The Difference Between Dropshipping & Selling Your Own Products
- What are the advantages and disadvantages of any of these?
- How do you start?
- Where do you find opportunities?
- How much does it cost?
1. Making your own products
- Low startup costs. Creating your own products compared to manufacturing - lots of units
- Brand control. You control your brand and can change it at any time without restrictions. You can market your brand etc
- Price control. Going hand in hand with brand control is the ability to price your products as you see fit.
- Quality control. When you make your own products, you can control the quality of your products and make sure it is up to your standards and the expectations of your customers.
- High time input (time-consuming). Depending on your exact product choice, making your own products can be a time-consuming process, leaving you less time to focus on actually building your business.
- Scalability. Making your products can become an issue when your business takes off. Although you have the option to look to a manufacturer for help as you scale up, this might not be easy or possible if your customers have come to expect your products to be handmade.
- Limited product choices. As mentioned prior, your choices of potential products are limited to your skills and the resources you have available to you. This will vary from person to person.
Another viable option for acquiring your product and inventory is to find a manufacturer to produce the product for you. When sourcing a manufacturer, you have the option of sourcing one domestically or from overseas.
- Lowest cost per unit. It’s not uncommon for manufacturing to garner the lowest cost per unit, giving you the greatest margins on your product.
- Brand control. Having your product manufactured means you can build your own brand around your product and aren't constrained by others.
- Price control. Along with the ability to build your own brand comes the ability to set your own prices for your product.
- Quality control. Unlike dropshipping or purchasing wholesale, when you manufacture your own product you're in control of the quality of your final product.
- Minimum order quantities. One of the biggest disadvantages of manufacturing your own product is the startup costs required for initial orders. Depending on the costs of your product and the manufacturer, your inventory investment can reach thousands or tens of thousands of dollars, easily.
- Potential for fraud from overseas manufacturers. Nothing will bring your business to a halt like being scammed by an overseas manufacturer.
- Time to get up and running. Manufacturing a product will likely take you the longest to get up and running. Manufacturing can be a long process of prototyping, sampling, refining, and production. The difficulty of this process can be amplified, even extended if you plan on using an overseas manufacturer where language, distance, and cultural barriers can arise.
Buying wholesale is a fairly simple and straight forward process. You're buying your product inventory (usually other brands) direct from the manufacturers or from a middleman supplier at a discounted wholesale rate, which you in-turn, resell at a higher price.
- Selling already established products. Because you’re selling already established products helps to lessen the risk associated with purchasing inventory.
- Brand familiarity. Selling already established brands can help position your brand by creating an aura effect on your brand.
- Selling already established products. Selling already established products can work for you as well as against you. Because the products are available from multiple retailers, you will need to fight extra hard to differentiate yourself and convince consumers to purchase from you.
- Price control. Selling other brands means to some extent you have to play by their rules. Some brands will enforce price controls to prevent you from discounting their products. This limits your ability to have certain sales and offers.
- Inventory management. When purchasing wholesale you will likely have to purchase a minimum order for each product. The minimum order will depend on the product and manufacturer, however, you will have to stock and hold inventory as well as manage that inventory for re-order.
- Dealing with supply partners. If you're carrying an array of products, dealing with multiple supply partners can become difficult to manage. Requirements may vary from supplier to supplier.
The main concept of dropshipping is selling products you don’t actually own. Working with dropship partners is not only a product acquisition model, but also includes product fulfillment. The process works by taking orders from your online business and forwarding them to your supplier/dropship partner. They in return, ship the product to your customer on behalf of your company. The key to making money with drop shipping is making a profit on the price difference between what you charge and what your dropshipping partners charge you.
The biggest benefit to dropshipping is the ability to offer a large selection of products without purchasing inventory upfront and managing that inventory.
- Low startup costs. The biggest advantage of dropshipping is low startup costs. Because you're never carrying inventory you have no inventory costs which generally are the most substantial cost for a new eCommerce business.
- Low risk. Since you don’t actually purchase your inventory upfront you aren’t taking the risk of having items you can’t sell.
- Streamline sales. Dropship partners will take on the tasks of picking, packing, and shipping your product for you. The dropship option provides convenience and efficiency, so you can manage your business from anywhere in the world.
- High competition. Because dropshipping has such low barriers to entry, you can bet that a lot of people are doing it. This makes competition stiff and harder to set yourself apart from the crowd.
- Low margins. Maybe one of the biggest disadvantages of dropshipping is the very low margins. This makes it extremely difficult to compete in the paid advertising space and means you’ll have to rely more on building content, service etc. Low margins also mean you have to sell at a significant volume to make a decent profit.
- Inventory syncing (out of stock). One of the other major disadvantages of dropshipping is back-ordering. Because you’re relying on someone else’s inventory, the occasion may arise where you place a shipment request to the wholesaler, but the product is sold out. The effect of this is longer-than-normal delivery times and maybe reflect badly on the retailer.
Whatever type of product you choose to sell, make sure you've done pretty extensive research about laws, fees, sales tax, and other housekeeping items.
Now you know what type of product to sell, it's time to get started!
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