Today, companies no longer need a physical store to sell their products. Because many consumers prefer to shop for goods in the comfort of their own home, purchases are now frequently done online. Now to cater to that, companies adopted new order fulfillment services and strategies to effectively allocate their products. This resulted in the establishment of the ecommerce fulfillment industry.
In general, the concept behind ecommerce fulfillment is rather simple. It’s a system that revolves around getting purchases delivered to a customer who placed an order online. This process is done by either an in-house ecommerce organization or an outsourced third-party logistics company. But as the ecommerce market grows more competitive, a variation of the system was recently introduced. This is what business owners refer to as drop shipping.
Now, drop shipping is a bit different than ecommerce fulfillment. While both serve the same purpose, they have distinctive processes that set them apart from one another. And to know which service suits your business the most, let’s find out more about what each of them has to offer.
What Is Ecommerce Fulfillment?
Basically, ecommerce fulfillment is a supply chain management method that covers all operations associated with delivering products from warehouses or fulfillment centers to customers. It covers storing merchandise, picking and packing orders, and shipping products.
How Does It Work?
The process starts as soon as the company purchases inventory from its supplier or manufacturer. This is done even before the company makes a sale. Thus, the bulk is kept in storage for a while at an in-house warehouse or a third-party fulfillment center.
Once a customer makes a purchase online, the order is received by said facility. And from there, it takes care of all order fulfillment operations such as picking, packing, and shipping orders.
What Is Drop Shipping?
Drop shipping is another method of supply chain management focused on fulfilling online orders. But unlike ecommerce fulfillment, it enables a company to operate without the need to maintain inventory and store merchandise in a warehouse or fulfillment center.
How Does It Work?
In drop shipping, the company supplier or manufacturer takes care of all order fulfillment processes. Because the company has no stored inventory, products are packed and shipped directly from the manufacturing facility.
What Is the Difference between eCommerce Fulfillment and Drop Shipping?
Both ecommerce fulfillment and drop shipping play an important role in order fulfillment. Truth be told, a lot of business owners confuse one with the other. So to help set them apart, here is a list of all their distinctive processes and properties:
Companies that make use of ecommerce fulfillment services own an inventory, because products are purchased from manufacturers prior to being sold online. These are kept in warehouses or fulfillment centers where order fulfillment operations take place.
In contrast, companies that drop ship do not store inventory since purchases are directly coming from the manufacturers themselves. For this reason, one of the obvious differences between the two is the presence of inventory, or the lack thereof.
2. Online Seller
In ecommerce fulfillment, the online merchant acts as the main distributor since goods are purchased before marketed. But in drop shipping, the online seller is only considered as a third-party retailer or marketer of the supplier.
3. Capital and Profit Margin
For ecommerce fulfillment, companies need capital to acquire inventory. Meanwhile, drop shopping can be done without shelling out money first. Nonetheless, profit margins are a lot higher with the former since companies are in control of product pricing, whereas the latter only yields profit in the form of commissions.
In drop shipping, the manufacturer takes the role of order fulfillment service provider. This means that the manufacturer is the one responsible for packing orders and shipping it to customers. On the other hand, ecommerce fulfillment uses either an in-house or an outsourced fulfillment service to handle logistics operations instead.
Which Supply Chain Management Solution Should You Choose?
Choosing the perfect supply chain management solution is quite difficult. The truth is that both drop shipping and ecommerce fulfillment services have the potential to boost your business, but in different ways. This is why the decision must not be made recklessly. It’s important to assess the needs of your company first, so you’ll know which of the two can help your organization operate more efficiently.