There are many different models for running a successful ecommerce business, including resellers and dropshippers. Resellers and dropshippers both operate ecommerce platforms designed to provide customers with a quick, hassle-free online shopping experience.
But although they are similar in many ways, resellers and dropshippers have a few key differences from a business perspective. Here’s what you need to know about the difference between resellers and dropshippers, so you can decide which method works best for the success of your business.
The Basics: Defining Resellers and Dropshippers
Resellers are businesses that obtain goods from a supplier and offer those products to customers through an online platform. Resellers operate their own distribution centers and are responsible for storing their stock prior to purchase.
Dropshippers don’t own any of their stock until a purchase is made. After a purchase is made by their customers, they are responsible for obtaining the product from the supplier and shipping it to the customer through their suppliers.
One of the main differences between resellers and dropshippers is how they acquire their stock. This is a central element for any ecommerce business, and effects every stage of the sales pipeline from warehouse managements to order fulfillment.
- Resellers acquire stock from the manufacturer in bulk. For example, a reseller offering sporting equipment might obtain a bulk order or tennis rackets from the manufacturer. The reseller then owns the stock of tennis rackets and is responsible for storing them until they are purchased and shipped to individual customers.
- Dropshippers sell stock on behalf of the supplier, and only acquire items on an order-by-order basis. This means that dropshippers don’t need to worry about storage facilities, and are only responsible for fulfilling the order and communicating with the supplier.
Since both resellers and dropshippers need to pay for their ecommerce platforms and marketing content, the notable cost difference between the two hinges on operations. Businesses that are interested in entering reselling or dropshipping should take into account the risks and benefits of investing in stock up-front.
- Resellers typically need more capital up-front in order to acquire stock. Resellers also need to pay for facilities that are appropriate for stock storage and order fulfillment.
- Dropshippers spend less capital up-front on business expenses. Because they are only selling products on behalf of the suppliers, dropshippers don’t need to worry about stock acquisition and storage costs. Because of the service their suppliers provide in the process, dropshippers normally have to pay a little higher unit price.
Benefits and Drawbacks for Resellers and Dropshippers
There is no right answer when it comes to running a dropshipping vs a reselling business, since both business platforms provide opportunities for significant gains.
Benefits of Reselling: Greater Profits
Reselling is generally a more profitable business model once orders start flowing. Because the reselling company purchases all the stock at bulk prices, they are able to turn around and sell the items for a greater profit margin.
Drawbacks of Reselling: Risky Business
Since resellers need to invest in stock up-front, the potential losses are greater. If business is slow or a certain product isn’t selling, resellers take the loss of the initial investment.
Benefits of Dropshipping: Accessible Opportunities
Dropshipping has a lower barrier to entry than reselling because dropshippers don’t need to invest in stock. This means that it’s easier for businesses to start a dropshipping operation since they are acquiring products on an order-related basis.
Drawbacks of Dropshipping: Complicated Customer Service
One of the biggest drawbacks to dropshipping is the indirect nature of customer service interactions. Because the dropshipper is shipping the product on behalf of the supplier, any issues with the product need to be relayed back to the supplier. This can create awkward communication mix-ups between the shipper and the customer and makes sorting out returns and exchanges more complicated.
Managing Your Shipping Business with Digitbridge
At Digitbridge we’re dedicated to streamlining your ecommerce operations at every stage of the process. Our low-cost cloud-based ecommerce management software allows you complete tasks, view orders, and manage stock from anywhere. Digitbridge is committed to making warehouse management stress free by integrating your warehouse management system with your ERP, so you can be well equipped for consumer-direct shipping and dropship logistic ready. With Digitbridge’s software, you can automate tedious tasks, maintain compliance, and access real-time business reports all in one, secure platform.
Ready to upgrade your ecommerce management software? Contact us today for a free demo, and experience how Digitbridge can change the way you do business in digital commerce world.