When you launch your own business, the myriad decisions you have to make to get off the ground can feel daunting. Which web hosting provider will you use? What will your first blog post be about? How will you reach your customers by optimizing your site? Of course, one of the first challenges before you can even begin to address these other questions is determining how to acquire the products you want to sell.
Two common methods for doing so are dropshipping and wholesaling. Yet, from there, additional questions arise. Which option fits better into your business plan? Is it possible to be a wholesale dropshipper? It’s important to unpack the differences between these methods in order to make the right choice for your business, so let’s break it down here.
Dropshipping vs. Wholesale: What’s the Difference?
Dropshipping and wholesaling are two different supply chain management methods that help ecommerce businesses fulfill orders and get products to their customers. Each has its own pros and cons. They’re both options for businesses that don’t want to manufacture their own products, but they’re different in a few key ways.
Buying wholesale is the process of acquiring product inventory at a discounted rate from a manufacturer and selling it at markup prices to customers. Wholesaling is a good option for new ecommerce business owners because it’s easy. The products are already being manufactured and sold, so business owners can buy quantities of what they’re selling in their ecommerce stores and manage order fulfillment by shipping to customers directly.
When business owners buy products wholesale, they’re purchasing an inventory that is already manufactured and has a good track record of selling successfully (otherwise, the wholesaler wouldn’t be making these products). This minimizes the risks associated with purchasing large quantities of inventory with no clear indication about whether it will sell or not. In other words, if customers already purchase these items from other merchants, they’re likely to purchase them from your ecommerce store as well.
The profit margins are typically higher with wholesaling because packaging and shipping costs are not factored into the prices of the items that merchants purchase in bulk from the manufacturers. Keep in mind, however, that this is largely because the merchants themselves are responsible for handling these aspects of product shipment.
The business owner can control product inventory by purchasing items from a wholesaler to keep up with customer demand. Having the product in stock and under your direct control means you can better fulfill orders faster for customers without depending on third party suppliers to do it.
On the flipside, when purchasing inventory wholesale, business owners must typically order large quantities of product and store them somewhere safely until they’ve been sold. This requires a business premises that’s large enough to and capabilities to ship orders, which can be costly and require up-front investment when you first launch your business. Further, you will also be in charge of shipping each order yourself or with the help of hired staff members, which serves as yet another business expense.
The biggest risk of purchasing products wholesale is that there is there’s always some level of uncertainty that you might not be able to sell the entire inventory, even if the product itself was popular at the time you acquired it. One reason for this is that it can be very difficult to break into a competitive market if the product is common or larger ecommerce sites like Amazon catch wind of it.
Examples of Wholesalers
The Lodge is an example of an ecommerce store that purchases men’s clothing and accessories from wholesalers and sells items at retail prices to customers. Costco Wholesale’s online store is another example of an ecommerce business that sells a variety of wholesale goods at lower prices for their customers.
Dropshipping is the process of selling products to customers without stocking an inventory. A dropshipper relies on third party suppliers to fulfill orders and send products directly to the customer. In this business model, the ecommerce store owner profits by charging customers at a higher rate than the supplier does.
One of the most well-known examples of a business that uses dropshipping services is Amazon. Although they process and ship many orders from their warehouses, products sold by third-party vendors are also processed and shipped by external dropshippers. Another example is Zappos, who sells shoes to customers once they’re purchased from a dropshipping partner.
With dropshipping, business owners don’t have to purchase large product inventories. Instead, they’re only buying items once their customers have already purchased them. This eliminates the risk of losing money on unsold inventory. Since ecommerce store owners only purchase products from suppliers after their customers have placed an order, there is also a quick return on investment.
When you compare dropshipping to wholesale, dropshipping appears to be a great choice for first-time entrepreneurs because startup costs are a lot lower. Business owners don’t have to manage the processing and shipping of orders, either. Instead, this is handled by the supplier directly, which further lowers the costs and responsibilities of the merchant.
That said, there is always some risk when you are not handling orders directly, and thus, it is key that you evaluate your suppliers carefully. There are some ways to help ensure that suppliers are going to be reliable. Most sites have some sort of feedback or quality scores, so always consult these before deciding to go with a given supplier.
When business owners purchase products from dropshipping companies, however, they achieve smaller profit margins than wholesalers do because the dropshipping partner assumes order processing and shipping costs, which are integrated into product pricing. While most dropshipping marketplaces offer distinctly low prices, wholesale prices are typically even lower.
Thus, the low upfront costs of not having to store inventory are somewhat mitigated by the fact that purchasing from supply marketplaces can often be more expensive than going directly through a manufacturer.
The risk of preferencing dropshipping to wholesale is that store owners won’t sell enough product to generate adequate profit to compensate for the lower margins, but with a diverse database of items to choose from and commitment to good marketing strategy, business owners can generate buzz and engagement. Plus, risks are generally far lower when you aren’t pre-purchasing and stocking inventory yourself.
With distinct pros and cons between the two, it would be ideal to find wholesale dropshippers that can combine the best of both worlds. Here, wholesale dropshippers can be defined as companies or marketplaces that offer products at wholesale prices and that can also facilitate your dropshipping process by managing the shipment of goods directly to your customers. Next, we’ll compare Doba, SaleHoo and Worldwide Brands, three examples of wholesale dropshippers, which promise higher profit margins associated with wholesale combined with the same low risks of dropshipping. Let’s evaluate each.
Doba is a wholesale dropshipper that was founded in Utah (USA) in 2002. It connects ecommerce store owners with wholesale dropshipping suppliers from around the world. The Doba platform is designed to be a one-stop shop for new business owners to launch their ecommerce stores by providing them with access to a variety of products. The following are the pros and cons of using Doba.
