Drop Shipping versus Making Your Own ProductLast Updated:
If you are looking for an alternative source of income, then selling items online might have already crossed your mind. Two of the most popular ways to do so is by drop shipping and making your own products. While both of them will require a website where your customers will place and pay their orders, this is where their similarity ends. Let’s take a closer look at each of their processes, and see which one is the right one for you.
Drop Shipping involves partnering with a supplier or a drop shipping company that will fulfill the orders on your behalf. The process goes like this: the customers order from your website, you forward the order to the drop shipper, and the drop shipper processes and delivers the order. Your part in the process is minimal, and is essentially finished after you pass the order to the drop shipper.
Making Your Own Products
On the other hand, every single step lies on your hands when you are selling products that you made on your own. You also need to ensure that you have enough materials to create the products, as well as set a timetable for production so that you can sell and fulfill orders on time. As such, the process goes: you the buy materials, make enough products to fulfill the expected volume of orders (although this step can also happen after you’ve received orders), accept orders, and arrange for shipping of the package to the customer.
Factors to Consider
Here are some of the major factors where drop shipping and making your own products differ:
Time and Effort Invested
Perhaps the single greatest factor that can make you decide between the two is the time and effort required by each method. For drop shipping, after you’ve set up your website, you can then relax a little bit and maybe focus on marketing your store to entice more customers. You don’t have to process orders, worry about inventory, or allot time going to a courier or making arrangements to have the package picked up and delivered over to the customer.
On the other hand, a big chunk of your time and energy will be eaten up if you are running an online store where you make the items yourself. This means there is less time to focus on marketing and advertising your shop. It will also probably take out some of your free time since you need to work on your products continuously to have a steady stream to sell.
If you are selling products that can be stocked up, you can make a whole lot even before you offer them in your store, but there is the risk of under or overstocking, since you never know when they will be sold. You are also responsible for every step of the transaction up to its completion, and you may have to handle the business full-time should you consistently receive a large number of orders.
Expenses for Starting Up
Another major factor when choosing between the two is the start-up cost. This is one of the strengths of drop shipping as it requires minimal investment on your part. You only need to pay for the online store and your drop shipping partner’s fees, if any. You don’t need to allot budget for each product, as you will only order them if a customer orders it. And since your customer most likely already paid for it, you can use that to pay for the item itself. In other words, you don’t have to pay for the products you sell beforehand; you can simply pass the cost to your customer.
If you don’t have a substantial budget set aside, better go with drop shipping.Meanwhile, as you may already know, making your own products will entail heavy costs. Materials and production don’t come cheap, after all. While it may not be as expensive as buying finished products in wholesale, it is still more costly compared to drop shipping. You better have a good portion of money set aside if you want to continuously run this kind of business.
Quality of Items
This is where drop shipping falls behind. Since you are only reselling the drop shipper’s items, you have zero control over their quality. You can check for reviews and research about the company, but that’s the best you can do to ensure that they are good enough. In some cases, when a product has problems, you would have to answer to the customer since the transaction involves them and your store. Passing the blame to a third party will seem like you are washing your hands off the responsibility, and customers won’t like that. As such, you need to research about the products, and hope for the best.
Now, if you are making the products yourself, you have absolute control over their quality. You can ensure that each product has solid build quality that can withstand the usual wear and tear. Moreover, should the customers have issues with the item post-sale, you can give instructions on how to fix it, or better yet, you can have the item sent over to you and you can fix it yourself, giving the customer a good after sales experience.
One look at drop shipping catalogs will show that there is a wide variety of items that you can choose from. You won’t run out of items to offer, and you can continuously add new products depending on emerging trends. You don’t necessarily have to stick to a specific niche, although you can do so if it’s working for your shop.
Offering different product categories will be quite a challenge if you are making them on your own. Just making one type of product already requires a lot of time and resources – planning to create a whole variety will probably need more people working full time. Most of the shops that offer self-made items focus on being a niche store though, and they actually benefit from it since they fare better in a less competitive market.
For drop shipping, your pricing will always be dependent on the drop shipper. For example, if their price for a certain mobile phone case is at $10, you need to set the price higher so you can profit enough from one sale, but not too high that you lose customers to other shops that offer lower prices. This is why drop shipping has low margins – you have to sell a sizable number of items before you can enjoy decent profits.
As for making your own products, margins are typically higher since you have total control over pricing, and the only factors you need to consider are the cost of the material and labor, which is basically the time and effort that you spent in making it. Moreover, while initial expenses are high, it’s more likely that the materials you bought will yield multiple products, so you have a sure profit once you sell all the items from one batch.
The Bottom Line
If you are creative and have a knack for constructing items with your own hands, then you may want to go the other route and make your own products for sale. Your passion project can become a steady source of income, as long as you have sufficient revolving budget to buy materials. You can be as creative as you want and try out different designs, colors and the like. This would most likely eat up a ton of your time, but if you enjoy getting your hands dirty and have more control over the entire process, this could be worth looking into.
Drop shipping, on the other hand, is advisable for people who have little resources to spare for their venture, and prefer a more laid back approach in the actual transaction process – which gives you more room to focus on advertising your shop. Since it only requires a computer, internet connection, and mostly marketing efforts, it can be done by those who have a full-time job but want an additional source of income. The initial costs are minimal, but the profits on a single sale is the same, so you’d have to sell a whole boatload of items before making a sizable profit. That said, drop shipping is definitely the easier route, and can be the stepping stone budding entrepreneurs need to make it in the industry.
Check out our list of the Best Drop Shipping Companies if you want to start now!