Dropshipping vs. Wholesale: What’s the Difference? (2024) – Updated Comparison

Dropshipping vs. Wholesale: What’s the Difference? (2024) – Updated Comparison

Dropshipping vs. wholesale: the key facts

When it comes to starting an ecommerce business, one of the biggest decisions you’ll need to make is whether to use dropshipping or wholesale. Both options have their own set of advantages and disadvantages, so it’s important to understand the key differences between the two.

How does the wholesale business model work?

Wholesale involves purchasing products in bulk from a manufacturer or distributor at a discounted price. The products are then stored in a warehouse or storage facility before being sold to retailers or directly to consumers.

How does the dropshipping business model work?

Dropshipping, on the other hand, eliminates the need for storing inventory. When a customer places an order on your ecommerce store, the order is then fulfilled and shipped directly from the supplier to the customer.

Main differences between wholesale and dropshipping

Holding stock

With wholesale, you are responsible for holding and managing inventory, which can require a significant amount of storage space. Dropshipping, on the other hand, eliminates the need for holding stock as the supplier takes care of storage and shipping.

Packing and shipping

In a wholesale model, you are responsible for packing and shipping each order. With dropshipping, the supplier handles the packing and shipping process, saving you time and resources.

Starting supplies

Wholesale requires a larger initial investment as you will need to purchase inventory upfront. Dropshipping, on the other hand, allows you to start selling with minimal investment as you only order products as they are sold.

Startup costs

The startup costs for a wholesale business can be higher due to the need to purchase inventory and storage space. Dropshipping has lower startup costs as it eliminates the need for holding inventory.

Scaling and white-labeling

Wholesale allows for more control over branding and the ability to white label products. Dropshipping may limit branding options and can be more difficult to scale.

Supplier location

With wholesale, you may have more control over the location of your suppliers. Dropshipping may require working with suppliers located in different regions or countries.

Product exclusivity

Wholesale may offer the opportunity to have exclusive access to certain products. Dropshipping may limit the ability to offer exclusive products due to multiple retailers selling the same items.

Returns and refunds

Dealing with returns and refunds can be more complex in a wholesale model as you are responsible for managing inventory and processing returns. Dropshipping suppliers often have their own return and refund policies in place.

Pros and cons of wholesale and dropshipping

Wholesale buying

Pros:
– Greater control over inventory and branding
– Potential for higher profit margins

Cons:
– Higher startup and operational costs
– Requires storage space and inventory management

Dropshipping

Pros:
– Lower startup costs and minimal inventory management
– Ability to offer a wide range of products
– Easy to scale and expand product offerings

Cons:
– Lower profit margins
– Limited control over shipping and fulfillment process

Questions to ask yourself before deciding on wholesale buying or dropshipping

– What is your budget for startup costs?
– How much control do you want over inventory and shipping?
– Are you looking to build a brand with exclusive products?
– What are your long-term scalability goals for your ecommerce business?

Sell better online with Shopify

If you’re considering starting an ecommerce business using either wholesale or dropshipping, Shopify offers a user-friendly platform to help you build and grow your online store.

Dropshipping vs. wholesale FAQ

Is it better to wholesale or dropship?

The decision between wholesale and dropshipping ultimately depends on your business goals, budget, and preferences for inventory and shipping management.

What is more profitable than dropshipping?

Wholesale can potentially be more profitable than dropshipping due to higher profit margins and greater control over pricing.

Do wholesalers do dropshipping?

Some wholesalers may offer dropshipping as an option, allowing you to work with suppliers who can fulfill orders directly to your customers.

In conclusion, the decision between dropshipping and wholesale comes down to your specific business needs and goals. Consider your budget, control over inventory and shipping, and long-term scalability when making this important decision for your ecommerce business.