CBD Dropshipping vs. Wholesale
21 July 2021
If you plan on starting a CBD online store, one of the first questions you should ask yourself is – CBD wholesale or dropshipping? Providing the right answer to this will determine the eventual fate of your business.
And to provide this right answer, one needs to understand the concepts of CBD wholesale and dropshipping. We are guessing that is what brought you here, and you will not be disappointed.
This article will walk you through both CBD wholesale and dropshipping, considering what they are, their differences, legality, pros and cons, and, of course, which is best for you.
What Is CBD Dropshipping?
It is impossible to define and understand CBD dropshipping without first understanding dropshipping itself.
Dropshipping is essentially selling products you don’t actually own. Yes, we know that doesn’t sound right, but that’s exactly what it is.
The way this works is you get an order from the buyer and process it on behalf of the supplier. So, in a way, you are serving as some sort of middleman or mediator that helps to process orders for suppliers. Call it third-party selling, if you will.
Now that we have that out of the way, what is CBD Dropshipping? Simple. CBD Dropshipping is the act of dropshipping CBD products. Customers place an order for the CBD products, and you process this order for the supplier. The supplier of the CBD products then ships them directly to the customer. As you can see, you don’t actually own the product you have sold. The selling of the products is usually done on your website or any online marketplace.
You can ask for permission from the supplier to help sell their products on your website, and once you get this, you start taking orders and forwarding them.
What Is CBD Wholesale?
CBD Wholesale involves selling products you own and bought in bulk. Yeah, yeah, that sounds too generic, but it’s the basic idea of wholesale. For CBD wholesale, you will have to place a bulk order of some CBD products from a supplier, store them, advertise them on your website, take orders, package them, and ship them to the buyers.
The products you buy in bulk are actually yours. So, it’s basically you selling your goods to customers on any online platform.
Difference Between CBD Dropshipping and CBD Wholesale
If you’ve been following, you will already know the primary difference between CBD dropshipping and CBD wholesale, which is product inventory or ownership. For CBD dropshipping, you do not need to own the products you are selling, while for CBD wholesale, you need product inventory.
The difference between CBD wholesale and dropshipping is not so much how you make a profit because they involve the same idea of placing orders for products from suppliers and selling them at retail prices to customers. Instead, it’s about how you buy the products you sell and whether you actually own them.
Is CBD wholesale and dropshipping legal?
One thing we will always emphasize is the legality of any CBD supply and marketing business. There’s no point studying CBD dropshipping and wholesale if they will end up being useless to you. Later on in the article, we will discuss risk-taking, but the legality of the business is one risk you must not take.
So, is CBD wholesale and dropshipping legal? That depends on where you live. CBD dropshipping is legal in the US and EU but not in some other countries. Even in the United States, where it is legal, there are still requirements that must be strictly followed.
In any case, your safest bet is to confirm with local authorities on what is legal and not. This isn’t just on the country level now because some states within the same country may have different regulations on the sale of CBD products.
Social Media and CBD Wholesale and Dropshipping
While advertising products on your social media platform doesn’t qualify as illegal, these companies usually frown at sponsored posts advertising CBD products, particularly wholesale CBD products. You can link the product in your natural posts on apps like Twitter, but you still need care when dealing with advertising CBD products.
If you break the law, you will get punished. The same applies to social media regulations, although the consequences aren’t nearly as grave. You may get your account restricted, suspended, or even outright deleted. All of these aren’t good for your brand.
Pros and Cons of CBD Dropshipping
1. Low Start-Up Cost
Perhaps the most significant advantage of CBD dropshipping is the low start-up cost. This makes sense as you don’t need to buy products upfront and store in an inventory. The only time the CBD seller has to cough up money is when an order is placed for the product by the buyer.
We likened CBD dropshipping to third-party selling, implying that many of the overhead costs of the CBD products being sold are borne by the supplier of the products. The suppliers are also the ones that ship the products to the customers.
Generally, whoever is dropshipping has very little influence on the packaging, transporting, and storing of products, which correlates to reduced costs.
2. Minimum Business Risk
Well, this just makes sense, doesn’t it? The fact that you don’t have to pay for all overhead costs means you need low capital for the business. Low capital equals low risk.
Then, since you also don’t own the products, you don’t need to worry if they get sold or not. And given the nature of the CBD industry, where a state can just make any radical decision to ban the sale of some CBD products, having the lowest possible risk on products is definitely a plus.
