6 Differences Between Dropshipping and Stock Selling

In the field of online sales there are many business models. One of the most famous is certainly dropshipping and this, however, must not be confused with stock sales !

Do you know the difference between the two models? Maybe you're almost there but you're not so sure? We at SPS Fulfillment are here to help you understand these concepts better. Let's start with the definition of the two terms and then make a direct comparison analyzing the pros and cons of each.

Index

• Definition of dropshipping
• Definition of stock sale
• The two models compared

Definition of dropshipping

Are you wondering what dropshipping is ? Dropshipping is an online business model in which the seller does not own any goods and therefore relies on an external supplier. The latter will take care of the packaging and shipping part.

What we have given you is clearly a very limited definition of dropshipping, however it is useful to give you a general idea. We have given you much more insights on this topic in the article what is dropshipping published on our blog.

Definition of stock sale

Warehouse stock selling is an online business model in which a seller procures a stock of goods from one or more suppliers. He then takes care of all the packaging and shipping on his own. Of course, in this case it is essential to have a warehouse in order to keep all the products inside.

Already from here, therefore, a huge difference emerges between the two types of business. But let's now analyze everything in more detail by making a direct comparison.

The two models compared

At first glance, it would seem that dropshipping is absolutely the best way, as it seems to be easy to manage. Also, there is no need to worry about having a warehouse. But this is not necessarily an advantage. Are you wondering why? Now let's go through everything point by point.

• Inventory Management
• Dropshipping - In dropshipping, as mentioned, there is no inventory to manage. When a buyer places an order, the retailer outsources the order to an outside supplier, who will handle the shipping.
• Stock sales - in stock sales the retailer must worry about placing all the orders and having them ready in his warehouse. This certainly requires higher expenses, first of all for the initial purchase of the goods and then for the management of the warehouse itself (possible rent, utilities and so on). We must not forget the fact that the products, if unsold, will remain in the warehouse gathering dust and will not produce any profit. On this topic, we think you may be interested in our in-depth study on how to optimize the warehouse with AI .
• Profit margin
• Dropshipping - profit margins in this case are given by the difference between the purchase price from the supplier and the sale price to the buyer. Very often it can happen that on a single product there is a profit margin of about 5-10%. Very rarely the margin is higher.
• Stock Selling - The profit margin here can be much higher than with dropshipping. Generally speaking, a reseller can buy a certain quantity of products in bulk and pay much less than they sell them for. This can in fact lead to a profit margin of 15-20% or even more (depending on many factors of course) on the single product.
• Ease of testing new products
• Dropshipping - One of the dropshipping strategies is to test new products, as it is very easy to do. In fact, all you have to do is contact a supplier and ask if that product is available. Once you have done this, you can then add that product to your online store. This will allow you to understand which products are popular and which are not and consequently you can focus on those that create the most profit.
• Stock sales - here the situation is slightly different, as testing a product actually means buying it in bulk and then selling it. Many, however, come up with the strategy of testing a product in dropshipping, perhaps even with "decoy ads", and then eventually buying it in bulk. Others, however, prefer to buy small quantities of a certain product so as not to risk too much.
• Control of product quality and shipment
• Dropshipping - in dropshipping, unfortunately, there is not much control over the quality and shipping of the products you sell. Everything, EVERYTHING depends on the choice of supplier. If the supplier is reliable and works well, then you can sleep soundly. If the supplier starts shipping late and selling defective products, then serious trouble begins! Speaking of which, feel free to check out our guide on how to find reliable suppliers .
• Stock sales - in this area, stock sales win hands down over dropshipping, as you will be the one to see the goods with your own eyes and organize the shipping. It is certainly more work, but you have full control of what you are actually selling to the customer.
• Customer Service
• Dropshipping/Stock Sales - in both cases, you will always need dedicated customer support to handle any shipping issues. This could also be simply to answer customer questions about a particular product that is on sale. Remember, the more you sell, the more support you will have to provide!
• Returns Management
• Dropshipping - managing a return in dropshipping can be complicated. Unsatisfied customers will always blame you, because they have no idea who the supplier is. They think that you shipped it. That said, you will then have to do some calculations on whether or not it is worth organizing another shipment to collect the goods, whether to refund the customer or make a partial refund by having the customer keep the product. In any case, it is better to write all the return policies well on your website. Instead, in cases where the customer has received an incorrect or damaged product, then you can try to contact the supplier and have them manage the return. On this topic, we invite you to read our guide on how to manage returns that we have published on our blog.
• Stock Sales - In stock sales, you will of course be responsible for each individual return, since you are responsible for packaging and shipping. Even in this case, however, always create a page on the site in which you clearly explain all the return policies.

In light of all this, ultimately, there is no answer to the question: "But is it better to do dropshipping or sell in stock?". This is because, as you may have already understood, there are many variables. We can say, however, that in a certain sense the two business models are complementary and can often be used together.

Dropshipping can be the best solution for those who are taking their first steps in online sales and do not have a large initial budget. However, this does not mean that it is not a serious business, on the contrary, many live more than well with this work. Furthermore, as already mentioned, sometimes dropshipping can also be used by those who sell in stock to test a product. If you want to try this form of online commerce, we can recommend that you set up your own store through Shopify and then get busy finding reliable suppliers.

Selling in bulk , on the other hand, certainly requires a more significant initial budget, but can lead to faster earnings and also offers much more detailed control over the quality of the products and shipping times. However, many who start with dropshipping end up taking a warehouse and selling in bulk. If you are interested in using this business model, we invite you to visit this page of our website where we explain all the services we offer.