Are you unsure which supplier type is best for your business? If you’re trying to decide between a drop shipper and a wholesaler, this guide will break down the pros and cons of each so you can make the right choice.
Wholesalers
What is a wholesaler?
Wholesalers are suppliers who buy products in bulk from manufacturers and sell them to retailers at discounted prices.
The best thing about wholesalers:
Their bulk pricing allows you to earn higher profit margins. The more you buy, the better the discounts.
Other benefits:
1. Access to the latest products: Wholesalers keep up with trends and often attend trade shows to source the newest items.
2. Reliability: Once you build a strong relationship, wholesalers can provide a long-term, consistent supply of products.
3. Support for smaller businesses: Many wholesalers understand small operations and are willing to work with you until your business grows.
Watch out for: Minimum Order Quantities (MOQs)
MOQs (Minimum Order Quantities) determine the minimum amount you must purchase in a single order. They exist because wholesalers rely on high-volume sales to stay profitable. For example, a wholesaler selling paintbrushes might only make $0.90 per unit. To make a profit, they need you to order 200 units or more.
Drop Shippers
What is a drop shipper?
Drop shippers stock, pack, and ship products directly to your customers on your behalf.
The best thing about drop shippers:
They require little start-up capital because you only pay for products after you make a sale. This also helps maintain cash flow.
Other benefits:
1. Less packing, more selling: Suppliers handle packaging, leaving you free to focus on sales.
2. Wider product range: Without the need to invest in inventory, you can offer more products within your niche.
3. Risk-free testing: You can list new products without committing to large orders, making it perfect for market testing.
Watch out for:
1. Tighter profit margins: Drop shippers typically add $2–$5 per item for processing, packaging, and shipping. To offset this, focus on niche products rather than highly competitive items.
2. Back orders: If your supplier runs out of stock, it may delay delivery and risk negative feedback. Discuss measures with your supplier to prevent this.
Quick Recap
Use a wholesaler if you:
1. Have capital to invest
2. Want to build a long-term supplier relationship
3. Don’t mind storing, packing, and shipping products yourself
Use a drop shipper if you:
1. Want to test new markets or expand your product range
2. Have niche products in mind and want to avoid inventory risks
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