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Drop Servicing vs DropShipping: Introduction
Drop Servicing vs Dropshipping.
Both are two scalable business models that we are going to compare to each other today.
We will be taking a look at:
- What both of these business models are & how do they work
- The Key Differences
- Pros & Cons Of Both Business Models
- How To Get Started With Either
As you can see, after reading this post, you should have a good understanding of which of these two business models is for you.
What Is Drop Servicing & What Is DropShipping
Drop servicing is a business model where you sell services.
However, instead of doing the service yourself, you outsource the work to somebody else who offers the service for a cheaper price than what you charge.
The difference between the two price points is your profit.
So, you are not actually doing the service yourself.
Instead, your freelancer (or whoever else you buy the service from) does it.
In case you are wondering with what services you can do this, here are some of my favorite ones:
- Social Media Management
Related article: The Best Drop Servicing Niches [Most Profitable]
Dropshipping is the same concept as drop servicing, but with physical products.
You sell products, but when somebody makes a purchase, you go and purchase that product from your supplier and ship it directly to your customer.
Of course, you charge a higher price than your supplier and the difference is your profit.
Shipping, production, etc. are all handled by somebody else.
You also don’t need any inventory, warehouses, or anything like that.
Drop Servicing vs DropShipping: Key Differences
Apart from the main difference which is that one sells services, whereas the other sells physical products, there are also some other differences which we are going to be talking about in this section.
- B2B vs B2C
- Dropshipping is less recurring
- Harder to understand in different aspects
For more detailed explanations, see the explanations below.
Drop Servicing Has Higher Margins / Dropshipping More Quantity Of Sales
On average, drop servicing has higher margins.
I believe dropshipping profit margins are usually around 30% as a rule of thumb.
Drop Servicing margins are often 300%-500%.
However, this doesn’t mean that you can make more money with Drop Servicing, as dropshipping makes up for these margins with more sales.
Drop Servicing is B2B whereas DropShipping Is B2C
There may be some exceptions to this but usually drop servicing is B2B, while dropshipping is B2C.
This is also another reason why drop servicing has higher margins because B2C businesses you usually make more sales.
One isn’t better than the other, but it’s important to note the target audience difference.
Of course, when you are selling physical products there is some shipping involved.
Yes, a dropshipping store does not handle it, but it can still cause potential issues on orders.
Additionally, there is also a shipping cost which adds up on larger volume of orders, so it is important to take it into consideration.
DropShipping Is less recurring
There are some exceptions to this.
I have seen a couple of dropshipping stores that have added a recurring supply of what they are selling.
However, usually speaking, dropshipping stores have less recurring sales.
With drop servicing there is a lot more room for recurring deals.
Again, this isn’t necessarily a disadvantage for dropshipping stores, as they make it up with a bigger quantity of sales.
Harder To Understand In Different Aspects
With drop servicing, it’s harder to understand the service.
For example, if you were to sell a service related to SEO, you kind of have to know a little about SEO in order to do so.
If you are dropshipping and you sell a posture corrector there isn’t really too much to understand about the product.
However, I think that dropshipping has a little more technical aspects to learn when it comes to:
- The store
- Order fulfillment
So, they both have their own learning curves.
Pros & Cons Of Drop Servicing
Pros Of Drop Servicing:
- It’s Scalable
- Big Margins
- Little Experience Required
- No Shipping, Inventory, etc.
- Low Start-Up Costs
- Low Competition
Cons Of Drop Servicing:
- May be hard to understand some services
- For a complete beginner, it might be hard to sell B2B services
- You are liable if the freelancer doesn’t deliver as promised
Pros & Cons Of DropShipping
Pros Of Dropshipping:
- It’s Scalable
- Bigger Quantity Of Sales
- Little Experience required
- No Inventory
- Low-Start Up Costs
- Low Competition (sometimes)
The reason I say low competition is because you can sell whatever you want.
If you really dig deeper into AliExpress or other suppliers, there will always be low-competition markets.
Cons of Dropshipping:
- There is shipping involved (usually from China)
- Some technical learning curve
- You are liable for your sale
I know you don’t handle the shipping yourself, but it’s still a con for me as it can bring potential issues if you have a bad supplier.
How To Start Drop Servicing
If you would like to start drop servicing here are the steps you need to take:
- Find a service from freelance marketplaces such as Fiverr
- Build a store around that service (charging more)
- Advertise to people interested/looking for it
- When you make sales, you purchase from your freelancer/supplier
- You deliver the order
For more info: How to get started with Drop Servicing
How To Start DropShipping
Here are the steps to start DropShipping:
- Find a product from suppliers such as Aliexpress
- Build a store around that product (again charging more)
- Advertise to people interested
- When you make sales, purchase from your supplier and ship to your customer
- You deliver the order.
Of course, there is a lot more to it. These are just the steps broken down as simple as possible.
If you would like to get started with dropshipping: How To Start a Dropshipping Business
Drop Servicing vs DropShipping: Which One Is Better?
Both are great business models, they are just a little different from one another.
There isn’t a better or worse option here, they are just different.
Personally, I prefer drop servicing as it suits my skillset better, but that might not be the case for you.
Drop Servicing has become increasingly popular in the last couple of months, despite the business model itself being around for a long time.
Dropshipping has been around for a long time too but is definitely far from dead. In fact, it’s growing significantly.
As you can see, there really isn’t a right or wrong decision here, so I’m not going to tell you that there is.
Drop Servicing vs DropShipping: Conclusion
Both of these business models are great opportunities in the current world of online business.
They are both scalable and pretty fun, so there really isn’t a right or wrong choice as I mentioned earlier.
Which business model do you prefer and why? Let me know down in the comments.
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