Dropshipping Versus eCommerce Fulfillment: Everything You Need To Know
There are several ways for people to earn money online these days, including affiliate marketing and online commerce. You’ve probably heard of “dropshipping” if you work in the eCommerce sector.
Dropshipping has recently gained popularity as a means of making money online. What is dropshipping, and how does it vary from conventional eCommerce fulfillment?
The main distinction between eCommerce fulfillment and dropshipping is that in drop shipping, an eCommerce company doesn’t buy or manage inventory before the transaction. Until you make a sale, your supplier keeps the goods on hand. Because they don’t need to lock up spare change in excess inventory, this is a benefit for startups and other cash-strapped enterprises.
Fulfillment includes purchasing the products and keeping them in your garage, an Amazon warehouse, or a fulfillment facility. The initial cost is higher because you buy a large volume of inventory at once, but your margins are better, and you have more control over how much you have in stock.
In this article, we will discuss eCommerce fulfillment, dropshipping, and how to select the suitable model for your business needs.
How Does eCommerce Fulfillment Work?
The process of taking consumer orders from your website and distributing the products to your customers within a specified timeframe is known as eCommerce fulfillment.
Your inventory is kept in a fulfillment center, which also processes and packages orders. If you run a small business, this could be a spare room or garage; if you run a large eCommerce operation, it could be a specialized warehouse or storage area.
The majority of smaller businesses will complete the orders themselves, but as your business expands and more orders come in, you can choose to outsource the task to a fulfillment agency that can take care of that part of the business for you.
How Does Dropshipping Work?
Although dropshipping functions similarly to typical eCommerce fulfillment, the main distinction is that you never retain the products you offer in stock.
A dropshipping site offers things they receive from another provider rather than keeping a storage facility (or spare room!) full of stock to sell online.
Building an online store for a dropshipping business is similar to building one for a typical eCommerce business, when orders come in, they are passed to your chosen supplier, who handles the fulfillment process on your behalf.
Dropshipping means you don’t have to manage the products, but you are still in charge of stuff like customer service and marketing.
Similarities Between eCommerce Fulfillment and Dropshipping
The following are the similarities between eCommerce Fulfillment and Dropshipping
- Retailers need to set up a website in both models.
- Retailers need to upload a product catalog in both models.
- Retailers design the checkout flow in both models.
eCommerce Fulfillment and Dropshipping: What Retailers Need To Know
Online enterprises using dropshipping and eCommerce fulfillment can both be successful. It is crucial to find the procedure that works best for your present circumstances and long-term goals. How do you choose between order fulfillment and drop shipping as a retailer? Here are some things to think about to help you choose the right model for your company:
Consider Suppliers and Products
Although many store owners utilize many distributors or manufacturers, not all of them drop ship to the customers. Because of this, you might discover that drop shipping every item is not an option.
Similarly, not all fulfillment suppliers will be appropriate for your business depending on the demand. Some fulfillment providers, for instance, wouldn’t be able to store your inventory if you sold things that need special storage.
Your options for order fulfillment and drop shipping are based on how many suppliers you work with and the goods you offer.
Think about your customers
Where do your clients live? Are many of them gathered in one region? Do you have clients in other countries?
When you are going through your fulfillment alternatives, customer location is another vital consideration. Your fulfillment center should ideally be located as close to your clients as possible. You can be better off looking for a fulfillment agency close to your customers if your manufacturer is in one location, but your customers are in another location.
Think about the Technology
The back-end technology used for order processing and shipping should also be taken into account by online vendors. Large B2B orders with relatively few commercial locations are common for manufacturers and distributors. This type of order fulfillment differs from direct-to-consumer eCommerce fulfillment, where smaller orders arrive more regularly, frequently from several channels, and must be processed, filled, and delivered to hundreds or thousands of clients quickly.
Examine the degree of connection they provide with your shopping cart and order management system with potential drop shippers and fulfillment firms.
Consider Your Margins
Keep your profit margins in mind whenever you contrast order fulfillment with drop shipment. You must pay numerous additional costs or fees while fulfilling orders for inventory storage.
However, dropshipping frees you from the headaches of managing a large inventory and allows you to manage virtual storage. Sellers occasionally pay manufacturers a significant retail sum to drop ship their products, which reduces their profit margins.
When considering each, consider your overall average cost per order to see which will result in larger margins for your company: drop shipping or order fulfillment.
Order fulfillment and dropshipping are two effective eCommerce strategies. Both have their benefits and drawbacks.
When deciding between dropshipping and eCommerce, you must carefully weigh several variables, including:
- Your Customers
- Your Suppliers and Products
- Your Margins
- Your Technology
Whatever eCommerce shipping method you decide on, you must build a top-notch store to attract a sizable consumer base. You must also find eCommerce solutions that help you run a successful fulfillment and dropshipping business.