When you run an ecommerce site, there are two ways you can outsource order fulfillment: dropshipping or ecommerce fulfillment.
Dropshipping eliminates the need for you to buy or manage inventory or handle any aspect of order fulfillment. You just find a dropshipper you like and pick what you want to sell on your site from their supplier list. You make a sale, the dropshipper does everything else.
Ecommerce fulfillment gives you more control over what you sell, since you buy your own inventory. You then store it at a fulfillment warehouse, and they take care of everything after the sale, including picking, packing, shipping, and return management.
Will dropshipping save you money? Initially yes, because you won’t have to buy inventory. But there’s a lot more to it than that when it comes to calculating true costs.
Is Dropshipping Dead and Ecommerce Fulfillment the Answer?
Dropshipping isn’t dead, despite what you might have read or heard from folks who tried it and failed.
There was a rush to start dropshipping businesses in recent years. Many ecommerce entrepreneurs saw dropshipping as an opportunity to make millions with little effort. After all, the barrier to entry is extremely low. How hard could it be to get rich?
Just pick an ecommerce platform, create your online shop, and watch the profits roll in. Making money should be easy. You don’t even have to buy any inventory. Just get the orders, make a profit on each sale and let someone else do all the heavy lifting.
Easy peasy, right?
Not quite. Online shops relying on the dropshipper model still have to be good at getting traffic to their sites, building an online presence, and designing effective marketing and advertising strategies.
No site visitors means no sales. And that’s what happened to many ecommerce site startups. Turns out most of them never saw a dime. Hence their claims that dropshipping is dead.
But their failures don’t mean dropshipping isn’t effective. It’s still a viable way to run an ecommerce business.
In fact, there are still tons of people following the dropshipping model and turning a profit. They’re the ones who understand their market, excel at driving traffic to their sites, and have an optimized experience for site visitors.
So don’t buy into the negative hype about dropshipping and think ecommerce fulfillment is the better route to go. It might be, but it does have its own set of headaches that you should understand before going this route. Once you know them, you can make a smart decision.
Comparing Dropshipping vs Ecommerce Fulfillment
How dropshipping works
Dropshipping lets online retailers avoid inventory acquisition or management responsibilities. Rather than buying and storing physical goods themselves, the online shop relies on a catalog of products offered by a third-party dropshipping company. The online retailer just picks and chooses which items to sell.
The dropshipping company is responsible for maintaining the inventory and processing orders when the online shop makes a sale.
In this model, the online retailer is basically a middleman. They make their profit on the difference between the price they pay the dropshipping company for the item and the price their customer pays.
Advantages of dropshipping
For the right ecommerce entrepreneur, dropshipping can be a great option.
- Initial investment is low – You won’t need to buy inventory, so your starting capital requirement is not huge. You also won’t have storage space or freight costs related to that inventory, either.
- Risk is reduced – You don’t keep inventory on hand, so you never have to worry about what to do with products you already paid for that nobody wants to buy. That is somebody else’s problem.
- Focus on growth – With inventory management and order fulfillment logistics off your plate, you can put your energy into growing site traffic via SEO, marketing, advertising, and site optimization.
Dropshipping is a good solution for someone just starting out with an online store or anyone with little starting capital to invest. It’s also a great option if you want to have a large, diverse product offering on your site.
Drawbacks of dropshipping
There are some downsides to dropshipping, though. One of the big things is that you don’t usually see the products you’re selling in real life (unless you order samples).
This may or may not make a difference to you, but weeding out low quality items before you sell them to customers can be important from a customer satisfaction standpoint.
Other drawbacks include:
- Profit per item is lower – You get the best wholesale price when you buy items in bulk. Since you’re not doing that with dropshipping, your profit margin on each sale will be less.
- You don’t call the shots – Your suppliers control order fulfillment and product quality. If either of those things go wrong, customers will only blame you. You’ll also be the one that has to fix these mistakes—at your own cost.
- The market is crowded – The low entry barrier means there is a sea full of dropshippers. You have to stand out from the crowd to be successful. This means you have to know your audience and understand how to grow site traffic.
Dropshipping isn’t for everyone. It takes a long time and a lot of market research to build a successful dropshipping business. There’s no overnight shortcut to success here. Just ask all the failed ecommerce businesses that adopted the dropshipping model.
If you can’t commit to playing the long game and doing the hard work to dial in your audience and offer the right products at the right time, dropshipping may not be your best option.
