Michael Roebuck's Blog

Online businesses that sell products have two primary choices: stock inventory or use a dropshipper. Choosing whether to buy and stock an inventory of products on-site or rely on a dropshipper's inventory and delivery methods is a difficult decision that should not be taken lightly. There are pros and cons of both methods of getting products for your online business that must be considered carefully.

Stocking Inventory

inventory or drop ship Having your own products in stock can help you maintain quality customer service with fast shipments. You are in completely control of how long the ordering process takes from start to finish from the time the customer places their order until the time they receive their item.

Stocking your own inventory is a slightly higher risk business model than using a dropshipper for a new online business owner, since you need to purchase inventory before you have orders for the items. There is always the risk that the inventory you purchase and keep on hand doesn't sell.

When you maintain your own inventory, you pay less for the items you sell which enables you to turn a higher profit when your customers purchase your inventory at retail prices. You can purchase your items in bulk and at a discount if storing your own inventory; as opposed to buying one item at a time from the dropshipper when your customers place orders.

The main reason many people decide not to stock their own inventory is due to space concerns. Depending on how successful your online business is, you may soon find yourself out of room to store all of the items you keep in stock. If you outgrow your home or storage space, you'll need to find additional storage space in order to keep growing your business. The more inventory you maintain, the harder it is to keep track of what you have and where it's located as well - which can slow down your ability to send shipments to customers.

Using Dropshippers

The primary advantage of using a dropshipper is that it ends the hassles of stocking and tracking inventory and shipping to your customers. It's a business model that takes less effort than stocking your own inventory, and offers lower risk to you since you aren't faced with having to purchase items in advance that may or may not sell.

Using a dropshipper means you'll have access to stock photographs of the items you want to sell. Sometimes, a dropshipping company will even provide you with a turnkey website - making it quick and easy to set up your online shop and start selling. The downside to this is the amount of competition. The ease of entry into an online business relying on dropshipments means you'll be competing against large numbers of people trying to sell the same items and having websites that look similar to everyone else selling those same items.

Despite the advantages of using a dropshipper for your online business, there are a number of disadvantages you should consider as well. When you use another company to deliver your product, you may end up with customer support issues if your customer doesn't receive their purchase in a timely manner. You are relying on another company to ship the items on time - but it's really out of your hands if they fail to do so. Your customers won't care that those items are coming from a dropshipper, they're going to form their opinion of your company based on the dropshippers ability to get the products out on time.

If a product is returned by a customer, they're going to return it to you and expect a replacement or refund. When you receive the return, you'll then have to deal with the dropshipper to find out how to return the item and get your money back for the purchase.