Wholesale Or Drop Shipping?

By Author: Ann Hoskins
Total Articles: 30
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In order to run a business, retailers must have merchandise that they can sell for profit. Many rely on wholesale sources or dropshipping as a means to acquire products for their business. Both sources ultimately serve the same purpose-to supply products to retailersbut one method may better suit a retailer depending on the needs of the business and the availability of funds.

There are three factors that influence the decision of whether to utilize wholesale or drop shipping methods: 1) the quantity of product that can be purchased at once; 2) the resellers availability of space for inventory, and; 3) who will be responsible for shipping the product to the customer.

Wholesale orders require that products be purchased in bulk quantities. The cost can be in the tens of thousands of dollars depending on the product, but the retailer realizes a huge per item discount which often results in a cost per item that is 5090% lower than what the consumer will ...
... pay. When the order is received, the retailer must unpack the order, rebrand and repackage the products if necessary, and have enough space available to store the products until a sale is made. If the items are not stored in a storefront, i.e. in a warehouse, the item must be picked (located), pulled, and shipped to the customer by the retailer. The customer usually absorbs the cost of shipping. The retailer assumes the risk and loss for damaged items or products that do not sell. Most large businesses rely on wholesale as their source of supply; however, the latest in wholesale news reveals that sales have somewhat declined due to economic downturns.

In contrast, drop ship items often can be purchased one at a time and on a per need basis. Some drop shippers charge a per item fee and/or a fee based on the order amount. These costs are usually passed along to the customer in the form of handling fees. The cost per item is generally much higher than wholesale which results in lower profits; however, the reseller does not have to store inventory, rebrand packages, or ship items to the customer. This is the job of the drop shipping company. The product is shipped from the drop shipping company to the customer who is unaware of third party involvement. Because there is no inventory to store, there is no risk of inventory damage or loss for the retailer. Most small businesses choose this method as a supply source.


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.