Drop Shipping Vs. Wholesale

If you're planning to start an Internet business, it's important to understand the dynamics of drop shipping vs. wholesale. Both drop shipping and wholesale selling are ways to profit off the difference between the wholesale and retail value of a product. However, they are fundamentally different methods. Both drop shipping and wholesale have their own advantages and disadvantages.

Drop Shipping

The fundamental concept involved in drop shipping involves selling products that you don't actually own. You sell these products on your website or at an online marketplace. You can obtain permission from a drop shipping company to sell their products on your website without buying them. You simply take orders and forward them to the drop ship company, who in turn ships the product to your customer.

You can make money drop shipping by selling your drop shipping company's products at retail value. This works because drop ship companies ask only for the wholesale values of the products you sell them for. Once a transaction takes place, you, rather than your customer, owes the drop ship company for the products you've sold. By collecting the difference between the wholesale and retail values of drop shipped products, you can make good money drop shipping online.

Drop shipping's main advantage is that it minimizes risk. You aren't required to make a large investment in a bulk quantity of a wholesale item not knowing if you'll be able to sell it.

Wholesale

In wholesale selling, you own the products you are selling. In this method, you find a company or manufacturer that sells goods at wholesale prices and you place a bulk order. Depending on the size and quantity of the product you're selling, you may or may not have to rent storage space in a warehouse to keep your products until they're sold. You advertise and take orders on your website or online marketplace account, package the items, and ship products to your customers.

The concept behind making money in drop shipping vs. wholesale is identical for both options. The bulk orders you place will be for the wholesale value of your products. By selling these products to your customers at their retail values, you'll be able to collect a net profit from each individual unit.

The main advantage behind selling wholesale is that you'll be able to get better prices per unit on the products you purchase. The more of something you buy, the lower the price will be per unit. Drop shipping products will retrieve barely more than wholesale value because the company is selling each unit individually. On the other hand, in wholesale selling, you can buy wholesale products in bulk. This ensures you'll make a good profit from each sale.

The disadvantage to wholesale selling is that you assume a greater risk. You have no security that the products you buy will actually sell.

Drop shipping vs. wholesale really comes down to differences in how you buy products. Because you don't have to buy the products beforehand, drop shipping allows you to have greater security. On the other hand, wholesale selling will afford you greater profit per unit because you can buy in bulk.