Advantages of Drop Shipping and Wholesaleing

Some people would consider drop shipping and wholesaling the same thing but there are distinct differences between the two. Dropshippers and wholesalers both sell products at a very deeply discounted price and do not charge a sales tax. Both require a valid business license and a state tax ID number. However there are certain advantages and disadvantages of each that should be considered before deciding which method to use.

The advantages to using a wholesale company is that you will probably get a bigger discount as you are buying in bulk. You also would also have physical custody of the stock and therefore you would not have to deal with back order issues that are common when drop shipping. You can find wholesale companies through wholesale news sites or wholesale sources such as wholesale directories.

The disadvantages in using a wholesaler are that you will have to pay for all of the merchandise up front with no guarantee that it will actually sell. You will also have to find a warehouse or space to keep your products, and you will have to ship everything yourself.

Advantages to using a drop ship service are that you would be able to offer more products with a very minimal investment. Drop shippers sell their products one at a time and mail the products directly to your customers. This way you don't have to worry about storing or shipping the products and there is no risk of slow moving products.

There are also many disadvantages to drop shipping. Typically drop shippers will not offer as great of a discount on the products as they would offer at wholesale because you are not buying in bulk. There is often a drop ship fee associated with drop shipping. This can be added to your customers handling charge however it will make you less competitive.

One of the biggest complications of using a drop shipper is products going on back order after they have sold. If you are using a drop shipper you are at the mercy of the manufacturer. If an item goes on backorder after a customer has ordered it they could wait for their product for weeks. Also beware of manufacturers who ship slower than their promised times. Your businesss reputation is on the line and using the wrong drop shipper could adversely affect your the integrity of your business.


Ann Hoskins has been writing and publishing articles about wholesale and drop shipping. She is a business consultant and has been specializing in logistics management and shipping for more than 10 years.