The difference between drop-shipping and wholesale is that
while one does business without having any physical stock, the other first stocks
up and then starts doing business. Given below are some more differentiating
factors.
The key word in both types of business is 'Control'. If you are a wholesaler,
then you have control over your product pricing, your sales price and the time
and mode of dispatch. You essentially can decide the price of the product. If
you buy in a large quantity, you can get a substantial discount from the manufacturer.
Depending on the market conditions you can then either reduce the price of the
product or keep the additional profit margin for yourself. Wholesalers however,
have to invest a lot of money for purchasing and storing of their products and
also need manpower to take care of all the logistics involved in ensuring that
the product reaches the customer at the right time and in the right condition.
There could be a lot of stress involved in managing such a big operation. However,
the margins in stocking and distributing are definitely higher and some special
deals could take care of any setbacks, which you might have received in other
deals. However, you will have to be on the alert all the time so that you do
not accumulate dead stock, and even if you have it, are able to sell it off
using innovative marketing ideas. You can thus be flexible in changing your
products prices according to the market situation.
If you have limited capital then drop shipping is the only option. All you need
is a computer with an Internet connection, a good knowledge of what can sell
on the online market and a good drop-shipping house to back you up. Again here,
the key word 'Control' is important since you will not be having any. You will
not be able to control the purchase price, since it will be the shipper's price
on which you will have to add your profit margin. Upon getting the order, you
will have no control over the dispatch time taken by the shipper. You will have
to take his word that he will ship the product on time to your customer. You
will also have no control over the condition or quality of the product when
it reaches the customer. So, it is of utmost importance that you catch hold
of an honest and efficient drop shipping house. However, you will also not have
to worry about stocking, packing or dispatching the products. All you have to
do is to display the product and its specifications and forward the order, which
you receive from the customer to your drop-shipping house. They might also allow
you to stick your stickers on their products at the time of delivery. So the
stress level and the capital required are definitely lower in this type of an
arrangement. However, the margin too is quite low. You should therefore look
out for innovative products from other locations to keep your sales and profits
on a high level.
Drop shipping and wholesaling both have their pros and cons, but depending on
your financial situation, you can take a decision on which one will lead you
on the path of success faster. Happy selling!
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