This article discussing some product choice considerations. Are you having trouble deciding whether to start with drop shipping, OEM, or ODM?
SUMMARY
- Drop shipping is relatively cheap as the business will be the middleman and have no products. See Drop Shipping Pros and Cons.
- OEM products may require the business to hold inventory and purchase product in bulk. The business will be able to brand the product and improve the brand a little bit easier. See OEM Pros and Cons.
- ODM products may require the business to engineer and design their own product and supply those designs to the manufacture. More simple products will require less resources to develop compared to a more complex product. See ODM Pros and Cons.
- You can also scale the business from drop shipping to OEM to ODM as the business grows its brands and products.
- Whether you build your product OEM or ODM, you should always be thinking about your intellectual property. This will be one of the main values of your product.
Below are some considerations on where to start:
STARTING WITH DROP SHIPPING
Drop shipping is always an easy place to start because it requires the least amount of resources. A business can take a small investment, without having to hold any inventory, to start the business or to test whether the market will like your product you have chosen and build your brand. If the product sells well, the business can add more products to drop ship. Once there is enough products to fund the business, it can move to more expensive products.
The next step is if the business is prepared to purchase in bulk, it can move to OEM products. Moving to OEM will provide the business with more product at a lower price. The business may be able to design the outside of the product and add its brand itself or have team to help design. As your brand builds, it will be important to have a unique product to add additional value to the brand.
The final step is moving onto ODM. Depending on the product, the business may need a team to assist on building and developing the ODM product. Since the product will have its own specifications, the business will need to have an idea for their own product or develop an improvement of the current product they are selling. This may require a team for R&D, UX/UI, and design to be able to fully develop a good ODM product.
STARTING WITH OEM
A business starting with OEM will require more resources than drop shipping. The business will need more money and storage to hold the products. In drop shipping, the business is acting like a middle man, they are not actually purchasing the product. In OEM, you can buy each product individually, however, usually both the business and manufacture will want to purchase the products in bulk. The business will have to store a large amount of the product but they may be able to get a lower cost on the product.
The next step can include doing either ODM or drop shipping. If the business focuses on their OEM product, they can add drop shipping to increase their revenue without spending much extra money. The business can also scale to developing their own improvements on the products through ODM as explained above.
STARTING WITH ODM
Starting with ODM may require the most resources. It is the same as starting with OEM, however, the business will need resources to create an idea or improvement on the product of their choice. In addition, the business should be able to engineer and design the products with their own resources. This can range from basic improvements to fully new inventions.
Starting with ODM does have less competition since the business will be selling a product that has an improvement or a new product that has not been seen in the market. If your product is a relatively basic product, creating a new design or improvement will be easy to do and cost less resources than a product that will need to be engineered.
The business can always include drop shipping and OEM products into the business while focusing on the ODM product. In addition, drop shipping and OEM products can eventually turn into ODM products once the business is able to focus more resources on the product.