Dropshipping vs. wholesale seems to be a never-ending debate in the eCommerce world. So, we decided to tackle it.
The eCommerce has evolved a lot throughout recent years and many different business models emerged, all with their respective pros and cons.
As a result, we cannot say that one business model is better than the other one. All we can do is help you find the one that’s most suitable for your specific needs.
Let’s dive in and see the dropshipping and wholesale models side by side – their pros and cons and features comparison.
Overview: Dropshipping and Wholesale
First, let’s give these two eCommerce business models a definition so that we can gain a basic understanding of the terms.
What Is Dropshipping?
As an eCommerce business model, dropshipping might mean never seeing the actual product in real life since you’re buying it from the supplier only after the customer buys it from your store, and the supplier is the one that packs and ships the product.
So, as an eCommerce store, you’ll only import the product listing, but you don’t have to hold actual stock.
That’s why there are no upfront costs. The customer pays for the product in your online store, and then you can use those funds to place an order at your supplier’s store.
The difference between the wholesale price you pay to the supplier and the retail price you sell the product for is your profit.
- Low start-up costs
- Low risk
- Great for testing multiple product ideas
- No holding stock
- No warehousing costs
- Focus on sales and marketing
- No fulfillment or shipping responsibilities
- No geographical restrictions (you can sell from anywhere in the world)
- Lower profit margins
- Less control over the supply chain
- Higher competition
- Higher product prices
- Dependent on suppliers
- Less control over product quality
- No control over shipping times
- Difficult to build a brand
What Is Wholesale?
Contrary to dropshipping, wholesale involves buying in bulk and holding stock and inventory in your warehouse or the warehouse of your third-party logistics provider, dropshipping agent, or sourcing agent.
Most eCommerce business owners decide to order in bulk due to the discounted price and the possibility to scale with better profit margins.
However, unlike dropshipping where you pay after the sale, with buying wholesale you have to pay for your bulk order upfront. Additionally, ensure you’re confident in your sales projections. Otherwise, you run the risk of being left with unsold stock.
- Better profit margins
- Lower product prices
- Suitable for scaling stores
- Better control over inventory
- Consistent product quality
- More control over shipping and fulfillment
- Better for building a brand
- High MOQs
- Higher upfront costs
- Risk of not selling the entire stock
- You stock and hold inventory
- You take care of order fulfillment
- Less product variety
Feature Comparison: Dropshipping vs. Wholesale
Now, let’s take a look at how the dropshipping and wholesale models compare in regards to their features.
Ease of Entry
You’ll find it much easier to start a business with the dropshipping eCommerce model rather than buying wholesale.
Buying wholesale and in bulk is riskier, plus it involves more responsibilities. Dropshipping, on the other hand, entails outsourcing tasks like fulfillment and inventory.
In terms of upfront costs, a dropshipping business has the upper hand since there are virtually no costs upfront related to product purchasing. The only upfront costs in dropshipping are those for an online store (Shopify or WooCommerce), and, of course, marketing.
With wholesale buying, on the other hand, you’ll have more upfront costs since you’re ordering a larger quantity of products at once.
We said that the upfront costs with a dropshipping business are lower but surprisingly, that doesn’t mean that the profit margins are better. Quite the contrary – buying wholesale will usually bring you much better profits than dropshipping.
High MOQs typically come with a discounted price. Plus, you’ll be the one taking care of fulfillment and shipping instead of outsourcing these services to third-party providers. Like this, you’ll have better price control, allowing you to set higher profit margins.
In terms of risks associated with each of these different business models, we believe wholesale buying is more troublesome.
With dropshipping, you have no significant investment and no upfront costs. This makes it a low-risk business model.
However, in wholesale, you pay in advance, plus you risk not being able to sell the entire stock.
With this in mind, it’s important to note that dropshipping also carries a couple of risks. For instance, no product quality control, long delivery times, etc.
For those who sell online and fulfill their orders with the help of dropshipping suppliers, the only responsibility is sales and product marketing. They don’t have to hold inventory, fulfill orders, or deal with shipping.
However, if you buy in bulk from wholesale suppliers, all of these responsibilities fall on your back.
When it comes to inventory management, the difference is pretty clear – dropshippers don’t hold inventory. The most they do is manage their stock virtually so that they don’t run into out-of-stock issues.
On the other hand, those that buy in bulk have to find an inventory storage solution. This can either be their own warehouse or they can collaborate with a dropshipping agent with warehouses close to their customers.
As a rule of thumb, we’d say that dropshipping is more suitable for beginners and those new to eCommerce, while wholesale buying is better suited to those with more experience.
However, this isn’t a rule set in stone. If you’re new to eCommerce and still want to feel the benefits of buying in bulk, you absolutely can! Just use dropshipping to start with so that you can test if you can actually sell the product.
Last but not least, we have the scalability factor. Here, wholesale buying is the clear winner. Why?
