There is never a wrong or right answer. It depends totally on your temperament, skills, financial status as well as resources at any given point in time. Consider the below:

• A drop ship model allows the smallest and newest of resellers to offer the widest possible variety of goods to their customer without stocking costs.
• A stock and sell model allows on the other hand, greater control over what you’re selling, the quality parameters and how quickly it reaches the customer.
• In drop ship situations, unless the communication between the drop shipper and seller is perfect, there is room for delay and errors in product shipments.
• A good drop shipper will also extend international shipments, the cost of which a seller would never be able to bear on his own, thereby restricting his sales footprint.

I think it really boils down to your financials. If you have the money to actually buy and hold stock – and deal with all the related costs like warehousing, security, wastage and shipment, then there should be really no reason why you should opt for the drop ship model since there is always a risk when you involve third parties.

In an ideal world, the drop ship model is great but the so called drop shippers are just middlemen that eat into your hard earned profits and can at worst, ruin your hard earned reputation overnight.

To me, it is more about the kind of drop shipper that you have been able to identify. For instance, if you have an opportunity to get the manufacturer or his Tier 1 distributor acting as your drop shipper, there is no reason whatsoever to take on the headache of a stock and sale model. You are getting the very best goods at the very best of prices.

But I think such drop shippers exist only theoretically or are at the very least, a rare, hard-to-find breed for the small reseller. In that kind of a situation, maybe you will need to evaluate the advantages and disadvantages that are applicable to you.

Business has to be about profit. You just need to figure out the costs and possible sales that you make in each situation and work out what is best to you. Be sure to factor in all hidden costs like your own effort, damages as well as the shipment logistics.

You may want to start out using the drop ship model to keep your risks low and then switch over to a stock and sell model. But ultimately it has to be about how much money you are making and will make if you continue with a certain kind of sales model.

I think dropship is the model of the future for all small businesses. With the cost of inventory being what it is, who wants to invest in a storage facility and then spend all his time trying to prevent theft and spoilage. So much of the stock becomes obsolete so fast with the way the market moves.

If you have access to a reputable drop shipper that supplies the kind of stuff you need, just go for it. If you don’t like it for some reason, you can always go back to buying wholesale and selling the stuff yourself.

You may find stock and sale to be a little like high risk – high return (though that may not always be the case). I think you could decide by using the following checklist:

• What works out cheaper in monetary terms?
• What allows greater sales?
• What allows for great profits? (As different from sales?)
• Which allows for better customer service?
• Which gives you more time to focus on building the business?
• How good is the so called drop shipper? ( How authentic?...etc)

Once you start asking yourself these questions and finding out the answers, you will be in a much better position to decide what model you want to use. Just remember that once you start stocking, it is difficult to go back to the drop ship model but you can also do it the other way around.

I personally have been using drop shippers for the past 6 months and these guys do eat into my profits since I know they are not really the big guys. Trouble is, manufacturers or the really large distributors that drop ship will not just work with anybody. They again ask for credentials and while it is worth their time to engage with you.

So while on paper, a drop ship model gives you wholesale prices and shipment with no costs, this is not really the case. However on the whole, it still works out cheaper as any back of the envelope calculation will show you. If it isn’t cheaper, then you probably don’t have a drop shipper; just some cheat in the middle.

Apart from costs, it the quality of the stuff that the drop ship guy is going to be sending which is a big concern. Fake or damaged shipments can really kill your feedback rating and then there is no surfacing.

I agree about the kind of drop shippers available today. They are just the guys that have the network to engage with the actual drop shippers and just coordinate with them for your requirements making an extra buck in the process.

Quote:

Originally Posted by HG12

Hi everybody. I have been hearing a whole lot about the many advantages of using a drop ship model rather than wholesale and stock goods. Can anybody tell me the respective pros and cons since I’m not sure what should be the right business model for me.

Hmm... Wholesale is always better for the margins, but it depend's what capital you have, alot of people start from dropshipping now due to not having to handle any stock and low capital!

What criteria of business are you targetting?