Looking for E-Commerce vs Dropshipping guide?
Setting up a reasonable online business is now considerably easy, thanks to globalization. However, succeeding in an online initiative is getting complicated for the same reason. That’s why you must narrow down your scope before implementing a business idea.
Access to internet through smartphones revolutionized the idea of e-commerce. Even dropshipping, a similar yet distinctive idea, can give you an online breakthrough. How the two differ from one another should get on your priority list to decide on the ultimate venture.
What is E-Commerce?
Electronic Commerce, shortened to e-commerce, is the approach to buying and selling products or services online. The transaction can take place through smartphone apps, websites, online marketplaces. It can come in numerous types, sizes, goods to meet consumer demands.
The traditional e-commerce model requires you to have a website with listed products, buying carts, and payment systems. It has been a massively popular industry and continues to expand its reach and revenue. Almost all kinds of items are now possible to buy and/or sell online.
Amazon, Wayfair, eBay, and Boohoo are some of the most widely checked-out e-commerce sites in the world. It has become a norm to do business while revolutionizing the way our way of shopping. Common features of a well-founded and well-operating e-commerce business include –
- A proprietary or rental warehouse to process all the placed or returned orders.
- Proprietary or courier services to make the delivery with or without certain exceptions.
- Complete control over the entire customer service or query, pre-sale and post-sale.
- A specific fulfillment center to handle the packaging as well as shipping requirements.
The first-hand advantages of any e-commerce business enlist –
- Exclusive catering to keep up with customer likes, tastes, favors.
- Provision of a secure network of transactions for retail businesses.
- Considerably cheap to run/maintain compared to offline stores.
- Absolute control over the ordering, packaging, shipping process.
Some of the concerning limitations to address with e-commerce features –
- Smooth, interdependent, active end-to-end management.
- High cost of rental spaces to set up warehouses for goods.
- Keeping the inventory relevant to customer tastes or likes.
- Incredible competition poses challenges in the beginning.
The total number of online stores is expected to remain within 12 – 24 million in 2024. And enthusiasts related to e-commerce are mostly 18-24 years old in the USA. It demonstrates what youngsters think of this consistently growing niche market to make a living.
What is Dropshipping?
It’s the retail fulfillment process by a store without keeping the product or service in stock. The store purchases the sold services or products from a third-party supplier. It’s the supplier who has everything in stock, ultimately sending the goods to the customer.
In short, you’ll place the order with a merchant and the merchant will buy goods from suppliers. And the supplier will directly send the goods to you. It’s the supplier who handles storage, packing, and delivery. The merchant, in charge of marketing, never sees goods.
AliExpress, CJdropshipping, and Meesho are the leading examples of such businesses. it’s more like a category of modern e-commerce, exclusively popular in the fashion industry. The fundamental points or features related to a steadfast dropshipping business include –
- Supplier’s handling of the entire fulfillment process.
- Steady customer service along with pre-sale queries.
- Somewhat uncertain post-sale customer service/aid.
- Suppliers often come from wholesale marketplaces.
The primary benefits you can enjoy with dropshipping include –
- Minimal manpower requirement, so it takes low cost and no labor.
- No premises or storage requirements to save your rental expenses.
- Comfortably reaching global audiences without delivery concerns.
- Financially cheaper to start, operate, maintain, handle by yourself.
However, there are associated drawbacks with dropshipping, like –
- Low-profit margin due to no involvement in the fulfillment process.
- Limited to zero quality control in hand over purchased goods/products.
- Level of offering reasonable solutions to refund or return is narrow.
- Low control over the delivery timeline on the international purchase.
Still, an online can push its profit margin by 50% by starting the business. However, the profit margin is more like 15% – 20% on average for any business in the niche market. However, nearly 27% of all retailers now use dropshipping for product, good, service fulfillment.
Dropshipping vs E-Commerce: Key Differences
Measuring one against the other in terms of online retailing is somewhat straightforward. The crucial distinction points between the two implies –
- Fulfillment Process: E-commerce handles almost everything, from taking orders to final delivery. Dropshipping only places the order, the supplier handles everything else to make the delivery.
- Inventory Management: Dropshipping relies on suppliers without managing or holding goods. E-commerce purchases, stores, delivers, maintains inventory through steadfast management.
- Upfront Investment: Traditional e-commerce is costly due to rentals, security, management, buys, hiring. Dropshipping keeps expenses minimal, suiting entrepreneurs with low capital.
- Inventory Risks: E-commerce has to bear risks associated with unsold goods, requiring clearance sales. Dropshipping only deals with order placement, terminating the liquidation requirements.
- Product Selection: Dropshipping can expand product catalogs based on the supplier’s inventory. But e-commerce allows curating control by providing a specific selection of available products.
- Scalability: More inventory, higher lineup, optimized supply make ecommerce sufficiently scalable. Dropshipping is more scalable as it enables quick listing of goods from different niches.
- Profit Margin: Dropshipping offers slimmer profitability due to the need to offer competitive prices. E-commerce has superior margins with specific-priced proprietary products/services.
- Branding: It’s difficult to think of a reasonable model to promote a dropshipping business. However, e-commerce goes for full-scale marketing with visuals, motto, vision, logo, value, etc.
- Control: Dropshipping limits the control over product quality since everything gets handled by suppliers. E-commerce enables excellent customer experience with full control over anything.
Dropshipping should be your choice when you’re about new initiatives, limited capital, market trend experimentations, flexible product offerings, or low-risk trials. Concerns like specific niche, quality control, higher risks, long-term vision, brand recognition, good capital should get ecommerce for you.
Wrapping Up
It takes no technical understanding to evaluate your capability, objective, expectation. That should help you choose in a better way. You don’t have to spend a fortune on fiercely competitive e-commerce when the resources are limited. Even so, you should give dropshipping a trial to see how things work. Then, you can eventually expand your niche to transform or combine both to establish a full-scale business.
Contact Tectera who offers ecommerce development in Toronto for ecommerce website development.