Simply because a higher MOQ will give you a discounted price. A lower product price translates to higher profit margins, especially in high-volume sales.
So, if you plan to increase your marketing and boost sales, wholesale is the better route.
If you’re aiming for a long-term business and want to sell online under a brand, then wholesale could be the better model for you.
Some dropshipping suppliers might be able to remove their branding and even add your own. However, for a fully branded product, it’s always better to buy in bulk and take care of branding before fulfilling the order. Like this, you can add branded packaging, invoices, slips, thank you cards, and any other detail you can think of.
Alternatively, you can work with a sourcing agent who offers product branding services.
Table Comparison: Dropshipping vs.Wholesale
For an easier understanding and a better visual representation, let’s look at both eCommerce business models in a table.
|Ease of entry
Dropshipping vs. Wholesale: Which One To Choose?
As you could notice by now, both dropshipping and wholesale have their advantages and disadvantages. So, how should you choose?
If you’re experienced in eCommerce
If you know what you’re doing, go ahead and order in bulk. All we ask you to do is be confident in your abilities to sell the quantity that you buy.
If you’re new to eCommerce
New in eCommerce? We recommend sticking to dropshipping to start with. And, if you still want to buy in bulk and dropship, use a dropshipping agent with warehouses.
They can help you store your stock and ship out your orders to customers one by one, as they arrive.
For testing products
If you don’t have a winning product yet, start with dropshipping until you find one that sells. Dropshipping is the perfect business model to test multiple product ideas.
For products that sell
For those of you that already have winning products and an audience that buys them, go ahead and order in bulk. Like this, you can enjoy the wholesale price and set better profit margins.
FAQs about Dropshipping and Wholesale
Last but not least, let’s look at some of the most frequently asked questions on the subject of dropshipping vs. wholesale.
What Is the Difference Between Drop Shipping and Wholesale?
The greatest differences between dropshipping and wholesale are order fulfillment and inventory storage. Dropshippers outsource these things to the suppliers, while wholesale buyers have to take care of warehousing, fulfillment, and shipping on their own.
Naturally, there are also other differences such as control over the supply chain, a discounted price that wholesalers usually get, etc.
What Is the Best Dropshipping and Wholesale Supplier?
Here are some great suppliers and platforms that work with both dropshippers and wholesale buyers:
This list is not final as countless suppliers in China and globally offer dropshipping and relatively low MOQs.
Dropshipping vs. eCommerce: What’s the Difference?
Dropshipping is just one order fulfillment method or one business model out of many in eCommerce. On the other hand, eCommerce is an umbrella term covering all types of buying and selling on the Internet – retail, wholesales, dropshipping, etc.
What Is Wholesale Dropshipping or Bulk Dropshipping?
Bulk dropshipping or wholesale dropshipping are terms usually used for ordering a large quantity order at your house or storage and then dropshipping individual orders.
However, this is a misconception since the term “dropshipping” itself implies outsourcing the fulfillment and shipping and not doing it on your own.
As such, we can’t really talk about “bulk dropshipping” or “wholesale dropshipping”, only about “dropshipping” or “wholesale” as individual (and opposing) concepts.
If you’re holding inventory, this isn’t dropshipping – it’s the typical retail model.
What Is Better, Dropshipping or Wholesale?
As mentioned before, we can’t say that one model is better than the other. We can just talk about which one is more suitable for your business needs.
Choose dropshipping if you:
- Want to test more products
- Don’t want to invest too much upfront
- Don’t want too much risk
- Don’t have too much experience in eCommerce
- Want to start something faster
- Don’t want to bother with inventory management
Choose wholesale if you:
- Have a winning product
- Are confident in your sales projections
- Have capital to invest upfront
- Can manage your own inventory and fulfillment
- Are experienced in eCommerce
- Want to brand your products
- Want a long-term business
- Want to scale and enjoy better profit margins
- Are familiar with international trade
- Don’t mind working with a sourcing agent
- Want more control over your supply chain
Can a Sourcing Agent Help Me Buy in Bulk and Dropship?
Yes! A sourcing agent is the perfect third-party logistics provider for this purpose.
A good sourcing agent should be able to provide an all-around service:
- Warehouses to store your inventory
- Product development
- OEM or ODM services
- Product branding
- Dropshipping services
- Worldwide shipping
- Order fulfillment
- Private labeling or white labeling
If you want to try the services of a sourcing agent without any risk, Niche offers free sourcing quotes.
To Sum Up
Deciding between different eCommerce models like dropshipping vs. wholesale or dropshipping vs. private labeling is tricky if you’re new to this. But, with a little bit of education and some practice, you can get the hang of it.
We sincerely hope that this comparison guide has helped you learn more about the two models so that you can implement the one that suits you the most.
If you need help moving from dropshipping to wholesale buying, get in touch. Just tell us what you need and we’ll send you a free quote. With us, you don’t have to decide on dropshipping vs. wholesale – you can have the best of both worlds!