The difference between wholesale and dropshipping

There are two main supply resources people use to sell on sites such as eBay, Wholesale and Dropshipping. Each have their pros and cons, and each is very different.

Wholesale
Buying wholesale means you are buying in volume (bulk) It offers you products at a discounted price, the more you buy, the better the price .It's all about buying power, the more a wholesaler can sell of a product, the more he can order. The more he can order, the better price they can secure from the manufacturer. The manufacturer can pass on better prices, because they have the orders to make more product and in so doing, make more money, and the wheels of business turn round and round.

Of course that's the benefit of wholesale, but the downsides are mostly cashflow and storage space!

Dropshipping
Using a dropship resource means that there is no volume purchasing, in fact you are buying one product at a time. As opposed to Wholesale, where products are purchased up front, a dropshipping model means that you aren't actually paying for the product until it's sold. So a definite benefit from a cashflow perspective and of course the stock holding perspective as well.

The downside, price. Dropshipping can never deliver you the price that wholesale does.

This is an area where a lot of people can struggle, wondering why a dropshipped product price can't compete with a seller on eBay. Of course the answer is quite simple, the seller on eBay you are comparing a dropshiiping price with is most likely buying his or her products using a wholesale supplier. When measuring the two prices, dropshipping is never going to compete with wholesale discounted prices.

Another two supply resources that should be never overlooked are Liquidation suppliers and second hand. Liquidation suppliers make it possible to buy in bulk, without have the large cashflow that wholesale often requires. Second hand, well we all know that if you can talk a good deal at a charity shop, a weekend market or at a yard sale (garage sale), then a few dollars can go a long way.

My mother had a rather unfortunate saying, "there are more ways to skin a cat than just one" Not quite sure what she ever had against cats lol, but her point bares out in there are many ways of getting into the market, you just have to find the one that best suits you.

So if I buy products from wholeseller? I've to stock it in my warehouse or they keep it and they ship it ?

If you buy in wholesale volume, all of the products are sent to a single address at the same time. You have to be careful, it can get quite confusing at times as a lot of dropshippers will actually call themselves wholesalers these days. Of course unless a supplier can sell you multiple items at a discounted rate that is based on the volume you are buying, then they aren't a genuine wholesaler at all.

Cheers

Thanks for your information Marc :)
This will def help

Anytime : )

problem with buying wholesale lots I find is, what if they don't sell..

Bit like the old amway saying, the guy at the top gets rich and the guys at the bottom are left with garages full of stock.

You do have to pick your market more carefully with wholesale, much more to lose than with dropshipping if you get it wrong. But the pay off with wholesale if you do get it right is the return on spend potential over dropshipping. Of course it comes down to research again, the more you know about your market, the better you can target that market.

posted by t0psales:

problem with buying wholesale lots I find is, what if they don't sell..

As the Austrians say, there's no such thing as things that don't sell -- only things that weren't priced right. I've been fairly successful at this, in a variety of niches (and to varying degrees) and like anybody else, I have many times found myself with a bunch of some item that just didn't sell as planned, the first time. I either made a bad call on demand, or on pricing, or presentation, or some other aspect or combination of aspects of the sales process. To get rid of them, to free up space and reclaim the capital I could, all that was needed was to sell them differently -- either at bargain basement prices, or bundled as a freebie with a higher-margin item etc.

I'm not trying to single you out; rather, just combatting the mistaken notion that anyone is ever really "stuck" with product. Unless the product itself is literally unsellable due to condition (it's all broken, or smells like cat pee or whatever) and you can't return it, you're never really stuck with product -- you're stuck with the paralysing fear of losing money on a load, which is a fear that I personally think ankles almost everybody who tries and fails to make money on eBay. Some stuff just doesn't work out. Sometimes it's your fault. And sometimes you end up losing some money, it just happens, horrid though it might be. Real world businesses lose their asses on various failed product ideas, partnerships, expansions, etc. all the time, every day of the week. It's just something that happens in the natural course of the pursuit of success and profit.


Frank