The popularity of DIY marketplaces like Etsy has many merchants wondering if there’s money in creating custom products locally. After all, 96 million active customers is serious money. Before you jump on the hype train, it’s important to consider whether print-on-demand is really more expensive than stocking locally.
Which Business Model Is More Expensive: Print-on-Demand or Stocking Local Inventory?
Comparing print-on-demand and local inventory management costs gets tricky because there are so many factors involved. The prices you see personally vary a lot depending on your state and how large your city is. Finding warehouse space in suburban Dallas, TX, costs a lot more than leasing a building in cozy Poplar Bluff, MO.
In general, print-on-demand provides lower profit margins and higher total costs per product, but your startup capital needs are extremely low. On the other hand, stocking inventory locally means you have to put up a lot of cash yourself, but potential profit margins are much higher (as long as products sell).
What Is a Good Profit Margin for Print-on-Demand?
Don’t get us wrong; print-on-demand products can deliver fantastic profit margins compared to mainstream e-commerce sales. Some Shopify merchants make 20% to 40% on their products. Others average closer to 10%, which is pretty common for apparel retailers.
Print-on-demand typically allows for higher profit margins because you’re selling something unique and hard to find elsewhere. Of course, how much people are willing to pay for your product depends on your niche.
Prices will vary depending on your product type, whether your POD platform charges per order, and your shipping fees, particularly if you ship internationally.
What Are the Costs When Stocking Local Inventory?
At first glance, the local stocking route seems like a no-brainer. If you can find affordable warehouse space, connect with a cheap supplier, print products yourself, and build a brand people love, you stand to make profit margins that often start at 30% and go as high as 220%. The only problem: That’s a lot of ifs.
Leasing Warehouse Space
Unless you live in the country and have a large barn, you’re going to need to lease storage space. This expense comes due every month — sales or no sales.
Overhead
Don’t forget about electricity costs, AC, and other business expenses. You must also pay for shipping from suppliers and equipment for printing/customization.
Employment Expenses
As your store grows, you’ll need to factor in the costs of hiring and training employees, as well as payroll and unemployment taxes. Managing inventory and preparing orders takes time, and hourly wages are high in many places.
Insurance Costs
Warehousing often requires business insurance. Liability insurance and worker’s comp plans are two examples.
Which Is the Better Choice: Print-on-Demand or Local Inventory?
Comparing print-on-demand and local storage is about risk versus reward. Inventory takes more time, effort, and money, but your long-term profits may be higher.
Print-on-demand is safe and easy. You’ll probably make less per item, but you can put your Shopify store on autopilot once you design your products.
See If Print-on-Demand Is More Expensive Than Stocking Locally for Your Niche
No one said you have to choose one business model or the other. Why not give print-on-demand a chance and then check out local inventory costs once your business is booming? At StayTuned Digital, our stellar Shopify apps make it easy to connect with trustworthy suppliers and customization agencies. Compare print-on-demand expenses with local stocking costs quickly and easily. Whether you’re scaling a POD brand or optimizing local inventory, we help Shopify sellers maximize profits.