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Drop Shipping vs Buying Wholesale Inventory (Part 1)

Drop Shipping vs Buying Wholesale Inventory (Part 1)

The Difference Between Drop Shipping and Wholesale Inventory

Should you set-up drop shipping or buy wholesale inventory for your eBay store? You might have out grown your current operation, and need to expand to the next level. This two part series looks at the advantages and challenges of buying wholesale and working with drop shipment.

Both models have their own distinct caveats, which makes it different for each eBay store owner. Large online eCommerce sellers like Staples have sold via both models successfully, as many other sellers have as well.

What is buying inventory?

Typically as an eBay seller if you go the inventory route you’re making a purchase from either the manufacturer or a distributor direct. They’ll ship the products to your home or warehouse for you to handle.

Benefits of Buying Inventory in Bulk

  • Better pricing because you’re buying larger quantities from a distributor, handling packing and shipping.
  • More control over the quality of the packaging when shipping.
  • Order control because you have control over the speed of processing an order.
  • Shipping guarantee since you have the ability to provide customers with information on shipping.

Challenges of Buying Inventory

Take inventory risk

Typically once you purchase a quantity from a manufacturer or distributor, you’ll be unable to return what you can’t sell.

Liquidity

When purchasing inventory your funds get tied up and you’re less liquid. Most distributors are going to require you to pay either immediately or within 30 or 60 days of receiving the product. Typically when your new to selling online many will require full payment up front.

Higher shipping cost

When you aren’t doing enough volume to command lower shipping prices. Try to negotiate the best shipping rates possible with either Fed-Ex or UPS. You can ship USPS as a possible way to save money in the beginning, though believe it or not you can get better rates via UPS or Fed-Ex. You also tend to get speedier service from either Fed-Ex or UPS which helps build better relationships with customers.

Misc Expenses

Depending upon the amount of inventory you decide to purchase you’ll need to pay for space being used and for your time or an employee for receiving inventory. You’ll have to inspect upon receiving and assure you’re getting what you ordered, that its in good condition and not damaged.

Insurance

Will now be needed to insure the inventory you’ve purchased against theft or damage.

Purchasing inventory usually does get better pricing though you need to watch out for additional costs that do add up. In Part 2 we’ll discuss the drop shipping and how it compares to wholesale inventory.

Happy Selling!


About The Author

Chris Labatt-Simon

Chris is the Executive Vice President of Operations and Finance at SureDone, and was formerly the Vice President of Customer Success. Chris's role continues to be customer focused. As he says, "My job is to put a smile on our customers' faces." In addition to managing customer support, customer service, customer success and onboarding, Chris also finds time to find ways to turn chaos into order and to manage the financial and legal aspects of SureDone.

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