3. Sell Wide Range of Products
Another pro of CBD dropshipping is the ability to sell a wide variety of products and brands. There isn’t any inventory or anything of the sort, so you don’t have to limit your advertising only to the products you have. You can sell several different types of CBD products, and this opens you to relationships with many suppliers and customers.
Again, if you notice one product isn’t exactly raking in too much money, you can easily switch to another without any cost implication.
1. Reduced Profits
You guessed it, didn’t you? Because you don’t order in bulk and the supplier covers virtually all of the overhead costs of the CBD products, your profit is significantly reduced. To make reasonable profits, you have to sell huge volumes of the product, and when you consider the competition in the industry, that’s not exactly the most viable option. This is the chief disadvantage of not owning the CBD products you sell.
2. No Chance for Branding
When a customer places an order on your online platform, you relay it to the suppliers. The suppliers then take on the bulk of the job from there, up till the delivery of the goods to the customer. This essentially removes you from the equation, making it very difficult to develop and popularize your brand. What makes matters even worse is, while the positive effects and feedback don’t usually rub on you, negative reviews may affect your brand a lot. And since you don’t own the products, it is impossible to properly ascertain the products’ quality.
Pros and Cons of CBD Wholesale
1. Increased Chances for Profit
If the major downfall of CBD dropshipping is reduced profits, it is the major upside to CBD wholesale. Because you buy in bulk, you will get a better price return per unit you sell, as you will sell at a higher price. In addition, the more units you buy, the better the discount you get on the stock. Therefore, the chances to make more profit are increased.
2. Proper Branding of Products
Branding is everything in business. One of the reasons CBD wholesale is preferred among many merchants is the ability to customize the unboxing experience clients get. Also, recall that you actually own the products you sell in CBD wholesale, and, by implication, it is your responsibility to deliver them. This enables you a high level of control over order fulfillment and will contribute to brand development.
3. Sale of Established Products
Another contributory factor to the increased chances for profits is that CBD wholesale exposes you to well-known and established products with a proven track record, making you more credible as a vendor. If you also do business with an established supplier, you will have a faster sales turnaround, corresponding to more money.
1. Greater Risk
The main disadvantage of wholesale is its increased risk. There is no assurance that the products you purchase in bulk will actually sell, and it will be sad, very sad, to buy tons of products and then have them waste away in the inventory. And you need to buy lots of products to realize a significant profit. Of course, you shouldn’t shy away from risks in business, but not all businesses can afford to take these risks.
2. High Competition
The competition in the CBD wholesale industry is just ridiculous. This is primarily because the products you’re buying and reselling are branded products that buyers are usually quite familiar with, and many resellers will be trying to resell these same products. This means you have to compete with the other sellers of the product, which even increases the risk for failure of the business, particularly as a startup or small business.
3. Big Inventory Space
CBD wholesale involves buying CBD products, storing them in a warehouse, and reselling them at a higher price. The buying and selling aspects are quite straightforward, but the storing aspect can be quite bothersome.
To start with, you first need to procure an inventory space, usually a warehouse. This will cost you money. And then because you need to buy lots of products, the inventory space has to be big, which will cost you even more money.
At the end of the day, you may end up eating deep into your profits in the process of managing your inventory space.
CBD Dropshipping vs. CBD Wholesale: Which Has the Edge?
We always get asked this question, and our answer is always the same – it depends on you. This is why we have collated the pros and cons of each for you to peruse and decide on which is best for you.
Of course, as a startup, the goal is to grow fast while also making reasonable profits. And while at this, you need to ensure you don’t take unnecessary risks too. These all seem to favor CBD dropshipping for small businesses just focused on not losing money. However, for companies with a huge capital base and willing to take big risks, CBD wholesale may be the way.
Again, it depends on you and your business. Consider all the facts and make the choice that will be best for you.
CBD Dropshipping vs. CBD wholesale is something we never seem to hear the end of. But for a good reason, as merchants have to be sure of what they are entering before taking any radical steps. Both involve buying from a supplier and selling at a higher price to customers, but they differ in products inventory.
Businesses that aren’t willing to take risks and are operating on a low capital may prefer CBD dropshipping, while those that can afford these costs and risks may prefer CBD wholesale.
If you need more help and assistance in making the right decisions for your business, we know just the right people for you – Us! Digital Octane is an eCommerce website development for CBD sellers and related SEO services.