The world of ecommerce is growing rapidly, and with it, the variety of options for selling products to customers.
From selling on online marketplaces to dropshipping and print on demand, you can take many approaches when starting an ecommerce business.
But what happens when you compare the tried-and-true model of reselling versus the more recently-popular model of dropshipping?
What is the difference between the two?
The main difference between dropshipping and reselling is that with dropshipping, you sell a product first and then buy it from a supplier, while with reselling, you buy a product first and then sell it to a buyer.
In this article, we will break down all differences between dropshipping and reselling and look at how they compare so that you can decide which business model is best for you.
Overview: Dropshipping vs. Reselling
Let's start with a concise overview of dropshipping vs. reselling!
Dropshipping is an ecommerce business model in which an online store doesn't house any inventory but acts as a middleman between customers and the supplier. Whenever a customer orders an item, the store directs that purchase to the dropshipping supplier, who then ships it directly to the customer.
And here is an explanation of reselling:
Reselling is the concept of buying a product, usually for a lower price than what the consumer can purchase it for, and selling it at a profit. It's popular on websites such as eBay and Craigslist, where users offer their items for sale all the time.
Both business models have pros and cons, so here's an overview of them:
|Pros of dropshipping||Cons of dropshipping||Pros of reselling||Cons of reselling|
|Lower upfront investment||Lower profit margins||Higher profit margins||Higher upfront investment|
|Reduced overhead costs||Less control over products and pricing||More control over products and pricing||Increased overhead costs|
|No inventory management||Longer shipping times||Shorter shipping times||Inventory management|
|More flexible hours||Increased competition||Less competition||Less flexible hours|
|Easier to scale||Harder to build a brand||Easier to build a brand||Harder to scale|
|Access to more products||Not as easy to offer a large catalog of products|
What is dropshipping?
Let's first understand the concept of dropshipping.
Dropshipping is a business model where you sell products on your online store while not housing stock of those products yourself. That is done by your dropshipping supplier, who will manage your stock, process, and ship out your orders.
To clarify, we will show you one of our infographics below that also explains the concept of dropshipping. After all, a picture is worth a thousand words, right?
And here is a more extensive summary of how dropshipping works:
- Dropshipping is a fulfillment method where a store doesn’t keep the products it sells in stock. Instead, when a store sells a product using the dropshipping model, it purchases the item from a supplier, who ships it directly to the customer.
- When someone places an order on your dropshipping store, you place the same order with your supplier. This process is usually automated using a third-party app like DSers or these 14 DSers alternatives.
- Your dropshipping supplier will handle the rest. They will package the product and send the order straight to your customer.
- The customer receives the package straight from your dropshipping supplier, and you, the store owner, would not have touched the product in the process!
Tip: If you are interested in learning more about dropshipping, we suggest this article:
Dropshipping for Beginners: What Is It & How to Start Today
Now that you know the basics of the dropshipping model, let’s analyze reselling!
What is reselling?
Reselling is the practice of buying a product and then selling it at a higher price to a different buyer.
This could include anything from cars, technology, and clothing to furniture, art, and antiques—the possibilities are endless!
Reselling can be done one product at a time, but some people buy products in bulk and sell them one by one.
The primary goal of reselling is to purchase something at a low price and sell it at or above the market rate. Here's a great infographic explaining it:
Many people engage in reselling activities as a hobby or even a side job. Popular online sites such as eBay and Craigslist have made reselling easier than ever before by allowing users to easily reach potential buyers from all over the world with little effort.
Although professional resellers can make significant profits from their purchases, it remains a fun side activity for most people.
The pros and cons of dropshipping vs. reselling
In the most general sense, the most apparent difference between dropshipping and reselling is that with dropshipping, you sell the product first and then buy it yourself. In contrast, with reselling, you buy the product first and then sell it to a customer.
Meanwhile, in both models, you're trying to sell products for a higher price than what you're buying them for.
For this article, we will compare the pros and cons of dropshipping vs. reselling in their most common form:
- Dropshipping: Selling products from a dropshipping supplier on a Shopify store.
- Reselling: Finding good deals on the internet, buying those products, and reselling them on marketplaces like eBay and Craigslist.
Pros of dropshipping (or cons of reselling)
Let's start with the pros of dropshipping. Or, if you view it the other way around, the cons of reselling.
Lower upfront investment
One of the most significant advantages of dropshipping is that it requires a low upfront investment.
Unlike reselling, which requires you to purchase inventory upfront, you can start dropshipping with relatively little money. This makes it an ideal business model for entrepreneurs with limited capital.
