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February 21, 2023

Dropship or Wholesale: Which is better for you?

Running a store is hard. There’s a million different things you have to consider to make your store a success. Online or offline? How should I take payment? What’s my brand identity? Should I use dropship or wholesale to fulfill orders? While the answers to these questions will be unique to each store, luckily, we can offer some guidance on at least one question; dropship or wholesale?

What is dropship?

Dropship is an order fulfillment method in which orders are placed through your store, but fulfilled by your supplier brand. The basic flow is that a customer will buy something in your store, the order will be communicated to your supplier brand (the brand that makes the product), and the brand will then package and ship the order to the customer. You never have to hold the physical inventory yourself as everything is fulfilled by the supplier. The key to a successful dropship business is a smooth collaborative flow between your store and the supplier. You need to be able to source the best products for your store, onboard brands quickly, communicate the brand story to customers through effective merchandising, and manage the order fulfillment smoothly. I know that seems like a lot of moving parts, but a platform like Matagora makes that entire flow seamless and automatic.

Pros of dropship?

  1. Low risk

    One of the biggest benefits of dropship is that there is little-to-no risk for your business. Dropship does not require an expensive upfront purchase like wholesale, which means that your store is never on the line for unsold inventory. All you do is onboard a product into your store and watch the profits come in. If the product doesn’t end up being popular, you can simply take it off your store and replace it with something new!

  2. Fresh and dynamic inventory

    One of the biggest advantages a modern retailer can have is an ever-changing and evolving product assortment. Consumer tastes can change in an instant, particularly as the trend cycle has picked up speed in the past few years. With dropship you’re able to add new products to your store whenever you want, and with Matagora that means immediately. Change, refresh, update whatever and whenever you want with no risk.

  3. Focus on growing your business

    Dropship makes a lot of aspects of your business easier, and that frees up time and energy to work on other things. Instead of worrying about fulfillment you can spend more time on branding, marketing, advertising, and anything else that you need.

Dropship cons

One of the biggest downsides of dropshipping is the general lack of transparency between store and supplier. Dropship is heavily associated with platforms such as Oberlo and Spocket that claim to supply USA and EU brands, but often end up supplying low-quality Aliexpress products. When you’re working with companies like Aliexpress there’s no room for a genuine human-to-human business relationship, and often that’s what will really set an independent store apart. By connecting with independent brands run by real people you can increase transparency and collaboration, thereby improving your dropship flow overall. Dropship also runs the risk of selling sold out goods. Communication between your store and your supplier can break down at various points, leaving you in the lurch when a product has sold out but your system doesn’t reflect it. To solve this problem you need a system that syncs inventory information in real-time so you’re never left having to deal with sold-out goods.

What is wholesale?

Wholesale is a form of order fulfillment where you buy all the stock you want upfront and then sell it directly to customers. It’s used often by big retailers such as Nordstrom or Saks. In a wholesale model, your store takes full responsibility over the stock and feels the consequences if it doesn’t sell.

Pros of wholesale.

  1. Branded experience

    With a wholesale model you’re entirely responsible for order fulfillment which gives you more room to imprint your own brand onto the product and shopping experience. It’s easier to use your own packaging and shipping materials. Similarly, in a brick-and-mortar store you can present the stock any way you want, leaving a distinct impression on shoppers.

  2. Discounted stock

    While there are risks when you buy upfront, there are also price benefits. You can often get discounted rates from supplier brands when you buy up front as you’re taking the responsibility out of their hands. Also, there’s potential for higher profits as you can mark-up the price of the products once you have them.

  3. Capture demand

    When you know that a product is particularly popular, you can hold a constant supply of stock to keep profits up. Instead of waiting for your supplier brand to fulfill all the orders, you can see a quicker turn-around for your business.

Cons of wholesale.

The biggest issue with wholesale fulfillment is the risk. A successful wholesale business has to account for forecasting what products will be popular, buying and recieving the physical products, and holding them either in a warehouse or sometimes in your own home. Even if you figure out all of the logistical issues, there’s always the possibility that the inventory won’t sell and you’ll be at a loss.

What’s the best option for your business?

Each store is different so there is no one size fits all model for order fulfillment. However, we can suggest some options depending on your store model.

If you are running an entirely online store, dropship is likely the way to go. Dropship will remove any of the infrastructural and logistical strain that comes from wholesale, especially if your entire enterprise is based online. It’ll be cheaper and make the day-to-day running of your business simpler.

If you have an online and brick and mortar store then there’s more room to play around. There can be a natural progression from dropship to wholesale. You can use dropship as a way to update and test new products for your store, then once you see that a particular product is popular, you can purchase it wholesale to capture existing demand in your store. You can also use a hybrid of the two models by showrooming a sample of a product in your brick and mortar store, then use dropship to get the product to a customer. The beauty of dropship is that you don’t have to be held down, and when you’re running a store both online and offline, the possibilities for order fulfillment increase exponentially.

Order fulfillment shouldn’t have to take time and energy away from other aspects of your business, so we hope this article helped make your choice easier! If you’re looking for more in-depth assistance in running your independent store sign up below to book a demo and see how Matagora can make collaborative retail a breeze.

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