Bulk vs Dropshipping: Which Is The Best Option For Your Business?
If you're thinking about starting a skincare business, you may have already come across the terms “dropshipping” and “bulk ordering”. For a product-based business, deciding on a business model can be a critical decision. Each method comes with its own set of advantages and drawbacks, making it essential to weigh the options carefully before getting started.
In this article, we want to explain the difference between bulk ordering and dropshipping. Hopefully, this will help you decide which of the options aligns best with your business goals and needs.
Understanding bulk ordering
Bulk ordering involves purchasing goods in large quantities upfront, typically from a supplier or a manufacturer. Then it's up to you, the entrepreneur, to process, package and deliver each order. This can be the option for you, if you have a physical store or a place, where to store stock.
One of the main advantages of bulk ordering is having more control over quality of the product. While you won't be able to affect the product formula in the case of white label skincare business, you can double-check every single item you receive. What's even better, is that you can add a personal touch to the final package, that's going to feature your product. For example, this can be a handwritten “thank you” note, a small sample gift or little brand merch.
Another major advantage is the possibility to create product bundles or gift sets without being limited by the manufacturer's options. Let's say you're using more than one supplier, then, by ordering in bulk, you can compile different items into the same package and send it to your customer. Or, even if you're using just one supplier, you can still create your personal bundles or sets, that you put together and send in one package.
The third-biggest advantage definitely is higher profit margins. When you combine the ability to brand products with the ability to directly supervise quality control, on top of partnering with suppliers that offer better per-unit pricing, you end up with much higher profit margins.
Quadrupling your profit margins is exactly what businesses need to reliably scale, which is why successful dropshippers often turn to bulk ordering to grow their business further. To see an example in numbers, how bulk ordering can significantly increase your profit margins, read here.
Of course, bulk ordering also has some downsides, the biggest of them being inventory storage.
When picking bulk ordering as your business model, you also have to secure a place, where you'll keep all the products. This can be a separate closet, room, or even a larger storage space or warehouse. Filling up a separate storage space or warehouse can mean you're going to rack up storage fees. Even if you end up with a few large boxes in the corner of your room, this can also be as a reminder of how many or little sales you have made, building unnecessary pressure.
Bulk ordering also requires higher upfront investment, because you are paying for the products upfront. This means you need to have the necessary funds available to make a large order, plus guarantee a storage space. In addition, it's common for suppliers to have high minimum order quantities (MOQs). If you aren't careful with choosing a good supplier, you can end up with hundreds or even thousands of units of product you can't sell.
Here, we must remind you, that Selfnamed doesn't have MOQs. Meaning that you can order as many products as you want. But, we do recommend ordering at least one of each of the products you wish to sell, so you can test it out for yourself.
Exploring dropshipping
Dropshipping involves partnering with a supplier or manufacturer who handles the production, storage, and shipping of products on behalf of the entrepreneur. When a customer places an order, the supplier ships the product directly to the customer, eliminating the need for the entrepreneur to hold inventory or manage fulfilment. Needless to say, that this is one of the biggest advantages of dropshipping.
Apart from worrying about production, shipping or storing of products, perhaps the primary advantage of dropshipping is the low investment.
Since you only have to pay the supplier once the customer has placed an order, you don't have to make the initial investment of buying inventory. You also don't have to worry about paying for storing products or shipping expanses. This makes dropshipping a low risk business model, which is particularly a good option for new entrepreneurs.
If we have to name another advantage, then it's the opportunity to test new products. Since a big part of the success of a dropshipping store relies on standing out from other brands and companies, it's a great way to test new products to a new market. Often enough, even experienced and already established entrepreneurs use dropshipping model to test the market before making investments in inventory and storage.
To name a few disadvantages of dropshipping, we have to mention low profit margins, product quality and delivery times, and brand building difficulty.
Products that are dropshipped usually may end up having a higher cost per unit, which means the profit margin will be lower. Nonetheless, every seller is responsible for setting their own profit margins as high as necessary in order to scale their business. Selfnamed recommends a 40% profit margin as a minimum, which you can learn more about here.
Since all orders are manufactured once ordered and sent directly to the customer, dropshippers don't have any control of the quality. This is yet another reason why you must choose a good supplier, that you can trust. Of course, issues are inevitable and there are many external factors, that can affect the order on its way to the customer, but a good supplier will be forthcoming and help you sort things out.
As for the brand building difficulty, it's important to remember that there can be limits to how the product will look in terms of packaging. While you can add your own design and customise the packaging, you are still limited to the packaging and labelling options that your supplier offers. Similarly, you need to have a good branding strategy in place, as you are competing with other skincare dropshippers in the ecommerce space.
Choosing the right option for your business
So, it's clear that both, bulk ordering and dropshipping, have their pros and cons. Which makes it even clearer, that you should carefully weigh the options before choosing which is the best one for your business. To help you, here are some scenarios in which you should pick one or the other.
Do you have limited funds? Dropshipping might be more suitable for you.
Do you want to maintain control over customisation options and inventory? You should go with bulk ordering.
Do you have a brand idea, but you're not sure how well it would do in the market? Choose dropshipping.
Are you considering long-term growth plans and need a solution that can easily accommodate increased demand and product expansion? Here, either can work, or you can even decide to go with both models simultaneously. For example, you have a physical store, for which you order in bulk, and also an online store with dropshipping option.
At the end of the day, the right option for your business will depend on your budget, goals, and preferences. By carefully weighing all the pros and cons of each model, you can make a decision that helps you start your skincare business on the right foot.
How To Start Your Own Skincare Line Using Selfnamed
Selfnamed is here to help create your own skincare line by making the process as simple and seamless as possible. As soon as you decide on your ideal customer and product range, there are only a few simple steps to take:
Select product sample sets. You can choose from more than 30 high-quality, organic or natural certified skincare products made in Northern Europe.
Add your style. Selfnamed offers an easy-to-use design studio to create labels and packaging. You can work with pre-made print-ready templates or create your design from scratch. You can also choose our design service.
Start selling your products. There are no minimum orders, meaning you can easily adjust the volume to your needs.
Before making a custom order, we recommend looking at our sample set selection. These sets contain curated product lines for different skin types, letting you choose the best products for your brand. This way you can test the products — their consistencies, textures, fragrances, as well as packaging quality.
There are the basic steps on how to start a skincare line from the comfort of your home. Best of luck with your new endeavour!
