Drop Shipping vs. Stocking Product
When you are trying to decide which e-commerce business model you want to follow, it is important to weigh each of your options carefully. Both drop shipping and stocking actual products have their own benefits and drawbacks, and you will need to learn about them before making a choice. This information will help you make the right decision and become successful in the long term.
When you use the drop shipping business model, you don’t actually hold any physical inventory. The manufacturer or distributor is instead responsible for receiving, stocking, packing and shipping all products.
Some of the main points of drop shipping to consider include:
- No physical inventory: Because you don’t hold any physical inventory, you are not limited by how much room you have for storing products. This also means you won’t have to pay for labor costs, storage space and many other things.
- You don’t ship anything: Following the drop shipping business model also means that you don’t have to worry about spending a lot of time or money with shipping out products, as the manufacturer does it for you.
- Receive payment before shipment: Those who follow the drop shipping model will receive payment before the products are even shipped out. You won’t have to deal with investing in any inventory upfront, which can be quite costly initially.
- Steep fees: One of the main drawbacks of drop shipping is that most wholesalers are going to charge you some fairly steep fees for the drop shipping services.
A lot of people who go into business online choose to keep their own physical inventory. You should consider the following before choosing this option:
- You will control the supply: One of the good things about stocking physical products for your business is that you will have complete control over the supply process. This means that you won’t ever have to worry about dealing with out-of-stock items and other issues.
- Filling orders faster: When you have your own inventory of products and do all of the work, you can fill orders faster. This means that your customers get the products they have ordered sooner, making them happier.
- High margins: When you have an in-house inventory of products, you won’t have to deal with any drop shipping fees, so the profit margins tend to be much larger. There are quite a few expenses associated with this option, but at least you won’t have to pay these fees.
- Storage space: Perhaps one of the biggest drawbacks to maintaining a physical inventory for your business is that you will need to have space for everything, which usually means paying for storage. You could end up spending a ton of money depending on how much inventory you want to have on hand.
Drop shipping and stocking product are two viable business models to consider before diving head first into a final decision. A lot of people have started choosing drop shipping over maintaining physical inventories because it is easier and more convenient, especially for those who are on a tight budget.