Start-up

Selling Standoff: Warehousing vs. Dropshipping

When it comes to stock acquisition, warehousing and dropshipping are polar opposites. While the former can make you busy with accumulating stocks, the latter allows you the freedom to do business without having to worry about keeping a sufficient stash of the products you’re selling.

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Nevertheless, both business structures are good to embark on. Read on to learn more about these two and to help you decide which design is the right one for you.

Warehousing

Warehousing is a business technique where you provide a storage facility for businesses to store their products that are meant for distribution. Since leasing a warehouse can be expensive for one business alone, there are business owners who opt to rent a space in warehouses to store their products.

It is the job of a warehouse manager to monitor the goods that come in and out of the warehouse, to ensure the safety of the products, and to guarantee correct delivery of those upon redistribution. The beginnings of warehousing entailed grueling paperwork for the manager but now, there are warehouse management systems available where computers are utilized to keep track of every transaction. But since a warehouse can be a place quite big for one person to handle, you might have to hire people to keep tabs on everything.

There are a number of ways to do warehousing. Public warehousing makes the storage spaces available to everybody who is willing to pay the standard fee. Private warehousing is exclusive to a single business or lessee. Finally, contract warehousing requires for the lessee to pay for the space whether they will use the space for the period of time specified in the contract.

Dropshipping

If managing a warehouse and carrying out all of the tasks it entails is not your cup of tea, perhaps dropshipping is the business for you.

Dropshipping is a method of retailing which allows you to take orders from customers and have the manufacturers or suppliers send them the products. You’ll also be the one who will collect the payment from the customers and earn your profit from the price difference between the wholesale price and retail price. On the other hand, there are cases where dropshippers require an additional shipping charge on top of the item’s price.

The many advantages of dropshipping have made it a feasible business undertaking for many entrepreneurs. Here are some of the benefits that await you should you decide that dropshipping is the right business for you:

It’s less expensive.
One of the reasons why dropshipping is a favorite among e-commerce entrepreneurs is that it doesn’t require a huge capital to set up. If your business is Internet-based and you decide to be a dropshipper, you can save yourself from spending on office and storage space and on pre-purchasing the products you plan to sell.

It’s mobile.
Having an online business is almost always tantamount to online transactions. Dropshipping allows you to do business regardless of your location. You can accept orders, process them, and talk to your suppliers online or on the phone, even when you’re on the go.

It’s product-friendly to different kinds of supplies.
It’s common for a dropshipper to not reveal to customers that he or she is one. There’s nothing wrong with this as long as you make all your transactions honest and fair. On another note, this kind of anonymity allows you to sell different varieties of the same product. This can be quite handy if want to focus on a specific industry. For example, if you wish to sell clothes online, you can offer varying types of clothes and simply find suppliers and manufacturers to furnish you with the goods.

It’s All Up to You

Truth be told, warehousing and dropshipping have their own appeal. But in the end, it’s still you who will know which of these techniques would suit your business. Whether you decide to be a warehouse manager or a dropshipper, you should also take into consideration partnering with the parallel side. If you think about it, dropshippers tap into suppliers when looking for stuff to sell. At the same time, those who operate warehouses can also venture into providing merchandise they’re selling. See, that’s a win-win situation right there.

Which business structure works for you? Share it to us via comments below!

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Carrina Candice is a business writer. Her specialty is writing about general business, marketing and branding. Catch her on Twitter @iamcayester
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    Matt
  • October 8th, 2013
Very informative article. I actually don't know the difference before. Haha! Can small businesses, like an eBay seller, get such service? Is it not too pricey?
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      cayecaye
    • October 9th, 2013
    Hello Matt!


    Glad you liked the article.


    Small businesses can difinitely do warehousing, most of the ads online are pricey but a technique that some business owners do is to rent out a space inside an already leased warehouse :)


    Let me know if this is the answer you were looking for ♥
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I find a combination of the 2 works best for me. Dropshipping allows me to offer hundreds of items that come in a variety of sizes or colors without inventorying each variation, though I only work with manufacturers who dropship - not the dropshipping bulk houses. One of the problems with dropshipping is the number of competitors for those products is greater since small sellers, ebay sellers, etc, can take advantage of these services as well (though many manufacturers I deal with now prohibit sales on ebay and other auction sites which helps).



But there are many manufacturers that do not offer this service as well as small artisan shops I buy from. For those, I inventory small amounts of product or order items as I get orders in. As I am home based, my 2 car garage serves as my warehouse. This allows me to offer more unique items than some of my competitors and not break the banks when it comes to inventory I'm holding.


So I don't think this has to be an "either/or" option for sellers - dropshipping and warehousing can co-exist.
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