Thanks to the internet, the days of needing a personal storefront to make a sale are becoming more obscure. The internet has changed the retail market allowing individuals to build brands without having products, a physical storefront, or even both. The eCommerce market has brought about different business models that enable entrepreneurs to earn profit with little to no risk on their end. An example of such a business model is dropshipping. If you are new to the online retail market, you may wonder how dropshipping differs from the regular eCommerce model.
In this article, we tackle dropshipping versus eCommerce fulfillment while also considering how they differ.
What is Dropshipping?
In the simplest terms possible, dropshipping involves listing and selling products in your eCommerce store without having to come in contact with them. The products are shipped directly from the manufacturer to the consumer.
Some people view dropshipping as outsourcing, with the entrepreneur being the middle man in charge of product delivery. Once a consumer places an order via your store, the middleman reaches out to the manufacturer with the shipping and consumer details, who ships the product directly to customers.
A difference between dropshipping and eCommerce fulfillment is how the orders occur. One reason why many choose the dropshipping model is due to the minimum capital that is required to start. The only time a person with a dropshipping stores parts with money is when a sale takes place. Not having to stock inventory reduces the cost required to start a business making this an almost perfect eCommerce model for beginners. To begin, you need access to a reliable manufacturer and a personal online store or one run via an online marketplace like eBay or Amazon.
What is eCommerce Fulfillment?
With eCommerce fulfillment, eCommerce store owners are required to purchase items for their store in large wholesale quantities. When a consumer places an order, the order is fulfilled in-house rather than via manufacturers, which is a difference between dropshipping and eCommerce.
For eCommerce entrepreneurs looking to use eCommerce fulfillment, they have to keep storage space in mind. In dropshipping vs. eCommerce fulfillment, eCommerce fulfillment requires that you purchase the products from a manufacturer beforehand or make them yourself and store them in-house. eCommerce fulfillment involves eCommerce store owners having a product on hand that they sell and then ship off directly to the customers.
For eCommerce stores low on space, fulfillment centers such as those run by Amazon or eBay allow you to have your products on hand and deliver them with ease. eCommerce fulfillment has more running cost impact than dropshipping, but it provides better control of your stock (quality and quantity). Cost builds up with eCommerce fulfillment because business owners have to purchase products ahead of time, either have adequate storage space or rent out, and handle the logistic costs.
Dropshipping Versus eCommerce Fulfillment
As with any business model, dropshipping and eCommerce fulfillment both have their advantages and disadvantages. We will take a closer look at what you stand to lose and gain with both business models.
A. Advantages of Dropshipping
1. Minimal Startup Capital:
very little can beat a low startup cost. The low cost of production makes it an easy business model to start. Since there is no reliance on product storage, website creation is the most a store owner would spend.
2. Outsourcing:
because dropshipping doesn’t require products to be on hand, eCommerce store owners outsource the shipping and storage of the products. The outsourcing of these business components enables more money to be spent on other segments like advertisement campaigns.
B. Disadvantages of Dropshipping
1. Minimal Product Control:
one of the pros of this business model also doubles as a con. Because you do not store the products yourself, your order fulfillment and the quality of the products delivered are left to others. Most store owners spend time praying and hoping that their customers receive products in good form and quickly unless they partner with a good manufacturer.
2. Limited Product Awareness:
Although it is normal for eCommerce brands to send the consumer and shipping details to the manufacturer, it is a chance that the manufacturers’ logo shows up on the product. Once a consumer receives the product, they tend to associate the product with the logo on it. A way to go around this is to establish with a manufacturer beforehand that you are a dropshipping store. Next is to ask that they incorporate your logo with the delivery. While some manufacturers might agree, the majority will not.
C. Advantages of eCommerce Fulfillment
1. Build a Brand:
eCommerce fulfillment is the route if you are the manufacturer of your products. eCommerce fulfillment allows for better brand awareness. It allows businesses to control the brand logo and shipping of the product.
2. Product Control:
eCommerce fulfillment puts eCommerce startups in charge of their product from its creation to when it reaches the customer. eCommerce store owners control product sourcing or manufacturing, product storage, branding, and ultimately dispatch to the customer. eCommerce fulfillment places you in control of events that could potentially go wrong in someone else’s hands.
D. Disadvantages of eCommerce Fulfillment
1. More Startup Capital:
Since eCommerce fulfillment requires that you have access to physical products, store owners are required to cough up more money to buy and store the products. Considering that most businesses don’t start out selling a singular product, the startup cost for a small eCommerce store can begin to pile up, especially when we include storage costs.
2. Product Sales and no Sale can be a Blockade:
once a consumer buys products with eCommerce fulfillment, business owners expect sales will ensue. If this does not occur, business owners are left to manage the loss of purchased products not being sold. For businesses who see a drastic decline in sales, the ability to keep up with the cost of production and delivery comes to question. Many consider this because most small businesses are unable to produce and deliver in a timely fashion.
Dropshipping Vs. eCommerce fulfillment: Which is Better for You?
There are other benefits and drawbacks to each business model that one can encounter, but the examples are common issues and bonuses you can get. Choosing the proper business model for you in dropshipping versus eCommerce fulfillment is dependent on your business environment, the resources available to you, and your brand’s long and short-term goals.
AllValue
Whether you choose dropshipping versus eCommerce fulfillment or vice versa, AllValue is here to make website creation and product sourcing a breeze. AllValue is an eCommerce software tool created to ensure that your business goals are met. AllValue can handle every dropshipping and eCommerce fulfillment requirement from website creation, inventory management, and even payment portals. Visit AllValue for more information on how to make your business goals a reality.