As an ecommerce seller, besides marketing and sales, choosing the best way to storage inventory and get the products to customers is another important thing you must factor in your business. Among numerous options, dropshipping and order fulfillment are the two frequently mentioned when it comes to fulfilling shipments.
Before digging into whether dropshipping or order fulfillment is the best way of your ecommerce business, let’s start with what they each refer to:
Dropshipping is a method by which merchants don’t actually buy the products from manufacturers or wholesalers until they receive an order from a customer, then the manufacture or wholesalers ship the product to the customer directly. Order fulfillment is the process that merchants or third party order fulfillment providers get products in the hands of end customers.
Dropshipping vs Order fulfillment
Consider your products and suppliers
It is generally that store owners will source from more than one suppliers, yet not all of them can pack and ship products directly to customers. In this case, you may find that you won’t be able to get the best out of dropshipping for shipping all of your orders, or at least it will narrow your choosing scope when it comes to worthwhile suppliers. Similarly, considering your products and needs, not all order fulfillment providers can be suitable for your business when you have special needs.
To a great extent, the number of products you sell and suppliers you source from will determine your option for dropshipping and order fulfillment. For order fulfillment, when your SKU number is huge and inventory turns around quickly, outsourcing to a fulfillment company will enable you to save on warehousing infrastructures and shipping rate by leveraging their large-scale facilities and freight discount.
Consider the technology facilitation
Online sellers should also consider the back-end technologies included in processing and shipping orders. Manufacturers are familiar with fulfilling B-to-B orders with a large number of products and delivered to a relatively low number of business addresses, which is very different from direct-to-consumer B2C ecommerce order fulfillment. In e-commerce fulfillment, small orders are placed more frequently and often from multiple sources, in order to process and deliver quickly to customers, the level of integration facilitation they offer to your shopping carts or order management system impact a lot on your option. Preferably, their software should communicate automatically with your store for rapid order processing and fulfillment, and also enable sellers with real-time inventory and shipment management.
Consider your margins
At last, when comparing dropshipping and order fulfillment, you also need to consider about your profit margin. When calculating your margin, you need to figure out the average cost of each order and factor in any overhead. While there will be some fee you have to pay in order fulfillment for inventory storage, dropshipping, on the other hand, will charge you a big retail amount to drop ship your orders to customer.
There no one-size-fits-all method to get your products to the customers, nor do you need to put all of your eggs in one basket. For most cases, it is wise to do this task with a combined solution, a mix of dropshipping and order fulfillment, which can either be done internally, outsourced or a combination of two.