Direct purchasing vs. Dropshipping: A Comparative Guide

What is Direct Purchasing?

Direct (online) purchasing is a form of wholesale shopping where buyers purchase stock directly from sellers. There are different forms of direct purchasing - from wholesale shopping appointments, trade shows, and online marketplaces. Orderchamp operates as a direct wholesale purchasing marketplace, bringing together a variety of brands and products in one convenient location. Think of us as your local trade show, but then online! This traditional wholesale model is well-suited for businesses that prefer having direct control over their inventory and are looking to build a diverse product range, offering several key advantages but also potential hurdles, listed below:

Pros of Direct Purchasing 

1. Comprehensive product & brand selection: Gain access to a wide variety of products from thousands of brands, making it easier for you to curate a unique product assortment that matches your store’s identity and customer preferences.
   
   
2. Increase your buying power: Direct purchasing sources like Orderchamp often have special offers and discounts for retailers to enjoy when doing their wholesale shopping. On top of that, suppliers have their own deals, often offering bulk discounts and exclusive deals for repeat B2B customers. This ultimately means you can improve your margins and profitability!
   
   
3. Direct brand relationships: Whether you’re directly purchasing online or offline, doing business in this way offers an extra level of personalization! You can get in touch directly with brands for better collaboration, exclusive offers, and insights into upcoming trends and business strategies. At Orderchamp, our curation process selects established brands that have consistent product quality and reliability.

Cons of Direct Purchasing 

1. Inventory management challenges: Managing inventory can require the use of certain robust systems and processes, which could lead to more complex operations. On top of that, there is always a risk of overstocking or understocking, potentially causing cash flow issues or missed sales opportunities.
   
   
2. Initial capital requirements: Buying stock requires upfront investment to purchase the inventory, which might be challenging for businesses with limited capital. This can especially be the case with reaching minimum order values. On top of that, handling extra stock requires additional space and resources.
   
   
3. Logistical responsibilities: Ultimately, the stock you purchased becomes your property. That means that everything that revolves around these sales, is also your responsibility. Processes such as storage, inventory management, shipping, and returns add to operational workload and complexity.

An online wholesale marketplace, like Orderchamp, is a great way to start doing your direct shopping online. The selection is extensive, it’s easy to find inspiration, and you can even benefit from extra offers that you may not get with offline and traditional wholesale. However, this typical wholesale model also comes with its obstacles . Do you still prefer to do business this way? Luckily Orderchamp has taken all the challenges of online wholesale in mind, offering solutions for all the difficulties that come with buying your own inventory. For example, we’re hosting our Low Minimums event from 16-26 May where the minimum order amounts on thousands of brands will be lowered to €50, helping you reach order minimums when buying for your business. Looking to scale your business without an initial investment? Then maybe Dropshipping by Orderchamp is the solution for you.

What is Dropshipping?

Dropshipping allows you to sell products online, directly from suppliers without holding or buying any inventory. Automatically connect a supplier’s inventory and product details to your webshop, selling it seamlessly within the rest of your collection. This model is ideal for businesses looking to minimize upfront investments and who want to focus on scaling quickly. We summarized the main pros and cons of a dropshipping wholesale model below.

Pros of Dropshipping

1. Minimal starting capital: One of the biggest benefits of dropshipping is that there is no upfront investment required to sell your inventory. The wholesale price is only paid when a sale is made, allowing you to sell inventory without initially paying for it.  This can be ideal if you want to test new products and market demand without the financial risk.
   
   
2. Operational efficiency: Simplify your store’s operations by eliminating the need to manage stock levels, storage, and shipping. With dropshipping, the order fulfillment process gets completely automated, as the supplier ships the product directly to the customer. This allows you to save time and difficulties in your operations.
   
   
3. Flexible product offering: Quickly adapt to market or customer trends by adding or changing products in your collection without the need for physical inventory. Dropshipping allows you to effortlessly expand your product range, which also offers opportunities in exploring different markets and niches.

Cons of Dropshipping

1. Lower profit margins: Generally, dropshipping solutions tend to have slightly lower profit margins when compared to direct (bulk) purchasing, mainly because suppliers will include their costs in the price. This may ultimately have a small effect on your competitive pricing as you’re dealing with thinner margins.
   
   
2. Less control over the supply chain: While it can be really beneficial to have outsourced a big part of your operations, this does mean you may have limited control over aspects such as shipping times, product packaging, and branding - all of which can impact your customer’s store experience. Ultimately, these are always factors that can be flexible and you can discuss with your supplier.
   
   
3. Supplier dependency: As your supplier is the one responsible for the post-purchase customer experience, your brand reputation may be impacted by a supplier’s mistakes or product quality issues. Additionally, changes in your supplier’s inventory or terms can have a direct effect on your product offerings and delivery times.

Dropshipping allows a lot of flexibility and potential for scale and financial growth. Sometimes it sounds too good to be true, and ultimately it is up to the store to really sell the products. However, if you are successful in the dropshipping business, it will allow you to grow your business in a faster and more efficient way than traditional direct purchasing offers. Our dropshipping solution, Dropshipping by Orderchamp, curates a selection of top brands that you can sell on your platform without the initial stock investment. Our service has purposely eliminated most of the cons of dropshipping, allowing you to truly benefit from this high quality solution.

Making the Right Choice for your Business

So what is the right decision for you? And how can you determine this? We’ve lined out the main factors of when to choose which solution for your wholesale shopping. 

When to Choose Direct Purchasing

• You don’t have an online shop.
• You have the resources to invest in inventory.
• You prefer to have full control over your brand and supply chain.
• You aim to establish direct relationships with manufacturers and suppliers for better pricing and product exclusivity.
  
  

When to Choose Dropshipping

• You have an online shop.
• You want to start or scale your business with minimal financial risk and operational overhead. 
• You prefer to test different markets and products quickly without the commitment of large inventory volumes.  
• Your business prioritizes flexibility in product offerings and ability to adapt to trends or changing customer preferences. 

Both forms of wholesale shopping can be an optimal solution for your business. In fact, we find the most successful businesses are combining direct purchasing and dropshipping wholesale solutions. Their main collection is filled with online and traditional wholesale purchasing, really bringing their own eye and taste into their product selection. The rest of their collection is then presented through a dropshipping catalog that they have automatically implemented onto their webshop and are able to test new products with, while easily (re)selling their bestsellers without extra effort. By carefully assessing your operational capabilities, market goals, and customer needs, you can select a model (or both) that supports your growth and enhances your market competitiveness. 

While dropshipping typically doesn’t have a great reputation, Dropshipping by Orderchamp offers the benefits of dropshipping while eliminating its  biggest concerns and challenges. Do you have your webshop in Shopify, Woocommerce, Magento, Shopware or Lightspeed? Seamlessly and automatically connect broad catalogs from multiple brands to your webshop and start Dropshipping by Orderchamp! Prefer to shop directly? Visit our marketplace to get started!