And which is the best option for a beginner?
When I built my successful ecommerce store, I started with the dropshipping model. It meant I could start with $0. Only after a few months’ success did I move on to a more traditional ecommerce store. From there on I bought most of my products in bulk and stored them at a fulfillment warehouse. This is how I made $550,000 from this store.
You may also be interested in reading the Ecommerce & Dropshipping Quick Start Guide.
What’s the difference between an ecommerce store and a dropshipping store?
With a traditional e-commerce store, you’d usually buy goods in bulk and store them in a warehouse. When you received an order, you’d then ship it to the customer. The warehouse could either be your own or it could be a fulfillment warehouse. A fulfillment warehouse can sometimes turn out to be the cheaper option.
With a dropshipping store, you won’t hold any products at all, so wouldn’t need a warehouse. When a customer ordered, you’d pass that order on to your supplier. They would then deliver directly to your customer.
Even with bricks ’n’ mortar stores, dropshipping is common with larger items, such as beds and sofas. If you buy a bed from a department store, they will often deliver it to you weeks later directly from their supplier. That is dropshipping.
Advantages of a dropshipping store
There are 3 main advantages to running a dropshipping store.
- You don’t need to buy products in bulk, which means you’re not spending large amounts of money in advance. This is ideal if you’re starting with little money.
- You can’t get stuck with products that don’t sell. If you order in bulk, you’ll be stuck with those products if you can’t sell them.
- You don’t have to deal with storing and shipping the products. This makes your job a little easier.
Disadvantages of a dropshipping store
There are also a few disadvantages to running a dropshipping store.
- Because the supplier is shipping the products to your customer, you don’t have any control over your customer service levels. If the goods are delayed, customers will blame you.
- Some dropshippers sell products without even seeing them. This can result in low-quality products being shipped to your customers. Even if you use this method, you should still check the products you’re planning to sell beforehand.
- Your profit margins will be much lower. This is not a good thing. Lower profit margins mean less money available for sales and marketing.
Advantages of a traditional e-commerce store
A traditional e-commerce store also has some major advantages.
- You order the goods in advance, so you’re able to check the quality of the products. You should also have done this before ordering.
- You get better pricing, which means bigger profits.
- You control the shipping, so your customers get better service.
Disadvantages of a traditional e-commerce store
Of course, there are also disadvantages.
- As you have to buy the goods in bulk, you need money up front to pay for them.
- You could be stuck with any unsold goods.
Do not do this if running a dropshipping store
If you’re planning to run a dropshipping store, make sure your supplier is in the same country as you are. I see too many people shipping goods from China directly to their customers in the US.
Customers do not want to wait weeks or months for delivery. You’ll end up getting canceled orders and chargebacks. This can result in your credit card merchant banning you from further transactions. Game over.
So, what’s best for a beginner?
If I was starting again, I’d start by dropshipping, as this is a great way to test whether the products will sell before buying in bulk.
You can also sell a wider range of products from different suppliers and compare them to each other. That way, you can choose the best suppliers and best products when you transition to a traditional e-commerce store.
You can also use a combination of both of these, which is what I did.
Order your best-selling products in bulk so that you get the best pricing and higher profits. For products that don’t sell very often, use a supplier that will dropship the for you.