By Paul Martinez
/ September 22, 2022 October 20, 2022
Table of Contents
Today, the internet has become the hub of online business. Apart from online business owners, people find online shopping way more convenient. Due to this, eCommerce marketplace and dropshipping businesses bloom with every passing day. The online industry is the trend for income now more than traditional methods. All you need to do is own an online website and select the correct business model.
If you are looking to open an online store or business, you must know about fulfillment methods. A fulfillment center is the department of a business where goods are processed and packaged. They are a kind of warehouse where stock is temporarily stored. Now, for your fulfillment center, you can opt for a simple storage room or a large dedicated warehouse. This depends on your business scale.
For an online business, two prime order fulfillment methods are available. These business models include eCommerce and dropshipping. However, there is a debate about dropshipping vs. eCommerce, which is better. We will walk you through what dropshipping and eCommerce fulfillment mean and which is the right one to go for.
Our Pick
Dropshipping vs. eCommerce, how do you know which option you should go with and when? To answer this question, you must learn about both options’ pros and cons. Both options are different business models, and they hugely influence the growth of your online business and high-profit gains.
While going the dropshipping vs. eCommerce fulfillment route, you need to consider the following key aspects to make your business grow fast and effectively. They are profitability, initial investment, scalability, marketing skills, flexibility, and branding. Based on this, eCommerce is our pick.
About eCommerce
The eCommerce business model is the traditional fulfillment method for online stores, and it is an umbrella term for selling services online. These services include every item you use daily, such as clothes, shoes, jewelry, home accessories, food, and so much more. Customers jump to the online website, skim through the items and place their orders. The payment is made via debit card, and the order is sent for further processing. The fulfillment center receives these customer orders, packs them, and labels them. Lastly, the courier services deliver the order to your doorstep.
Features
Fulfillment Centre: With eCommerce, you need a warehouse. However, you do not need a big fulfillment center if you own a small-scale business. On the other hand, if your business grows larger, you will require a processing unit to handle the customer orders and demands. Huge companies like Amazon have proper teams allocated for each department to ensure smooth and fast processing while maintaining product quality up to the mark. Small businesses, however, fulfill the orders within themselves. Yet the main process does not differ so much.
Tracking: If you are a part of an eCommerce fulfillment center, you must keep track of orders and products or manufacture more products in an hour. Whether you own a large-scale business or not, ensuring good product quality is the aim. If you are into marketing branded products, you should follow this business plan.
Control: In an eCommerce model, the retailer can control the quality of the product that goes out to the customer and takes responsibility for customer satisfaction.
Catalog: On the website, the customer can access a list of items, add them to their carts and pay online.
Pros
More control over the processes
Makes marketing branded products easily
No risk of poor quality supply of products
Cons
The risk of losses is higher
Requires a higher skill level
About Dropshipping
Another major eCommerce business model is dropshipping. The gist of the concept behind dropshipping is that such online stores that do not have a fulfillment center within themselves team up with an external vendor known as the dropshipper. They are responsible for handling the orders and sending them to the customers effectively. Dropshipping business models essentially differ from the normal eCommerce fulfillment route.
Features
No Inventory: You own the online business store without the inventory. Your customers visit the website, place their orders, and pay online. The next step is to place a similar order to your dropshipper. The rest of the order processing and delivery at customers’ homes is the responsibility of the dropshipper.
Passive Responsibility: The retailer’s responsibility in this dropshipping model relies on managing customer relations and enjoying passive income. Just like eCommerce, this business model is rapidly growing in the market.
Control: The dropshipper holds complete control of the inventory. It is like two companies coordinating with each other. The customers have no idea what exactly happens behind the scenes or where they place their orders. Dropshipping is a deal between two companies working to receive and handle customer orders.
An important thing to remember here: dropshipping is not the same as third-party logistics. In third-party logistics, you own the inventory; just the responsibility to deal with the processing of the order is of an external vendor. Unlike third-party logistics, in the case of dropshipping, the inventory is totally out of the picture.
Pros
No proper staff/team required
No issue of space to keep stock
Easy way of passive earning
Cheaper to start and run
Cons
Cannot guarantee product quality
Expect low-profit margins
Similarities Between Dropshipping and eCommerce
Now that you know the fundamentals of both fulfillment methods, i.e., dropshipping and eCommerce business models, we will compare the two to see how they differ and their similarities. Additionally, towards the end, you will have an idea of which of these options works best for you.
It is easy to differentiate between the two marketing strategies. However, they do have some similarities.
Websites
Website is the major and obvious similarity between eCommerce and drop shipping. In both, the business owner must create their websites. Uploading the product catalog to sell products online is essential to an online business. Once you have successfully attracted the target audience, advertise and market the products. As your business grows, a capable workforce ensures a successfully running business. In both cases, the developer must come up with an effective plan.
Marketing and Advertising
In dropshipping and eCommerce models, marketing and advertising are crucial. Both have similar practices for marketing and advertising, such as email marketing, multiple platforms, and search engine optimization.
Catalog
In dropshipping and eCommerce, cataloging is used. On the website, the retailer provides a list of items on sale. Customers go to the online website, skim through the items and place their orders. Payment is also made online in both cases.
Differences Between Dropshipping and eCommerce
Inventory Ownership
As we discussed earlier, the key difference between eCommerce fulfillment and dropshipping is inventory ownership. In the case of eCommerce, the online store owner has his inventory, including online services advertised on the website. On the other hand, the dropshipping business requires the business owner to contact the vendors for order fulfillment.
Structure
The second difference is somewhat linked to the first one in that if a business owner got to have his inventory, he must have a concrete structure to keep the stock. This requirement is not mandatory if you are teaming up with a dropshipper.
Control
The third main difference is the control over the flow of processes. Owners of eCommerce businesses have full control over the entire process, from customers’ online orders to the delivery of products at their homes. At the same time, the dropshipping business model has minimal control over the processes. The business owner only has powers limited to customer orders, and inventory management is the dropshipper’s task.
Initial Investment
Lastly, the initial investment is an important factor in eCommerce fulfillment. Once you decide to go with it, you need to devise a budget for the upfront costs like inventory, shipping, and warehouse. However, this is not a necessary condition for a dropshipping store owner.
Business Model
You should go for an eCommerce business model when you have sufficient funds in your pocket to deal with initial investments easily. If you are willing to sell your own branded products and have full control over your order fulfillment, opening up an eCommerce store is the right path.
On the other hand, dropshipping is a relatively safe option for newbies. Hence, you can avoid huge start-up investments using this business model. Moreover, dropshipping makes you deal with minimum damage if you expect the risk of unsold inventory. Lastly, go with this option when you are not looking to market any branded products or sell your items.
Conclusion
If you are all geared up to embark upon the world of online business, opting for the right business plan is crucial to achieving a successful online business. Order fulfillment methods have a huge impact on how successful your business can be. However, sellers can easily approximate this impact by evaluating how quickly they deliver orders to the clients. While in an online business, going for the right fulfillment center must be your number one priority.
Both dropshipping and eCommerce business models help you in different ways. Hence, the main point is that the business owner must figure out what plan works best for him. With the correct mindset and enough knowledge, you can take your online business to the next level and gain profit margins.
Paul Martinez is the founder of EcomSidekick.com. He is an expert in the areas of finance, real estate, eCommerce, traffic and conversion.
Join him on EcomSidekick.com to learn how to improve your financial life and excel in these areas. Before starting this media site, Paul built from scratch and managed two multi-million dollar companies. One in the real estate sector and one in the eCommerce sector.
