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    1. TJ007 is offline

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      #1

      To wholesale or dropship? Risks and benefits of both.

      Looking for opinions on wholesale and dropshipping and how they impact my business. I need to know if dropshipping is really worth all the hype I’ve been hearing about it. Is it a worthwhile business option or is it better to stick to good old wholesale?
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    2. RogerSterling is offline

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      #2
      Fundamentally, it’s about the time and resources you have, and how much of your business and brand you’re willing to put into someone else’s hands. Fundamentally, the difference is this:

      â—Ź In a wholesale model, you buy units (typically in bulk by the palette) and store them against future purchase. When you make a sale, you package the unit(s) and ship.

      ● In a dropshipping model, you buy nothing, but have an established relationship with a dropshipper that maintains the inventory from which you’re selling. Basically, you buy the item from the dropshipper when a sale is made, and the dropshipper packages and ships the unit(s).

      There are advantages and disadvantages to both models, and it entirely depends on your circumstances. If you’re just starting out, then dropshipping is a great way to get your market legs. Let’s break it down a little bit, and check out the pros and cons for each model:

      Wholesale

      ProsCons
      Complete control over packaging and shippingPersonal responsibility for the time and expense of packaging and shipping.
      Personal management of inventoryNeed to predict demand for items, especially when faced with apparently excellent deals on bulk sales. Possibility of ending up with palette upon palette of suddenly accumulating, unsalable merchandise taking up space.
      Brand is in your hands, without relying on the competence of outside companies not to spoil your reputation.Need to balance each and every part of your business. If you focus too much on cost and expedient shipping, then you may lose sight of customer service, and vice-versa.
      Control over quality of your products, and confidence in your provider.If a unit is faulty or broken upon arrival, you have no one to blame but yourself.

      Dropshipping

      ProsCons
      A large chunk of “grunt work” is taken out of your schedule. When all you have to do to fulfill an order is shoot off a payment and an email, you have a lot more time to focus on customer service and promotion. Dependence on an outside provider to fulfill your orders. Dropshippers are another link in the chain. Despite your supplier’s competence, honesty, and proven reliability, something is just that much more likely to go wrong, because there are more hands in the project.
      No warehousing necessary. You can literally run a business on the dropship model from your laptop.No control over inventory. You must rely on the dropshipper’s warehouse to have the items you sell in stock, when it’s time to satisfy a sale.
      No dedication of resources to packaging and shipping. No more last-minute runs to the UPS store or the post office!No control over packaging and shipping. Again, you’re relying on the dropshipper’s expertise and professionalism to get the job done.
      Less micromanaging than wholesale. No need to predict markets for the most part. Distinction between dropship and wholesale is that your dropshipper is invisible to your customer. If your dropshipper messes up an order, it’s still your reputation on the line with that customer.

      An important point to focus on is that whether your model is dropshipping or wholesale, the distinction is invisible to your customers. That is, if the unit dropshipped to the customer is bashed to pieces because your provider didn’t package it well enough, the customer doesn’t know (nor do they care) that you didn’t personally pack the item. This ignorance is in no way unfair; dropship or wholesale, it’s your responsibility to insure your buyers get the product they ordered on time and in one piece. Even if your dropshipper turns out to be entirely incompetent, it’s ultimately your fault for hiring them in the first place. At least with a wholesale model you KNOW it’s you that screwed up.

      It bears pointing out that the base prices for dropshipped products tend to be higher than wholesale. That said, dropshipping also saves you considerable resources that would otherwise be relegated to storage, inventory management, packaging, and shipping. Given that, the two models at least balance out, with dropshipping carrying fewer variable expenses.
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    3. Jake1313 is offline

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      #3
      Can’t really stress enough that you have no contact with dropshipped products. You literally never touch the inventory. This means that you’re totally reliant on the dropshipping supplier to provide not only quality stock, but the items you believe you’re selling.

      Dropshipping, then, is extremely front-heavy, which is to say that you have to source your supplier VERY carefully.

      Don’t get me wrong, I did quite well for myself with dropshipping when I was just starting out in sales. It’s especially great when you’re just getting your business going and don’t entirely understand the market yet. Once you get a feel for what things are in demand and what you can best risk investing in, I’d recommend dropping the middleman and going wholesale.

    4. TJ007 is offline

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      #4
      That’s some great information, and I’m probably going to dropship (since, like I said, I don’t as yet, have any warehouse space). Given that dropshipper selection is so important, any suggestions on who I can go through?

    5. RogerSterling is offline

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      #5
      I’ve honestly never dealt with a “dropshipping firm” or specifically dropshipping supplier. Rather, the dropshipping I’ve done has been through suppliers I’ve gotten on board with who dropshipped some of the stock for me. That is, I’ve never paid to join a dropshipping collective or registry. I’ve contacted regular wholesale suppliers who are willing to take a higher slice of the pie to package and ship directly to my customers.

      That’d be my recommendation to you. Sell your vision to a reliable supplier you can put a face on, and you will be rewarded. Also, if you decide to make the transition to wholesale or a mixed-model, you don’t have to go hunting different suppliers - you already have an established relationship with one.

    6. Jake1313 is offline

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      #6
      See, that’s the rub - most folks don’t want to give out information like supplier names and reliable firms because we don’t want the competition. Some dropshipping registries have so much competition happening between clients that nobody can make any money off their catalogue.

      My suggestion to you is to check out the following sites, and make sure you follow up with any testimonials and reviews you can find. In general, though, keep away from dropshippers who charge a fee or refuse to reveal prices to you before a sale. These two traits are sure-fire ways to weed out scammers.

      For reviews and more information on these sites, head over to this post.

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