Reduced overhead costs
In addition to not needing to pay for inventory upfront, dropshipping allows you to avoid many other traditional business expenses, such as inventory storage costs.
And because the supplier ships the products directly to the customer, you don’t need to pay multiple times for shipping costs. This can result in significant savings compared to a high-volume reseller.
No inventory management
Another benefit of dropshipping is that you don't have to worry about managing inventory.
When you sell products through a dropshipping supplier, they will handle all the inventory management for you.
More flexible hours
Dropshipping can also offer more flexibility in terms of working hours than reselling.
Because you don’t need to be physically present to ship orders, you can operate your business at times that are convenient for you. This makes it a great business model for people who want more control over their work-life balance.
Easier to scale
Because your overhead costs with dropshipping are relatively low and you don’t need to hire additional staff to ship orders, it’s easier to add new products and grow your business!
Access to more products
When you partner with a dropshipping supplier, you'll have access to an extensive catalog of products. This allows you to test different products without significant risk.
What's more, you can find which products work best for your target audience and react more quickly to changes in market trends.
Cons of dropshipping (or pros of reselling)
Now, it's time for the other side of the story, the cons of dropshipping!
Lower profit margins
One disadvantage of dropshipping is that it typically has lower profit margins than reselling.
This is because dropshippers generally pay higher prices for their products than resellers, who either take the time to find that one great deal or buy their products in bulk for a discount.
Less control over products and pricing
Another disadvantage of dropshipping is that you have less control over your products and pricing than you would if you were reselling.
This is because you are at the mercy of your supplier regarding product availability and pricing. If your supplier runs out of a product or decides to raise prices, there is little you can do about it!
Longer shipping times
A challenge that most dropshippers struggle with is long shipping times.
Although there are ways to achieve fast shipping times with dropshipping, it generally takes longer for products to reach your customers than if you were reselling.
This is because the products must be shipped from the supplier to your customer, which can add a few days or weeks to the shipping time, especially if your supplier is based in China.
Because dropshipping is a relatively easy way to get started in ecommerce, there is a lot of competition in this space. This can make it difficult to stand out from the crowd and attract customers to your store.
Harder to build a brand
When you resell products, it is easier to build a brand around your business than if you were dropshipping. This is because you are the one who is in control of the product and can choose what branding to put on it.
With dropshipping, the supplier usually controls the branding, making it more challenging to build a strong brand identity.
Although it's more difficult, it's not impossible, as these 12 branded dropshipping stores have shown!
Which business model is right for you: dropshipping or reselling?
As we've seen, both dropshipping and reselling have pros and cons.
So, if you're hesitating between dropshipping and reselling, it's important to consider those pros and cons and think about which model will work best for you.
In general, dropshipping may be the right choice for you if:
- You don't want to deal with managing inventory.
- You don't have the capital to purchase inventory.
- You want a business model that comes with limited risk.
- You want the convenience of more flexible working hours.
- You like having the ability to sell any product in a supplier's catalog.
Meanwhile, reselling may be the right choice for you if:
- You want higher profit margins.
- You want more control over your products.
- You don't like dealing with lots of competitors.
- You don't mind the extra risks and tasks of managing inventory.
Ultimately, you can run both types of businesses profitably with careful planning and research – it just comes down to understanding which unique advantages match your individual goals and expectations!
Compare other business models
Not sure yet if dropshipping or reselling is the right fit for you? Check out our other comparison articles below:
- Dropshipping vs. Drop Servicing
- Dropshipping vs. Affiliate Marketing
- Dropshipping vs. Print On Demand
- Dropshipping vs. Private Labeling
And to compare more business models, visit the comparison hub!
Before we go to the conclusion, we've created a quick summary of this article for you, so you can easily remember it:
- Dropshipping is a business model where you sell products on your online store while not housing stock of those products yourself.
- Reselling is the practice of buying a product and then selling it at a higher price to a different buyer.
- The main difference between dropshipping and reselling is that with dropshipping you sell a product first and then buy it from a supplier, while with reselling, you buy the product first and then sell it to the customer.
- Some pros of dropshipping include lower upfront investment, reduced overhead costs, no inventory management, more flexible hours, and easier to scale.
- Some cons of dropshipping include longer shipping times, increased competition, and that it's harder to build a brand.
Now that you know the difference between dropshipping and reselling, which business model do you think is right for you? If you’re still unsure, consider each option's pros and cons to help you make your decision.
Whichever path you choose, remember that starting your own online business takes time, effort, and dedication. But if you’re willing to put in the work, it can be a great way to earn extra income!
Want to learn more about dropshipping?
Ready to move your dropshipping store to the next level? Check out the articles below: