Looking to start a product-based business? You probably want a low-risk approach and have seen opportunities like dropshipping and reselling products. Now, while these two options are similar with a low-risk approach, they are still very different. As a reseller, you’re basically the mediator between the product brand and the client. Reselling is reasonable and is a good alternative for a new business. However, it makes it difficult for your brand to stand out. As a dropshipper, your organization is empowered to work without needing to worry about inventory control and product brand limitations. You’ll be able to sell products under your own brand, as if they were your own.
What is Dropshipping?
Dropshipping is when products are moved from manufacturers directly to a consumer. The retailer isn’t required to keep any stock on hand or fulfill orders that are received.
What is Reselling?
Reselling is when you buy a product from a manufacturer or retailer with the intent of selling it to someone else.
There are advantages to both dropshipping and reselling. However, there are also disadvantages to both as well. It’s important to use the option that is going to fit best with your business model and core values. Although both are similar, they have different methods of being a part of your business.
Advantages of Reselling
With reselling, you’re walking into an opportunity where there is a want or even an existing customer base. This can make it easier to get the products sold and revenue coming in. There’s also less work involved as you don’t need to worry about stock or other administration tasks that come with inventory. However, generally you will have to take care of fulfilling the order yourself with products provided by the brand your selling for.
Disadvantages of Reselling
Your business won’t have a face as a reseller. You have zero brand control when reselling products. When re-selling products you may also see smaller margins than you would dropshipping. This depends on the product itself as well as any shipping costs as part of the order. Since you have virtually no control over the products, quality control is also impossible to have. This could have a negative impact on you as clients won’t blame the company, but the reseller.
Advantages of Dropshipping
With dropshipping your startup costs are very low because you don’t need to worry about inventory. One of the best things about dropshipping is a low-minimum order fulfillment. Let’s say you own an online t-shirt shop and you receive an order for just one shirt. With dropshipping you can fulfill that single order and it’s still cost-effective. Dropshippers also refresh their stock quite frequently which helps ensure that you won’t have an “out-of-stock” problem.
Disadvantages of Dropshipping
The biggest disadvantage I’ve found with dropshipping is the lack of control over order fulfillment. The vendor is in complete control of getting the product together and sending it to the client. This can become problematic when there’s delays in clients receiving their orders as it falls on your business, not your vendor. While it’s a plus that you can fulfill a low quantity order, this can be problematic when it comes time to pay your vendor. Some dropship vendors will increase the cost of the product if a small quantity is ordered which can have an effect on your margins.
Dropshipping and reselling are good ways to start your business with low-risk and low-cost. However, you may start to find that the risk and cost become higher than if you were to purchase wholesale or create the product yourself. Sometimes taking the low-risk route may look easy but turns out to be much more difficult. If you have capital to spend I would suggest going the wholesale or creating the product yourself route. It’s important for any new business to have a good brand reputation as soon as they can. With dropshipping and reselling, you don’t have control over the things you need to in order to ensure your reputation stays afloat. While this may work out in your favour, there’s a chance it may also not. Know the risks and do your research before working with a new vendor.
Written By Josh Grieve of BeGeek Canada