Dropshipping vs Wholesale: Which distribution model should you choose for your business?

Описание: Dropshipping vs Wholesale: How to determine which one to choose?

What we have seen is small businesses start with dropshipping because its a lot easier to start shipping your product directly to your customers from your own garage, you have control over your inventory, there are low start-up costs because you don't need to purchase inventory upfront.

In another scenario, you can choose to not manage your own inventory and possibly outsource inventory management, order fulfillment, and shipping to external entities. It works so well because you are cutting down any extra logistics and warehousing costs and pay for items based on customer order volume. You can focus on other revenue generating activities like marketing (driving traffic to your website, increasing eyes on your products on social channels etc.) and customer support and retention.

EDI Perspective: However, do remember and get prepared to sell more volume of products because the profit margins are lower. If you are using a third-party dropshipper then, if there is a delay in delivering your product then you are risking your reputation.

On the other hand, if you take the wholesale distribution approach, you take full responsibility of the inventory. You buy in bulk from the manufacturer at a discounted price and sell at a premium price. You'll need a warehouse and logistics planned out which can be cumbersome.

EDI Perspective: You will definitely require lot more software systems to record data and ensure a central repository where all you data is stored. If you want to be digitally ahead in the game, you'll need all your systems to be integrated (ERP, WMS, TMS + EDI). Considering bulk orders, you will also have higher profit margins than dropshipping.

Overall, it depends on multiple factors like what kind of product(s) you are selling, what is your order volume, availability and overall cost of the products.

Do keep in mind that the last thing you want is problem with cashflow if they you buy in bulk and cannot sell them in a particular time period.

Don't hesitate to reach out if you have any questions at [email protected] or call us directly to talk to an EDI or data integration expert at Phone: 484-485-9835.

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