Drop Shipping VS Wholesale VS Making Your Own Product

Which method is better?If you are planning to set-up an online store and you’ve done some research, you have probably come across these three concepts individually. But to give a little refresher: Drop shipping is when you sign up for a supplier to take care of inventory and shipping; buying wholesale is when you buy products in bulk and resell them in your shop; and making your own product is pretty self-explanatory. Let’s take a look at them side by side and see which one would be a better fit for your online venture.

Major Differences

While all three methods can help you earn a steady income online, they all work differently. Those differences are pretty important as they can help you decide which one best caters to your needs.

Initial Investment

Initial investment is always required when starting a business. But, which method fits your needs best?Out of the three, drop shipping requires the least financial resources from you. Possible expenses include online store fees and any dues required by the partner supplier – and not much else.Even better, since DIY solutions will let you build an online store for $20 or less, and drop shipper’s fees are usually around $30 to $50, it is possible to start your online business for just around $100.

When buying wholesale, meanwhile, you need to have sufficient financial resources to be able to afford the items in bulk. You don’t necessarily have to stock up a lot, but in most cases, you can haggle for lower prices if you purchase in higher quantities. If you want to offer several items, you need to portion your budget accordingly. You may also need to consider getting a storage space for the products, to ensure that it’s secured.

As for making your own products, your starting capital requirements depend largely on the type of item you plan to sell. If it’s only small items, then the materials are probably inexpensive and you can buy enough to create a sizable stock to sell. Meanwhile, if the materials are expensive, you can purchase a limited amount only, and it can yield only several products.

Product Selection and Supply

For drop shipping, your product selection is pretty much limited to what the drop shipper is offering. If there are a certain set of items that a drop shipper does not carry, you can try signing up for another supplier. You’d have to shell out a little extra, but given that drop shipper’s fees are usually pretty minimal, you may be able to afford it. Moreover, reputable drop shippers are constantly adding new products to their virtual shelves, so if you happen to stumble upon one, then there is no need to subscribe to another.

While drop shipping takes inventory management responsibilities off your hands, that also means that re-stocking is entirely at their discretion. This means if an item is out of stock, there is nothing much that you can do. You can send them a request to re-stock the item, but that’s pretty much it.

No need to manage inventory when drop shipping!

Product variety is more attainable when you buy wholesale, although it will come with a price. Since you are in full control over which products to purchase, you can offer anything that you like in your store, as long as you have the resources. This is also the same with inventory — you can re-stock the items whenever you like, or whenever you have enough budget to do so. You have absolute control as far as product selection and supply go.

While the scenario is somehow similar when you make your own products, time is the main concern here. Sure, you can plan on offering as many products as you like, but it may be quite a challenge to make them all. You also have to consider that when a certain item is low on inventory, you have to purchase the materials and work on it as well. Usually, shops that make their own products focus on one category only, usually items that can be fashioned from the same materials.

Price Control

Each method affects the prices of your products differently.Your prices will be fully dependent on your drop shipper’s prices, since you are basically reselling their items. This is why profit margins are typically low in drop shipping. You can’t set the price too high since you’ll lose customers to more affordable competitors, and you can’t set it too low, either. This is why finding a drop shipper with the lowest prices is a must.

Now, when buying wholesale, you are also reselling items, but since you bought them in bulk, you will be getting wholesale prices. While you are still dependent on the price given to you by the supplier, there is more room for profit since you are getting discounts and other perks for buying in bulk.

The only actual expenses you have to worry about when making your products are for the materials; setting a price for your time, effort, and creativity is entirely on you. You have total control over the prices of your products, and you can gain a decent profit just from one sale.

Order Fulfillment

Drop shippers are in charge of processing the order and shipping the items out to the customers, so you don’t have to worry about it. All you have to do is forward the order details that you receive from your shop, and wait for the updates from the drop shipper. These tasks can even be automated with drop shipping tools, so you only need to check on things periodically. This is one of the reasons why you can run an online store with a drop ship partner while continuing with your full time job – it doesn’t require much of your time.

Drop shipping offers much easier order fulfillment processes.Meanwhile, you are responsible for the whole process when you buy wholesale or make your own products. This may not be much of an issue for the former, but for those who make their own products, it can become a handful if you are balancing production of items and store management at the same time. There are tools to help you keep track of orders which can make your life a little bit easier, but you still have to commit to your venture full-time to make sure that things are in order.

Quality Control and After Sales

As with many other processes, you don’t really have any control with the quality of the items when you rely on drop shippers or buy from wholesalers. You and your customers can take advantage of warranties, but as for the product itself, you can only trust that it’ll last for a reasonable amount of time. Moreover, for drop shipping, processing returns and exchanges or handling complains can be a little more complex, since you haven’t seen or touched the item beforehand. You can’t put the blame on the drop shipper since they are invisible to the customer’s eyes. In these cases, your customer service skills will be put to the test.

Those who make their own products have it easier than their counterparts when it comes to after sales matters.Considering that you made the items yourself, the quality of the items depend on your workmanship. Design, color, build – all of these aspects are in your hands. This is why after sales service is quite easy when you make the products yourself. You have complete product knowledge and you can give the customer instructions on how to solve an issue. When there are claims of defect or damage, you can assess it yourself, and given that you made it yourself, you should be able to determine accurately if a claim is legitimate. You can even give the customer tips on how to make their purchase last, which is a big plus for you in the customer service area.

So Which One Is The Best Fit For You?

If you are still on the fence over which business process to follow for your online venture, then here’s a quick tip to help you decide: If you have limited time and budget, then drop shipping is your best bet. On the other hand, if you have some free time and a lot of financial resources, then you may be better off buying wholesale. Finally, if you are passionate about specific items and have the skills and resources to make it yourself, and you have a ton of free time, then why not make money out if it and start selling them via your online shop? You don’t have to choose one exclusively, of course.  You can start off as a drop shipper, and when you have enough income, you can expand your store to offer a new set of products that you made yourself!