Enopoly Automation founder Vladyslav Varizhuk aka Vladdy says, “So you’re looking to get involved in ecommerce. And you’re gonna be selling on Amazon and/or Walmart. So you’re forced to make a decision. What business model are you gonna do? Is it dropshipping or is it wholesaling? To help, let me explain the differences between the two. So what is dropshipping? It’s a very simple model where you find suppliers and find the products you wanna sell, right?”
“Then you’re gonna take the pictures of those products and write a description and upload it on your Amazon or Walmart store,” Vladdy continues, giving us the mile-high overview of dropshipping as a business model. “From there, whenever a shopper sees that listing, they’re gonna purchase it, you’re gonna get a notification, and then you simply go to that supplier, process that order, and that supplier’s gonna ship that product to that shopper that bought it from you. Make sense? Good.”
“Now wholesale is where you actually buy the products up front. You’re gonna have to do your product research, find the products you wanna sell, buy inventory (typically in bulk), and then ship it off to Amazon and Walmart and they will fulfill those orders. Now, for somebody brand new to ecommerce, dropshipping definitely sounds like the better option. But there’s pros and cons to both of these business models. Let’s talk about what those are real quick, so you understand.”
Vlad explains how dropshipping, since you’re not buying any inventory up front, carries less risk. If any of your product listings don’t sell, big deal, right, because you’re only out the few minutes of time you spent making the listing. And the ones that do sell, assuming you didn’t overpay on ads or screw anything else up, are gonna be immediately profitable. Whereas, with wholesale, you’re buying those products up front, right, so you can’t afford to be wrong. Well you can, but you’ll be buried in credit card debt.
With dropshipping, you can make your first money faster and scale faster. Again, you’re just listing products, driving traffic, seeing what sells, then turning it up, right? With wholesaling, you’re gonna need more patience. It might take 3–4 times as long to sorta find your groove. Which, at this point, you’re probably going, “Who in their right mind, then, would pick wholesale over drop shipping?” But not so fast. See, with dropshipping, it’s easy to get yourself in trouble with both Amazon and Walmart.
Dropshipping, itself, isn’t against Walmart or Amazon’s terms, but they are pretty particular about how the products show up to the customer. On Amazon, for example, say someone buys one of your dropshipped products. Cool. But that product better show up in an Amazon box (or at least an unmarked box). Otherwise, it’s only a matter of time before some confused customer complains and you find yourself banned. “I ordered this from Amazon.com but it showed up in a Home Depot box,” right?
And if you’re gonna play the “I’ll just try to get away with it for as long as I can” game, that’s fine, but just know: when Amazon or Walmart suspends your account, any funds from previous sales could be locked up for months. And you may never actually get paid out on ’em. Now maybe wholesale’s not sounding so bad, huh? It’s slower, steadier, and it’s probably the strategy that’s gonna win the race, depending on what sorta goal you have as your finish line.