Dropshipping or Third Party Fulfillment?

Before you make a decision, you should know the difference between Dropshipping and Third Party Fulfillment.

How Dropshipping works?

Dropshipping is a business model that allows online sellers to sell products without stocking their own inventory. The online retailer purchases needed inventory from third-party suppliers and the suppliers ship the products directly to the customers.

Advantages of Dropshipping

Low cost from start

The biggest advantage to dropshipping is that you don’t have to pay for stock. This makes it appealing to startups on a tight budget. You won’t have to buy a product unless it has been paid for by the customer. Also low overhead, you won’t need to buy inventory or manage a warehouse, dropshipping eliminates the stress of overhead costs.

Minimum MOQ

With dropshipping, you won’t have to do sourcing, packaging or delivery of the product. Therefore, you won’t have to worry about the additional costs incurred in the whole process. You could just forward your customer’s request to a third-party supplier or purchase goods from company like AliExpress.

Wide product selection

You can provide a wide variety of products to test the market. This helps you experiment new product offerings and expand your product category listing.

Disadvantages of Dropshipping

Over-reliance on suppliers

You always have to rely on your suppliers to keep stock and hope everything goes smoothly. Any supplier errors may do harm to your business and this can damage the reputation of your business.

Poor customer service

If a customer comes to you with the issue of a damaged, incorrect or missing order, it will be hard for you because you have nothing in control during the whole process.

Shipping complexity

When working with different suppliers, you’ll experience separate shipping costs for sending every product. This will open discrepancies between the cost you offer to customers and the true shipment cost.

Low profit margins

Under fierce competition,you will be struggling to win customers. Especially for startups, you’ll have to think of how you can differentiate your brand and offer value.

Limited branding

As the products are often designed and branded by the suppliers, your parcels are the same as your plenty competitors.

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