Dropshipping vs Wholesale - which is better for a beginner?

I'm a beginner in online selling and currently doing research to start off with some products.

After reading from various of sources of information, there are many comments from experience people.

But the conclusion i got from them is Good Quality and Price wins out.

And now in my mind is, Dropship most of the time has quite high price while Wholesale has good price.

But as a beginner, dropshipping offers a good platform for us to focus on marketing with higher price.

But wholesale has price advantage that sales should perform better than dropship but a lot of hassle on doing shipping.

Hope some comment from fellow SaleHoo'ers.

Matthew

Hi Matthew,

The major advantage of drop shipping is that it allows you to source and resell items without huge capital investment to start with. Although with this method you do not have to pay for stock inventory nor worry about getting stuck with products that do not sell, drop shipping entails a lot of hard work and its success lies heavily on the reliability, professionalism and support of your chosen drop ship supplier. And since the drop ship suppliers are the ones in charge of the fulfillment - safekeeping, shipping and delivery of these items, they also tend to put a price on these products to compensate for these services, thus not giving you much chance to create a margin for profit. As a reseller, putting a markup on the products to be drop shipped depends on the competition and we all know that an overpriced item will never get a slice of the market. The bottom line is that this method allows beginners to get a feel of the online selling process, it enables them to build a reputation as a seller and/or create a good business "front" (through blind dropshipping), and all these can be done without being limited by their financial capacity.

As you will notice with most of our posts, the common advice is to start with this method, learn from the experience and save up, so that the business can take off once enough funds become available for wholesale purchasing.

Nevertheless, you will encounter resellers who continue to use the drop shipping method in combination with bulk purchasing from wholesalers/manufacturers/liquidators. This is a good way for everyone to discover products that one can do well with and initially assess the performance of the supplier. From past forum posts, I've learned that this practice has served several successful resellers quite well. :)

Welcome to SaleHoo!

Hi Matthew,

As a beginner, I would suggest neither for starters :)

The best way is still to start out by selling things from around your home - things you no longer use but are in good condition. WHY?

- You get to experiment by selling various products with little to no loss/risk and have the chance to discover a niche!
- You can practice your selling skills (like writing a good description, taking photos) and hone them to prepare you for the dropshipping and wholesaling.
- If you are planning on selling on eBay or other auction sites, this is a good way to help you generate feedback to boost your buyer confidence.

I hope I didn't leave anything out but many big-time sellers started out this way :)

For more tips, I suggest reading this guide - Link hidden: Login to view Although its directed for eBay selling you can still use the tips for online selling in general.

Hope this helps.

My semi-annual anti-dropshipping rant will now commence:

If you are a newbie, and cannot afford real wholesale stuff (eg. pallets or gaylords of merchandise) then the answer to the question "dropship or wholesale?" is _neither_. Dropshipping at the individual, work-from-home kind of level is total rubbish, and I have no idea why it is continually trotted out as something people should try to make money. (No offence Salehoo, you know I love you.)

If you cannot afford to actually buy, inventory, market and possibly take a dead loss on even a single load of wholesale merchandise, take the educational road and get into affiliate marketing. Pick your niche, find some companies to represent, and get to work. You will learn many valuable things along the way, eg. how to build and maintain a website, product research, how to gauge search volume for a given product and terms related to it, social network marketing etc. etc. etc. etc. without pouring money through a sieve for some dropshipping outfit.

At the individual, work-from-home level (I mention this because the problem I am describing is not with the actual practice of dropshipping, which is very common at the corporate level) absolutely no one benefits from your dropshipping efforts but eBay, PayPal, the dropshipping company. Not even the consumer benefits, because chances if he bought it from you at your dropshipper+eBay fees+markup price then he's an idiot who could have gotten the same thing vastly cheaper if he'd looked around a bit. By contrast, if you are simply running an affiliate site or sites in the same niche, your costs are comparable, yet you have access to a virtually unlimited number of price-competitive suppliers of all the top name brand items in your niche -- not refurbs of year-before-last's model being sold for 10% under replacement cost, but all the best current stuff. Profit margins on most dropshipping are so paltry that even Amazon's trivial 4% base affiliate commission is competitive.

As your efforts product traffic and sales, you can track what seems to be bringing people in and making you money, and look for ways to capitalise on that specific subset of your traffic, rather than trying the shotgun approach. ie. you cast a wide net with the best and most competitive products out there, leave the close and the order fulfillment etc. to professionals, yet you get to keep the data -- search terms, click statistics, etc. -- upon which you can build a solid business.

Again, the answer to the question "dropship or wholesale?" is, unequivocably, "affiliate marketing."


Frank

I've trying to look for drop ship supplier but some of them actually asking for some fee.
I get to read some of the article saying that a genuine dropshipper shouldn't charge any fee.

I'm quite confuse
Senior salehooer, please advice

I've trying to look for drop ship supplier but some of them actually asking for some fee.
I get to read some of the article saying that a genuine dropshipper shouldn't charge any fee.

Hi matthewliew,

While by no means ideal, a small account set-up fee is fairly common practice among drop shippers. In most cases we can understand the charge because it costs the drop shipper time and money to process a new account.

That said, not all drop shippers in SaleHoo charge a fee. And even if an account set-up fee is charged, you can often get around it by purchasing through the wholesale area of the site rather than the drop shipping area.

Hope that helps. Please let us know if you have any further questions.

You should also consider selling things that you purchase from a physical auction house if there are any near where you live. Recently my son (who has just moved into his own brand new home) introduced me to an auction house about half an hour's drive from our home. Man! I've never seen such bargains. They mainly sell modern furniture from ex-display homes and scratch and dent whitegoods, but they also sometimes have liquidation stock from insurance claims which can be picked up for just a fraction of new prices. (wallets, small appliances, decorative plants, luggage, wall pictures, bed linen, retail brand name clothing, toys, games, etc.). I really wish we had a large garage or farm shed we could hold some of this merchandise in because I've seen stuff go for peanuts in the last half hour of the auction when most people are heading off home.

Most people starting off in online sales will expect to find their supplier online which is why it's so difficult to find a good supplier who does not also supply every other man and his wife, making it almost impossible for you to make even a modest profit.

Very true -- many very good sources like auction houses, local/regional liquidators etc. are not online, or do not ship (ie. they advertise online but it's all pick up only.)

Of course, none of those places dropship and would probably laugh if asked.


Frank