Traditional Dropshipping VS Going Direct With Wholesaler/Supplier: Which Is Better?
When you’re starting off in the eCommerce industry, chances are almost 100% of the time you will be doing dropshipping via AliExpress.
The flow goes like this: When a customer buys a product on your shopify store, you will simply head to AliExpress and order that specific product for your customers. If you have Oberlo, the process is almost automatic as you just process the order from the Oberlo shopify app itself.
It’s convenient, it's simple, and you’re at the stage where very minimal risks are involved.
But as you slowly mature into the industry, the time will eventually come when you will start building business relationships with your suppliers or wholesalers. More than likely, you would probably be dealing with orders outside AliExpress.
Let’s look at the following example. Who has an advantage in this situation?
Person A is purchasing stocks at $1.50 from the same supplier that he/she had known and had built a business relationship with.
Person B is purchasing stocks at $2.00 from AliExpress from the same supplier that he/she doesn't even knew of (no business relationship, nothing at all).
Well, most people will say person A because he/she gets an additional $0.50 per conversions. But what if person A ends up having their products being delayed in shipping out or worse, being played out by his/her supplier? Person A will bear the full brunt of the fury from his/her customers as well as having his/her shopify store reputation ruined.
Person B however, is less likely to run into these kinds of issues and he/she gets the flexibility of changing to another supplier in AliExpress if ever such a situation arises. Because AliExpress has a "seller ranking system" where good and poor buying reviews would affect the ranking of the supplier. And obviously a poor ranking seller would have their products displayed at the bottom of the search engine in AliExpress. Now it’s person B who won.
And no, I'm not telling you not to go direct with your supplier. In fact, it would be wrong of me to give you a biased point of view. I am here to widen your perspectives on the possibilities on what you will face if you intend to go direct with your suppliers.
As you can see, it’s not as clear as black and white when it comes to deciding whether to go through the normal channel in AliExpress or to deal with suppliers directly. Each option has its own distinct advantages, and a good dropshipper is able to tell which is better for each situation.
In this post, I’m going to explain the pros and cons of each and give you some advice on how to go direct with your suppliers.
Direct vs Traditional
Product Cost is the first thing that comes into our mind, and it's also the main advantage of going direct.
Since you’re going to go direct and build business relationships with your suppliers, chances are that if you managed to negotiate with them, you will get a slightly better off prices as compared to original AliExpress displayed prices (i.e $1.80 instead of $2.00).
(A sidetrack here: If you're dealing with AliExpress suppliers, chances are that your supplier is likely to be a chinese. In the world of business and entrepreneurship in China, the chinese strongly believes in building up connections and business relationships when doing business. In chinese this is what they called "Guanxi". Guanxi loosely translates as personal connections, relationships or social networks. Having good, bad or no guanxi impacts one’s influence and ability to get things done, or gaining access to exclusive deals and rights.)
Few years back, I wanted to sell this special anime themed umbrella in AliExpress, and the cheapest I could find in AliExpress is around $2.70 I could remember. However, I tried asking one of my existing suppliers directly even though I usually gets sports apparel stocks from her. Which to my surprise, she said that she could help me get the umbrella stocks at a price of $2.30 per umbrella. You see, by going direct with my suppliers, I managed to get a additional $0.40 advantage as compared to my competitors.
That's a approximately 14% margin advantage.
14% may not seem much on face value. But imagine if you managed to scale up your products to 6 figures, that is a good $14,000 of additional savings or profits at the bare minimum.
Getting Your Items Shipped
When you go direct with your supplier, you have a higher risk of not getting your items shipped. Why is that so? Because you have cut off the middleman which is AliExpress. Now it is entirely between you and the supplier, and they decided to play you out by not shipping your customer's products. What are YOU going to do about it? You can’t do much. You’re a single dropshipper without any power. Good luck suing a corporation located in a weird rural place in china.
Things will be different if you and your supplier are dealing via AliExpress. If your suppliers decided to not ship your customer's products, you can simply just give them a bad review onto their store which will affect their store rankings. Nothing can sink their AliExpress store faster than multiple bad reviews and poor rankings that they’re not delivering their products.
Going direct with suppliers have various risk levels. Be smart, and do your research. Shady and unethical business are everywhere, not only in China.
Truth to be told, I don’t like to compete against other dropshippers. I’m basically selling the same items like other dropshippers that can be found in AliExpress, and sometimes it feels like I could have milk out the product even more if there are no other dropshippers selling this product as well. Being able to scale as high as 6 to 7 figures is about having an edge and having competitive advantages.
I spend a lot of time building strong relationships with my suppliers in China. Occasionally, I even flew to China and meet up with my suppliers. They stop seeing me as just another individual who simply just purchase from them in AliExpress, and they start seeing me as a business partner.
In fact, I'll have you know that a good number of my best selling products weren’t even on AliExpress (or even Amazon for that matter). My suppliers had exclusives products just for me to sell. And my suppliers is kind enough to allow me to just pay only when my customers made an order from me instead of requiring me to purchase in bulk first.
If I have the exclusive, I don’t have to worry about other dropshippers competing with me on this particular product that I'm selling, as they won't be able to find it on AliExpress anyway even if they managed to find it using spytool.
How to Go Direct with the your Supplier?
This is where the test of taking your dropshipping business to serious business comes in.
It is a lot easier than you think. Simply just PM your supplier in AliExpress and start building a business conversation with your suppliers. For a start, you can try negotiating with your suppliers whether are they able to help you to fulfil your orders in one go by sending them a list of your customer's orders via a document file.
Slowly, as your business relationships with your suppliers starts to improve, you can start to go direct with your suppliers. And from there, you can meet them face-to-face by flying over to China and meet them in their workplace.
Chances are, majority of these suppliers are actually retailers who are resellers themselves, that's a well-known fact. But however, what you may not know is that these suppliers have lots of contacts and connections with the factories where they source their products from. In short, by leveraging on their connections they can virtually source for any kinds of products that you want.
As you can see, there are different pros and cons to going direct with your suppliers.
This post is NOT meant to encourage or discourage you to go direct with suppliers, but rather to widen your perspectives on the possibilities on what you will face if you intend to go direct with your suppliers.
There are thousands of suppliers out there in AliExpress, and most of them are willing to go through the extra mile for you. Yet there are some who aren’t willing to. The most important point I want you to takeaway is not to source for products solely based on overall price. Instead, source from the suppliers who are willing to go through the extra mile for you.