shopping cart software to choose from when it comes to selling products that you’ve bought wholesale.
One of the easiest shopping cart platforms to use is Shopify.
You can open your store in minutes and pricing is fairly inexpensive. They also offer a 14-day free trial which a lot of shopping cart platforms do not.
Ideal Shopping Cart Software for Dropshipping
Shopify also works well for dropshipping products. You would need to find a Shopify dropshipping app in order to dropship using that platform.
Oberlo is one such app that is made for Shopify. However, if you plan on sourcing products from AliExpress and want to save on recurring monthly software fees, I recommend dropshipping using WordPress.
The AliDropship dropshipping software is the ideal choice for dropshipping with WordPress.
What’s even cooler is that they offer a custom dropshipping store service and will build your store for you.
AliDropship has zero monthly software fees and offers free lifelong updates and customer support.
Hopefully, this post has provided you with the advantages and disadvantages of selling wholesale and dropshipping.
It may all come down to your budget as wholesale start-up costs can get expensive. Dropshipping is low-cost and provides you with the ability to offer a wider variety of products.
However, buying and selling wholesale items provides you with more control over your inventory and allows you to sell on multiple platforms.
What are your thoughts on the differences between these two online business models? Leave them in the comments below.