Have you ever wondered how online stores make a profit? Or wondered what the difference is between dropshipping and reselling? If so, youve come to the right place! In this article, well be diving into the details of both dropshipping and reselling so that you can determine which one might be right for you.
Well discuss what each of them is, the advantages and disadvantages of each, and then compare them side-by-side to help you make an informed decision.
So, lets get started!.
Short Answer
Dropshipping is a business model where a store does not keep the products it sells in stock.
Instead, when a store sells a product, it purchases the item from a third party and has it shipped directly to the customer.
Reselling is a business model where a store purchases items from a third party, typically in bulk, and then sells them to customers.
The store is responsible for stocking, fulfillment, and shipping of the products they sell.
The main difference between dropshipping and reselling is that with dropshipping, the store does not have to keep any inventory in stock, whereas with reselling, the store is responsible for stocking, fulfillment, and shipping of the products they sell.
What is Dropshipping?
Dropshipping is a popular ecommerce business model in which a seller sources products from a third-party supplier and has them shipped directly to the customer.
Unlike traditional retail, dropshipping eliminates the need for the seller to purchase inventory upfront or manage and store inventory.
This lowers the cost of entry for sellers, as they only need to pay for the cost of the product once an order is placed by a customer.
Dropshipping also eliminates the risks associated with purchasing and storing inventory, as the seller only pays for the product once an order has been placed.
The major benefit of dropshipping is that it allows sellers to focus on marketing and customer service, as they do not need to worry about managing and storing inventory.
Additionally, dropshipping allows sellers to offer a wider variety of products without having to purchase them upfront.
This makes it easier for new sellers to enter the market and test out different products without having to invest heavily in inventory.
The downside of dropshipping is that the seller has less control over the customer experience, as they do not handle the shipping and returns processes.
What is Reselling?
Reselling is a popular business model used by online retailers to sell products to customers.
It involves purchasing products from a supplier or manufacturer and then reselling them to customers.
This allows the seller to make a profit on the products they are selling, while also providing customers with access to products they may not find anywhere else.
Reselling is an attractive business model as it allows the seller to have more control over the customer experience and the pricing of their products.
The seller is also able to customize their product offerings to meet their customers needs.
However, reselling does come with risks, as the seller must purchase inventory upfront and manage and store the inventory.
Additionally, the seller must ensure that they are able to source products from reliable suppliers and manufacturers in order to ensure the quality of their products.
Advantages of Dropshipping
Dropshipping has a number of advantages that make it an attractive option for online sellers.
The main advantage is its low cost of entry.
Dropshipping requires a much smaller investment than reselling, as the seller does not need to purchase inventory upfront and can start selling immediately.
This also eliminates the need to manage and store inventory, as the third-party supplier handles all of the shipping and returns processes.
Dropshipping also carries fewer risks than reselling.
Since there is no need to purchase inventory upfront, the seller is not exposed to the risk of having unsold inventory that cannot be recouped.
Additionally, since the shipping and returns processes are handled by the supplier, the seller does not need to worry about dealing with customer service issues.
Finally, dropshipping is a great option for sellers who are just starting out.
The low cost of entry and lack of inventory management make it easier for new sellers to get started without investing a lot of time and money.
Additionally, the lack of customer service issues makes it easier for new sellers to focus on growing their business without having to worry about dealing with customer complaints.
Disadvantages of Dropshipping
When it comes to dropshipping, there are several disadvantages to consider before committing to this retail model.
Perhaps the biggest disadvantage of dropshipping is the margin of profit.
Generally, dropshippers charge their customers the retail price of the product, while they only pay the wholesale cost.
This means the dropshippers margin of profit is much smaller than if they were to purchase the product at retail and resell it.
Another disadvantage of dropshipping is the lack of control over the customer experience.
Since dropshipping involves having products shipped directly from the supplier to the customer, the dropshipper does not handle the shipping and returns processes.
This means the dropshipper has no control over the delivery speed, or the quality of the packaging or shipping materials.
This can lead to a less than satisfactory customer experience, which can lead to negative reviews and decreased sales.
Finally, dropshipping can be a risky business model, as it relies heavily on the supplier.
Dropshippers are completely reliant on the supplier to provide accurate product information, timely shipping, and quality products.
If the supplier fails to deliver on these promises, it can have a negative impact on the dropshippers business.
Additionally, since the dropshipper has no control over the quality of the product, they may end up with unhappy customers who return the product or leave negative reviews.
Advantages of Reselling
When it comes to selling products online, reselling has a few distinct advantages over dropshipping.
For starters, reselling allows the seller to have more control over the customer experience, as they are the ones responsible for selecting and stocking the products, packaging and shipping them, and handling returns.
This gives the seller an opportunity to build relationships with their customers and provide them with a more personalized shopping experience.
Additionally, reselling allows for higher margins, as the seller can purchase products in bulk and negotiate lower prices from the supplier.
This means that the seller can make more money from each sale, as the cost of the product is lower than what they are charging the customer.
Finally, reselling carries less risk than dropshipping, as the seller does not have to worry about product availability and lead time.
When reselling, the seller can purchase large quantities of the products they want to sell and store them in their own facility, meaning they are always in stock and ready to ship.
This eliminates any potential delays in order fulfillment, as well as any issues with product availability.
Disadvantages of Reselling
When it comes to the disadvantages of reselling, it is important to keep in mind that the seller is responsible for purchasing inventory upfront and managing and storing it.
This can be a significant upfront cost and can also add to the seller’s overhead costs.
Additionally, the seller must handle the entire shipping and returns process, so there is the potential for more customer service issues than with dropshipping.
Furthermore, the seller is responsible for any quality issues with the products, so there is a greater risk of returns and dissatisfied customers.
Finally, with reselling, the seller must compete with other resellers on price, which can be difficult in a competitive market.
Comparing Dropshipping and Reselling
Dropshipping and reselling are both popular methods of selling products online, but there are some important differences between the two.
Dropshipping involves sourcing products from a third-party supplier and having them shipped directly to the customer.
This allows sellers to offer a wide variety of products without having to purchase them upfront or store them in a warehouse.
The seller also has no responsibility for shipping or returns, so they are not exposed to the risks associated with inventory management.
However, dropshipping can be more expensive than reselling, since the seller must pay the third-party supplier a higher price for the product.
Additionally, the seller has less control over the customer experience, since they do not handle the shipping and returns processes.
On the other hand, reselling involves buying products from a supplier and then selling them to the customer.
This requires the seller to purchase the inventory upfront and manage and store it.
This can be a riskier option, since the seller has to pay for the inventory upfront, but it also allows them to have more control over the customer experience and to establish better relationships with customers.
Additionally, reselling can be more cost-effective than dropshipping, since the seller can purchase the product at a lower cost.
Overall, dropshipping and reselling both offer advantages and disadvantages, so it is important to consider the unique needs of your business before deciding which method is right for you.
If you are looking for a low-cost entry point and are not as concerned with having control over the customer experience, dropshipping may be the right option.
However, if you are looking to have more control over the customer experience and are willing to take on more risk, then reselling may be the better option.
Final Thoughts
Dropshipping and reselling are two very different methods of selling products online, each with their own advantages and disadvantages.
Dropshipping provides a lower cost of entry and fewer risks, while reselling allows for more control over the customer experience.
Ultimately, the decision of which method to use depends on the needs and goals of the seller.
If you’re considering either dropshipping or reselling, consider your goals and resources carefully to make the best decision for your business.