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The Difference Between Wholesalers and Drop Shippers

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Hello Everybody!

Wholesale and drop ship are two different business models. Please do not mistake the two- especially for new online retailers.

First off, you should know that our entire database is composed of both wholesalers and drop shippers. Many might ask why even bother putting in wholesalers in your directory as drop shippers are much easier to use because of the advantages of not carrying any inventory or having to deal with shipping out the products. This is true, but there is also an upside of using wholesalers which we will get into later here.

Drop shipping by far is the most convenient and easiest way to get started in selling products online from your website or through auction sites like eBay and ubid. Drop shippers typically do not have any minimum order restrictions and they will carry the inventory, package the products, and ship them directly to your customers. You don't have to actually pay for the item until the product has been sold to your customer and you received payment. So really there is no out of pocket expense except for the very minimal fee of listing the product on an auction site if that is your avenue of selling the products.

Furthermore, drop shippers will also handle any returns or damaged goods during shipment. Although these cases are very rare, if it would happen, the customer would send the product back to the drop shipper directly so you wouldn't have to get involved in mailing the product back and forth. Think of a drop shipper as the full-time supplier that works for you. Many people do not have a lot of extra money to buy products in bulk or up front, so using a drop shipper will solve both of those problems.

Those are definitely the advantages of using a drop shipper.

To sum it all up, it's fast, easy, and convenient to use a drop shipper when selling online. So why use wholesalers?

That leads us to our next topic of the advantages of using wholesalers.

Wholesalers that do not drop ship have a reason for doing so. Many suppliers have their own business model established and some will sell in larger quantities so you may have to buy the items in bulk and then resell them yourself. There are many suppliers that don't want to deal with one item at a time so that is why they sell bulk quantities. The advantage of this is that you will get the products much cheaper in price than buying them one at a time from a drop shipper. The downside is that you have to put up money to pay for the products, package them yourself, and then ship them to your customer. A lot of people steer away from this option because it's not as easy as using a drop shipper.

However, we will share a secret with you for those of you interested in selling on eBay. Most of the people that are selling the hot items on eBay are NOT using drop shippers. Why? The reason is simple, Because eBay has a lot of competition with many sellers that list the same types of hot items like personal music players, cell phones, etc., they have to buy in bulk to stay competitive with the other sellers.

We do not recommend that you sell these types of items on eBay unless you have a lot of buying power to purchase these types of items in bulk to get the pricing discount.

So to sum it all up, using wholesalers are necessary when you want to buy items in bulk (typically hot items) that you want to resell yourself on eBay. Using drop shippers are beneficial when you sell niche type products on eBay or have your own website because you aren't competing with anyone else directly on your own site. So you could definitely use a drop shipper to sell hot items from your own website as many of our members are doing this.

Here's a snapshot of the pros and cons of wholesaler vs. drop shippers so you can see which one is best for you.

- Drop Shippers

Pros: No inventory to carry, no packing supplies to buy, the supplier will ship the products to your customer for you, and they handle all returns.

Cons: Price of products can typically be higher than using wholesalers and some suppliers do charge a small drop ship fee per order which can range from $1-2.

- Wholesalers

Pros: Price of products will be typically cheaper than using a drop shipper and no extra drop ship or processing fees are added to your order.

Cons: You may have to buy in bulk and you will have to carry the inventory and pack/ship the products yourself.

Buying in wholesale means meeting the supplier's minimum order requirements (either by the case or purchase amount) to get the wholesale price. The more items or case quantities you purchase, the cheaper your wholesale price is going to be. Drop shipping typically does not have dollar/ order minimums- meaning the drop shipper can process and ship your single unit order to the end consumer.

Seeing the difference between the two models' order requirements you can expect that the wholesale price is going to be cheaper compared to that of the drop shipping price. A retailer buying 2 dozen cellphone cases will acquire a lower purchasing amount as opposed to someone buying one (1) cell phone case.

The profit margin is not the greatest "strength" when it comes to drop shipping. However, this business model is still going strong is pursued by online retailers. Why? Technically with drop shipping, there's not much capital you need because you only pay for the products you have already sold. Start-up costs vary depending on where you want to list your items and if your drop shippers have any membership fees. This allows you to explore different target markets and which one works for you and your business, and which one doesn't.


Your Sincerely,

Owen Smith
Founder & CEO
SMITH DISTRIBUTORS


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