There are many ways for retailers to sell products online without having to open a physical shopfront. Dropshipping is a unique business model that has emerged from this wealth of opportunities. This model is unique because it allows retailers to sell products and not have any inventory.
Dropshipping is a different fulfillment process than other eCommerce businesses. This can cause confusion for small business owners who are just starting out in the online business world.
This post will discuss the differences between eCommerce fulfillment and dropshipping. Before we discuss the pros and cons of both dropshipping and eCommerce fulfillment, we will take a closer look at each. We will discuss the options for dropshipping at retailers. We’ll wrap up by discussing whether Alibaba.com can be used to dropship.
eCommerce is a new phenomenon
The internet has become increasingly accessible over the past decade. Online shopping is becoming more popular as online payment portals are now secure.
More businesses are selling online to meet the increasing demand for online shopping. Online selling and buying is known as “eCommerce”.
It is easy to get involved in eCommerce. As new sellers enter the eCommerce market, there are many platforms and resources available to help them.
Online selling is becoming more popular for many businesses that used to have brick-and-mortar shops. This trend was made more common by COVID lockdowns. Online selling is safer for shoppers as well as the employees who work in shops.
There are many eCommerce business models. Two of the most common are dropshipping and eCommerce fulfillment. Let’s look at each model.
What is eCommerce fulfillment?
eCommerce fulfillment refers to a business model that includes purchasing products in bulk, selling them online and fulfilling each order in-house. This business model allows the retailer to keep an inventory of the products they sell.
Business owners can create custom websites using eCommerce. Shopify is a popular eCommerce platform. Squarespace and WordPress have plugins that allow you to create online storefronts.
When they first start selling, many people run their eCommerce sites from their garages or spare rooms. As an eCommerce business grows, it may become necessary to rent fulfillment centers or warehouses.
Fulfillment refers to the act of accepting orders from your e-commerce shopping cart, and then shipping the right products to your customers.
Four distinct components make up e-commerce fulfillment:
- Your customer visits your online shop and adds items to their shopping cart. Then, he clicks on the Buy button.
- The online order is sent to a fulfillment center.
- The fulfillment center picks and packs the order, then ships it.
- FedEx, UPS or another third-party shipper deliver the order to the customer.
You might be a small seller, or just starting your business. The fulfillment center could be your garage. You might pick up and pack the orders. You can also use Amazon’s fulfillment service to have your products shipped directly from Amazon warehouses.
You might consider a fulfillment warehouse like Red Stag to store your merchandise and send your orders if your company is larger.
If you sell coffee, for example, you might invest $10,000 to purchase a new blend of coffee for your online coffee business. The supplier will ship the coffee to your fulfillment center. This inventory is used by the fulfillment center to ship orders. You can reorder your coffee supplier if stock runs out.
Dropshipping: What does it mean?
Dropshipping is an eCommerce model where retailers sell items they don’t have in stock. This business model is a success because of automation and outsourcing.
These businesses can be setup in the same way as the eCommerce stores mentioned above. Only the only difference is how orders are fulfilled, who holds inventory and what investment is involved.
Dropshipping allows you to still create a brand online store. Dropshippers also manage customer relations, customer support, and customer service. Dropshippers handle all aspects of the business, except fulfillment.
Dropshipping has received a lot of attention over the last few years due to the fact that retailers can start this business without having to invest a lot. Dropshipping is a way to save money on your inventory.
Drop-shipping is a business model that allows you to purchase inventory only after your customer orders it.
As an example, let’s say you want to add some new coffee blends online to your coffee company. It’s not a good idea to keep all your inventory in stock, especially if you don’t know how the new blends will do.
Your supplier will create the blends and keep some on hand at their facility. Your supplier will ship bags of coffee directly from your supplier to customers who place orders for the new blends through your e-commerce website.
This is the drop-shipping fulfillment model. There’s no fulfillment center. You, your customers and your supplier are all involved.
Dropshipping vs. eCommerce fulfillment
Drop-shipping is a great option if you aren’t convinced and want to fulfill orders in another way. Here are some pros and cons.
Drop-shipping requires a lower upfront cash investment. Drop-shipping can be a great option to cash-strapped startups as you get your e-commerce website up and running and learn what works and doesn’t.
Drop-shipping is a way for established e-commerce companies to try new products without making a large cash investment. This way you won’t end-up with five pallets of coffee no one is buying.
Drop-shipping has its downsides. Drop-shipping can save you money upfront, but it will result in a lower profit margin for each product. You also have less control over fulfillment quality, speed, and cost. Your fulfillment center may be strategically located so that it can ship most customers in two days. You might have to wait longer for your supplier because they may be located far from you.
You don’t need to spend more money upfront when you use e-commerce to fulfill orders. However, you will reap higher profits as a reward. Once you have a better understanding of the demand for your products you can adjust your inventory to maximize profit margins and minimize the stock holdings.
Traditional e-commerce fulfillment also gives you greater control over the fulfillment process. You can personalize your packaging and select from a wider range of fulfillment services that you can offer your customers.
The pros and cons of eCommerce fulfillment
There are some perks to fulfilling your own eCommerce orders, but there are also some downsides. This business model is a great fit for some people, while others find it difficult.
Entrepreneurs who want to sell their products through eCommerce fulfillment are well-served. This could be products they have sourced, branded, or products they made.