How ecommerce fulfillment works
When you first open an online shop and sell your own inventory, you likely start out storing and managing all that merch and fulfilling orders from your garage, basement, or a spare room in your house. You may or may not try to automate some of these tasks on your own, with mixed results.
It’s a workable solution when you don’t have a lot of orders coming in or inventory to store.
But eventually, you’ll need to make room—literally and figuratively—to scale. One solution is using a third-party ecommerce fulfillment partner. With them, you can outsource almost everything related to an online sale. Almost everything.
When you choose the fulfillment route, you are still responsible for acquiring inventory and keeping it stocked—just not in your own space.
Your fulfillment partner has that covered, along with:
- Managing inventory – You order inventory, then have it sent directly to your fulfillment partner’s warehouse. They take care of unboxing, tracking, and storing it. They’ll even notify you when stock is running low and some offer auto-reorder functionality.
- Filling orders – Once you make an online sale, the order information is forwarded to your fulfillment partner and they pick the item(s) off the shelf and get them ready to send.
- Packing and shipping – Orders are securely packed at their facility and sent out using the shipping method selected by the customer. Tracking information is provided.
- Handling returns – Your fulfillment partner manages the time-consuming task of customer returns. They process returns and can issue refunds or replacements.
Advantages of ecommerce fulfillment
Offloading inventory storage and order processing responsibilities to a third-party fulfillment service offers several benefits.
- Lower shipping costs – Fulfillment services ship a lot of things each day and can leverage economies of scale to offer shipping prices lower than anything you’d get on your own.
- Optimized speed and efficiency – Automated systems reduce errors with picking and packing. Real-time inventory management and auto-reordering means products are always in stock. Technology makes order fulfillment fast and reliable.
- Higher customer satisfaction – Orders get processed really fast, tracking information is automatically provided, and returns are smooth and hassle-free. All this combines to deliver excellent customer service which means happier (and repeat) buyers.
Drawbacks of ecommerce fulfillment
There are some things to be aware of, though, before jumping into an ecommerce fulfillment partnership.
- You give up control – With someone else controlling your products, the things you could do easily before at your kitchen table are no more. Modifying orders gets harder. You also can’t do quality control on packages before they get sent out.
- Customization may be limited – Fulfillment services operate at scale, so you may not be able to add those handwritten thank you notes or customized package inserts you could do before. Again, fulfillment centers work at scale, so things are more generic.
- Costs might outweigh benefits – There are many charges you’ll incur, like receiving fees and storage costs, picking and packing fees, customization charges, and even minimum monthly charges. If you have low sales volume, these costs can quickly eat up any profit.
Solutions for Dropshipping and Ecommerce Fulfillment
If you’re just dipping your toe into the online shop landscape or don’t have a lot of investment capital to spend on inventory, dropshipping might be a great option for you. Keep in mind, though, that you need to dial in your marketing and advertising efforts to ensure a steady flow of visitors to your online shop.
If you’ve already got your ecommerce store up and running, are making a good volume of sales, and outgrowing your physical space with inventory and shipping supplies, then ecommerce fulfillment may be a suitable solution.
Here are our top recommendations to consider if you want to go the dropshipping route.
- SaleHoo – SaleHoo has more than 8,000 pre-vetted suppliers, all of whom have passed rigorous testing for quality and reliability. This removes a lot of the common risks associated with dropshipping. You can confidently shop more than 2.5 million products.
- Printful – If you want to sell customized apparel and decor, no dropshipper does this better. Printful has more than 300 items you can have custom printed, including brands like Adidas, American Apparel, and Champion.
- Spocket – If you’re creating a high-end product catalog and want a dropshipper to match, look no further. 80% of Spocket’s suppliers are U.S.- and Europe-based, and you can easily order a sample to test the product’s quality before adding it to your site.
You can also check out our full list of the best dropshipping companies for more ideas.
If you’re ready to partner with an ecommerce fulfillment partner, here are our favorites.
- Shopify Fulfillment Network – A robust, all-in-one solution that has simple pricing, exceptional service, and no up-front costs to start. You get inventory management, product storage, reliable and fast shipping, and return processing.
- ShipBob – When you are selling across multiple channels to customers around the world, ShipBob delivers with 30+ fulfillment centers in six countries. They also guarantee a 99.95% accuracy rate and 99.96% delivery rate.
- Falcon Fulfillment – Don’t give up personalization when you go the fulfillment route. Falcon’s custom packaging options help you elevate every shipment. You can customize every element of your shipment and even opt for eco-friendly packing options.
For more ideas, be sure to browse our recommendations and comparisons of the best ecommerce fulfillment services.
