When you launch your e-commerce business, one of the biggest decisions you will face is finding merchandise to sell. Some businesses choose to hold products in inventory, giving them the ability to fill orders for customers directly from the stock they have on hand. Others opt for dropshippers to fill the orders for them, eliminating inventory expenses and streamlining shipping.
Which approach is right for you? We’ll take a look at the pros and cons of wholesale stock and drop ship merchandise to help you make the right choice.
Wholesale stock offers the option of purchasing items in bulk and then selling them to your customers directly. You purchase and store the items, sell them on your website, ship them to the customer and collect payment. There are numerous benefits to this approach, including:
- Buying in bulk allows you to purchase at the lowest possible prices
- Full control of the item stocking, based on your specific customer needs
- The opportunity to sell at more competitive prices because you paid less for the item up front
- Personal inspection of the merchandise to ensure your customers are receiving the highest possible quality
Despite many advantages of wholesale stock over dropshippers, there are some drawbacks as well, including:
- The need for space to store unsold merchandise
- The time and expense of wrapping and shipping orders to customers
- A larger initial investment to stock your warehouse prior to selling
- Larger capital risk from unsold inventory
If you have the initial capital to build your stock and time to ship directly to customers, wholesale may be the best choice for the largest profit margin.
Drop Ship Merchandise
When you sell drop ship merchandise, you list the items for sale on your website, but dropshippers send the merchandise directly to the customer. You collect payment from the customer and then pay the dropshippers directly, keeping the difference as your profit. The benefits of using dropshippers include:
- No time or money spent shipping items to customers
- Less investment up front, so you can begin selling as soon as your website is launched
- Some dropshippers will list your company name right on the delivery box
While dropshippers save e-commerce business owners time and hassle in shipping merchandise, there are drawbacks to this method as well, including:
- Lower profit margins
- No control over the stock available
- No ability to check merchandise quality before it is sent to customers
To ensure your drop ship business is successful, it is important to find dropshippers that provide a high quality product and efficient service. Read through our forums to see what other e-commerce business owners are saying is a helpful way to research reliable dropshippers.
When it comes to choosing between wholesale stock and drop ship merchandise, there is no right or wrong answer. Your choice will depend on how much money you have to invest up front, how much profit you want to pocket, and how much time you want to spend on shipping. When you take these three factors into consideration, you will be able to choose the best type of merchandise for your specific business needs.