eCommerce shops market their products online through their own websites, on hosted websites, and in marketplaces. Whenever a customer places an order, the shop has several different methods in which to fulfill the order. Two common methods are dropshipping and eCommerce fulfillment. Learn the differences between these two practices and how to decide on which one to select for your eCommerce operations.
You often hear the term “eCommerce fulfillment” as a catchphrase to encompass all the various fulfillment methods, including dropshipping. However, this fulfillment method is actually a specific supply chain model. eCommerce fulfillment means when you take care of the entire fulfillment task.
You purchase the products from suppliers and store them in a warehouse or at a store. When a customer order comes in, you perform assembly, sorting, and pick/pack tasks before packaging the products and sending them out for delivery.
Dropshipping fulfillment works from the standpoint that you do not outright own or control the product inventory. Instead, you only take and process the customer orders. Then you send the orders to the dropshipper, which could be a supplier or manufacturer, who picks and packs the products, packages them, and sends them directly to the customer.
eCommerce shops involved with dropshipping focus strictly on marketing and selling products while outsourcing their supply chains. On some occasions, your company does not brand the products that you sell. Instead, the supplier or manufacturer promotes their brand when delivering the products.
Key Differences Between Dropshipping and eCommerce Fulfillment
The major difference depends on who owns the product and who handles the supply chain. eCommerce fulfillment places the entire supply chain under your control, as you have a final say on how to market products, complete orders, and ship products. You only control the marketing and order processing when adopting the dropshipping method.
Deciding on a fulfillment method for your shop will depend on your operations and capabilities. If you do not have the storage space to store products, and you are just looking to be the go-between for the customer and the supplier, then dropshipping may be the viable option.
You have a lower initial investment since you are not leasing or purchasing warehouse property to store products. You also don’t have to worry about warehouse overhead costs. However, you may have to pay a slightly higher fee to the dropshipper for fulfillment services.
On the other hand, if you want more branding power for your company and have the warehouse space to store products, eCommerce fulfillment may be the better alternative. While you have a larger initial investment toward owning or renting warehouse space, you have more marketing opportunities and can keep all the profits without splitting it with a dropshipper. You own the products outright, so you are able to control product prices and supply chain costs.
Keep in mind that you don’t have to pick one fulfillment method over the other. Many companies may use eCommerce fulfillment for their own product lines and a dropshipper for items that may be too large, bulky, or complex to store in their warehouses.
American Warehouse, Inc. – Your 3PL Partner
Here at American Warehouse, Inc., we offer third-party shipping services to the eCommerce industry. Whether you are involved with fulfillment by Amazon (FBA) or fulfillment by merchant (FBM), we offer logistical strategies that can help you get orders out to your customers by the required deadlines. Contact us today to learn more.