Many people confuse about dropshipping & resale difference. The business idea of ”dropshipping” comes from the American-speaking area. Translated, it means “drop shipping” or “direct shipment” by the wholesaler. Dropshipping offers the possibility to set up and operate a mail order business without equity and without warehousing. It is a business transaction that involves three parties; the wholesaler, the retailer and the consumer. Upon receipt of payment, the retailer orders the item from the wholesaler and the wholesaler delivers the product directly to the buyer.
It offers the retailer the opportunity to sell many products without having to store them unnecessarily. Many entrepreneurs invest their money in this type of business, as it has many advantages over traditional resale. But there are also disadvantages that should not be concealed. For example, the goods are sent by the wholesaler. This means that you have no direct influence on the quality of the goods, delivery times and possible errors in deliveries.
In summary, the following advantages can be mentioned
- 1. Low equity is required: The goods are only ordered when money has already arrived from the customer.
- 2. Exploitation of payment terms : With lightning-fast prepayment options via PayPal, credit card, or last name by the customer and in turn setting long-term payment terms with the wholesalers, the money can be worked with.
- 3. No storage required: Since the goods are sent from the wholesaler’s inventory, only the wholesaler has to store them. There are therefore no costs and space for storage
- 4. No effort for logistics: The packaging and shipping of the goods take a lot of time, especially for small companies that have not automated their processes. The wholesaler will now take care of all this for you.
The following example is intended to clarify the dropshipping process:
A customer orders an Mp3 player from your internet shop against payment in advance. Now just wait for the customer to receive the money. After receiving the amount, you order the goods from the wholesaler, who then sends the goods to your customer. It can be clarified with the wholesaler in advance that the packaging used does not provide any information that the goods were sent via a wholesaler. The graphic shown illustrates the process again.
Dropshipping & Resale Difference
Reseller in English, reseller, is a term that is mostly associated with the Internet these days. It describes companies or people who buy products cheaply and sell them at a profit to end customers. You can also call them middlemen and these have always been around. In the past, traveling traders earned their living from this and almost every shop actually works according to this principle. In the age of the internet, however, this way of making money has become a lot easier. Because the internet has revolutionized the old sales channels and processes. Customers are able to place orders without delays. Countless sales channels are available to you, whether online shops, product search engines or wholesale markets such as eBay and Amazon. And it is precisely the Internet that has made a new kind of distribution possible. Since all of these sales channels were opened up online, there is no need to have a stock. If you order in an online shop, you don’t know where the goods you have actually ordered are.
Dropshipping as a special form of Resale
So nowadays a reseller needs not necessarily a sales room, shelves or storage space to bring the offered items to the end customer. And that is exactly what makes the difference between classic resale and dropshipping. In dropshipping, the middleman does not need his own inventory, as the goods sold are sent directly from the wholesaler. This saves additional storage and administration costs, and consumers benefit from the low prices. Many entrepreneurs invest their money in this type of business, as it has many advantages over traditional resale. Since reselling is nothing new, it can be said that there are also many dropshipping contenders among resellers in Germany. The difference between resale and dropshipping is that the manufacturer or wholesaler does not first send the ordered goods to the reseller but directly to his (end) customer, without appearing visibly with a logo, delivery note, invoice or shipping label. In summary, dropshipping is a special form of resale that was only made possible by the advent of the Internet and the resulting e-commerce.