This business model allows you to create a brand however you like.
The main benefit of eCommerce fulfillment is the ability to have greater control over the whole process. If you handle everything in-house, there’s no need to worry about your fulfillment partners losing the ball.
This business model has one major drawback: it requires a lot of capital to start. Online storefronts require business owners to invest capital and purchase inventory in order to start. This is a risky investment because the business might not succeed as planned.
You are responsible for the cost of selling your inventory if you cannot sell it. This is true even if your initial launch was a success. However, it can be a problem as you add products later.
If the business is successful, however, owners of eCommerce businesses must be ready to take action. To keep customers happy and deliver orders quickly, it is important to fulfill orders on time.
It takes careful planning to scale a business like this. This type of business requires a physical location. Small businesses that start in the garage may soon grow and require warehouse space. Growing pains will result in growing costs and will lead to scaling.
All of this can lead to higher profit margins. Entrepreneurs can source products at wholesale prices by cutting out the middleman. This takes more time. This will increase the cost of hiring people to assist you in growing your business. The benefit is that you can have greater control over your expenses.
Dropshipping: The pros and cons
Dropshipping has its advantages and disadvantages. Dropshipping is similar to eCommerce fulfillment but not for everyone.
Dropshipping is attractive because it is easy to start. Dropshipping doesn’t require you to buy inventory other than samples. It is possible to set it up in a very cost-effective manner without having to move.
You don’t need to keep an inventory so overhead is low. The website setup and advertising are the biggest expenses for drop shippers. To scale your business, ensure that your vendor supplies your products and fulfills orders in a way that allows you to grow.
Low overhead allows you to experiment with different products and advertising methods. You don’t lose a lot if the business fails.
Dropshipping can be an attractive business option for digital nomads and expats who want to be able work remotely with their laptops and Wi Fi.
Dropshipping has its downsides. Dropshipping has the main drawback of having little control over fulfillment and delivery. Drop shippers could be left in an awkward situation if the vendor who supplies the products or handles fulfillment is unavailable. Drop shippers can find themselves in legal trouble when suppliers run illegal operations.
Dropshipping can make it difficult to increase brand awareness. Dropshipping is a way for people to purchase products from a brand-branded website or storefront. However, the items often reflect the branding of the supplier. Customers are likely to associate the product with the brand they received.
Profit margins are also lower. Dropshippers outsource and automate the majority of the work. This is to be expected. Dropshippers are unlikely to get their products wholesale and would have to pay fulfillment fees.
Deciding which course to take
Dropshipping and standard eCommerce fulfilment offer entrepreneurs many opportunities. Depending on your interests and current resources, which route you choose will determine what path you take.
Dropshipping can be seen as a simpler option, since half the work is outsourced. Dropshipping requires less capital, making it more affordable for many people. Dropshipping businesses can be scaled easily, provided you have the right resources.
Dropshipping is a lot more expensive because so much of it is outsourced. This means that the profit margins can be quite low. You can still choose to dropship to get started if you have the funds to buy a new product.
The eCommerce fulfillment option is an option if you have the resources and the drive to succeed. Although this requires more effort, it’s easier to build brands and offers higher profit margins. You can also sell your own products.
These two approaches require you to build a website and a brand for your shop. This requires some design skills. If you don’t have the right level, it may be necessary to hire a specialist.
Dropshipping and eCommerce fulfillment share many other similarities. Marketing and advertising are essential to your success. You can place ads on Google, Facebook and Instagram to increase exposure. Both models also require customer service.
Each of these business models is not superior to the other. It all comes down to the amount of time and resources that you are willing to invest in your business, and what you hope to achieve.
Where to do dropshipping
If you decide to dropship your products, you need to decide whether to sell them in an online marketplace or your own site.
Dropshippers often create their own websites as it allows them to control the branding. Dropshippers often sell their products through established B2C marketplaces to reach existing customers. You can use any combination of these methods to sell products.
Shopify, Magento (WordPress), WooCommerce (WordPress), Squarespace are some of the most popular platforms to build your online storefront. These platforms make it easy to create a drag-and drop website. If you have a unique vision, some of these platforms permit for some custom coding.
AliExpress is a B2C eCommerce marketplace owned by the Alibaba group. It offers dropshipping tools that are great.
AliExpress allows you to customize your storefront to reflect your brand and showcase your products. Amazon, Etsy and Wish are some other popular online selling platforms.
Search engine optimization (SEO) is something to be aware of in both these strategies. Organic traffic is the most important source of traffic if you don’t use social media content marketing or run ads. You will need to optimize the pages of your website to rank higher on Google and other search engines if you list projects on your site. You can also optimize your listings for search engines built into online marketplaces. Your products will be more easily found on dedicated eCommerce platforms, as they have fewer listings that major search engines scan.
Dropshipping and eCommerce fulfillment can be great ways to make money online. You can succeed in both dropshipping and eCommerce fulfillment if you have the right product, the right branding, and a solid strategy for marketing.
Dropshipping is a business in which you supply merchandise to retailers and fulfill orders. You then ship the goods directly to customers. You can also be a supplier to standard eCommerce businesses.
Alibaba.com allows you to connect with dropshippers or eCommerce businesses around the globe. Alibaba.com has all the tools to help you connect with clients and simplify the sales process.