Doba connects business owners with a variety of dropshipping suppliers, so they can sell and purchase a diverse array of products for their customers.
The platform is easy to use and offers a variety of free educational resources, including eBooks, blog posts, and infographics for business owners to learn more about ecommerce and supply chain management.
A Doba membership isn’t as affordable as other dropshipping services are. As of October 2016, membership pricing ranged from $29 to $249 per month depending upon the subscription.
Despite the fact that it markets itself as a wholesale dropshipper, product prices are high and, therefore, have trouble competing against similar products sold by major ecommerce sites such as eBay and Amazon.
Customer reviews reflect problems with customer service as well, including difficulty connecting with representatives and being charged during the free trial period.
The wholesale dropshipper, Salehoo was founded in New Zealand in 2005 and connects business owners to a database of dropshipping suppliers through their user interface. One feature that’s distinctive compared to other dropshipping databases are their market research labs, which allow users to find potentially lucrative customer niches that they can market and sell to.
Salehoo is somewhat affordable, with subscriptions ranging between $27 and $97 per month in October 2016.
Dropshipping suppliers and products are all reviewed by Salehoo analysts, and with their 60-day money back guarantee, business owners can be confident in the products they’re purchasing and the reliability of this database.
Salehoo has limited resources for customer education. Their content marketing strategy isn’t as developed as their competitors’, and their site offers customers fewer free tools to educate them.
The affordable price reflects that the database isn’t as large as other dropshipping marketplaces. This limits ecommerce store owners in terms of variety and pricing of products they can offer customers.
Some product prices are high and potentially unable to compete against other prices on major reselling sites like Amazon or eBay.
Worldwide Brands is a wholesale dropshipper that was founded in 1999 and offers similar services to its competitors above. It’s a directory of products that ecommerce store owners can purchase from wholesalers and manufacturers. Worldwide Brands is geared toward higher quality products in the more expensive brackets of different markets, and with that comes higher membership and product prices. It’s a worthwhile investment for customers looking for a wide variety of options combined with excellent customer support.
Worldwide Brands has a large directory on the market, and both wholesale dropshippers and their distribution networks are all certified by the company to ensure a quality experience for their customers.
Although the membership fee is steep ($299 as of March 2017), it’s a lifetime membership, so it can repay itself depending on the level of success an ecommerce store experiences.
The upfront cost of Worldwide Brands is higher than its competitors, and if merchants aren’t working to access customers and fulfill orders efficiently, they may not see a rapid return on investment. There are extra Worldwide Brands services that are sold to users and billed at additional cost to the initial membership fee, which means that the price of using Worldwide Brands effectively is actually higher than the website might initially let on.
To summarize, lifetime membership, even with a wholesale dropshipper, isn’t exactly the perfect fit for first-time ecommerce business owners who may need additional time, resources, and support at an affordable price to get their businesses up and running.
Dropshipping vs. Wholesale: Why Oberlo?
After comparing some of the most prominent wholesale dropshippers out there, it can feel like you’re Goldie Locks walking through the house of the three bears. The only problem is that so far, none of the options sounds quite right. The most important thing when starting a new business is to secure reliable suppliers so that you can start fulfilling orders and meeting customers’ needs without running into issues. A features-rich dropshipping solution provides a strong infrastructure for your online business, and dropshipping with Oberlo is the ideal solution to successfully starting your ecommerce business. More specifically, when you choose to source products from Oberlo Supply, in conjunction with using the Oberlo app, you will encounter some unique advantages. Before we explore them, let’s first start by running through the story behind the app.
The Oberlo App
The Oberlo app was founded in 2015 in order to create an all-in-one solution that takes the work out of sourcing products for your ecommerce store. It offers seamless integration with Shopify, which is one of the best ecommerce store platforms available for setting up shop. This integration, in turn, allows you to quickly and easily add products into your store to sell to customers. Then, when the products are purchased, Oberlo helps you process orders for your customers by acting as the liaison between your Shopify storefront and your third party suppliers. Moreover, Oberlo automatically monitors supplier inventory and product pricing, so business owners aren’t at risk of running out of product stock and getting a bad business review from an unsatisfied customer.
Oberlo’s customer support is readily available for 23 hours per day, 7 days a week. In addition, users have access to the Ask.Oberlo forum, where they can communicate with other Oberlo ecommerce customers. Not to mention, there is a plethora of detailed educational resources on their website, which include blog posts, ebooks, and case studies.
At this point, you’re probably curious about Oberlo’s pricing, and there’s more good news. Oberlo offers a completely free starter plan. This price is vastly lower than the competitors discussed previously, and you have access to similar robust databases of products at wholesale prices.
Oberlo Supply Marketplace
Most recently, Oberlo is working on expanding its own supply marketplace. Particularly when dropshipping with the Oberlo app, selecting products from the Oberlo Supply Marketplace has plenty of distinct advantages. For one, Oberlo automates order shipping and fulfillment, meaning that you can fulfill up to 1000 orders with just one click. Further, the suppliers selling their products on the Oberlo Supply Marketplace are chosen with the utmost care. For this reason, it is one of the most secure options for entrusting the third party ordering and fulfillment aspect of your dropshipping business. In the event that there is any issue or complication, the Oberlo team has direct contact with each supplier, and can resolve issues quickly and efficiently. This will keep your customers happy by limiting the number of issues you have to account for in your dropshipping process.
There are numerous dropshipping options available to ecommerce store owners first launching their businesses. With so much to do to establish your brand, identify your audience, and reach out to customers, it’s the best possible investment to find and order products in a streamlined, reliable, and affordable way. This is the solution that Oberlo offers.