There is a growing trend of entrepreneurs showing an interest in starting an online store.
If you’re in that group, you’ve likely heard about the controversy surrounding dropshipping vs. online stores.
Both are common ways to get what you want, but each has its advantages and disadvantages.
We hope this comparison will help you choose the option that is best for you.
Both the strengths and weaknesses of each business model will be covered, as well as how they compare to one another.
That being said, let’s launch into action!
Overview of Dropshipping
With drop shipping, you can fulfill orders without investing in stock. Your orders are sent straight to the manufacturer, and they’ll handle fulfillment while you pocket a cut of the profits.
Given its low entry barrier and high return on investment, dropshipping has become increasingly popular among entrepreneurs in recent years. There’s no need to spend more than $100 to get things moving if you plan ahead.
However, you shouldn’t approach dropshipping as a means to get rich quick. The low entry barrier combined with the high degree of competition makes this an attractive market.
If you want to succeed, you need to put in the time and energy into the business, and you also need to develop a good marketing plan.
Pros of Dropshipping
You need not fret over stock.
The vendor is responsible for handling all order processing.
requiring little to no money to get going.
There is a low barrier to entry for trying out brand new products.
More pliable to the needs of novice business owners.
Cons of Dropshipping
There is already way too much rivalry.
The quality of the product is not being monitored.
Can cause reliance on the service provider.
Overview of eCommerce
In its most basic form, an online store is run as an eCommerce company. Products are kept in stock, orders are accepted, and then delivered to customers within the specified time frame.
You’re responsible for every facet of the company, from finding suppliers to arranging deliveries. It is up to you whether you keep your stock in a bedroom or a rented warehouse.
There are two options for handling order processing: employing a third-party logistics firm or handling everything in-house. Order fulfillment is a service that is typically outsourced by companies with a medium to large workload to reliable courier services.
Pros of eCommerce Fulfillment
Pricing breaks for bulk purchases.
As a result, your reliance on the provider is reduced.
Assuring high quality is now a breeze.
Large potential for future gains in profit.
More direct management of the customer service department.
Cons of eCommerce Fulfillment
Because of the larger outlay of capital at the outset, in order to stock inventory.
It’s imperative that you have a private place to put your things.
Order fulfillment and packaging materials use up a lot of time.
Dropshipping vs. eCommerce – The Key Differences
|Initial Investment||Requires a high initial investment.||Requires a high initial investment.|
|Ease of Operations||Easier to operate because packaging and shipping are done by the supplier.||Harder to operate unless you have higher third-party fulfillment services.|
|Scalability||Depends if the supplier can meet the demand for the products.||You can stock more inventory and scale at your own rate.|
|Experience Level||The perfect business model for beginners due to the low risk and low investment.||Requires a high investment so it is much riskier for beginners.|
|Private Labeling||You need to find a supplier or service that can help you with private labeling.||You can private label the products yourself to launch a brand.|
Dropshipping vs. eCommerce – Detailed Comparison by Features
Need more information differentiating between an online store and a dropshipping business? Find below a more thorough analysis of how each feature stacks up:
To a large extent, the success of dropshipping can be attributed to the fact that it is less risky than conventional methods of doing business.
You can get started in the dropshipping business for general goods with little risk and low overhead costs.
However, if you go with a classic online store, you won’t have to worry about this. Having to keep an inventory stocked makes it more difficult for novices.
In addition to that, you’ll need to have some understanding of logistics if you don’t plan on outsourcing order fulfillment.
Since dropshipping is so accessible to newcomers, it wins hands down in this category when only previous experience is considered.
In order to launch a successful dropshipping business, you must first research a product, design a website, locate a reliable supplier, and then dive headfirst into marketing.
Not an easy process, but that’s about it on paper.
If you’re comfortable with computers, you might be able to create your own website by following a tutorial and selecting a free theme. You could spend a lot of time looking for products, but unless you use a paid subscription service, you won’t have to spend any money doing it.
Once you’ve located a reliable provider, the bulk of your budget will go toward advertising, as you’ll need to use paid channels to draw in customers.
In the case of a conventional online store, however, most of your capital would be used to stock merchandise. We haven’t even gotten into the expense of actually fulfilling the orders yet.
Put simply, a dropshipping business can be launched with a negligible initial investment, while a conventional online store requires much more capital. So, this is yet another argument in favor of the dropshipping business model.
Now to the meat of the matter: which company generates more revenue? Profit in dropshipping comes from maintaining a margin on each sale.
You might, for instance, purchase an item for $5 and then resell it for $6. That’s about the maximum acceptable profit margin, which is 20% per transaction.
Don’t be discouraged if you find yourself lowering your listing prices by 10–15%, as this is the norm for new dropshippers.
To sum up, the formula for profit per unit sold goes as follows: product price > price per unit sold. This is also one of the main drivers of the current success of high-priced dropshipping.
In contrast, if you run a conventional online store, you’ll need to keep inventory on hand, which means you’ll have to make wholesale purchases. We all know that most vendors will give substantial savings for large orders.
It stands to reason that a product’s potential profit would increase in tandem with its low sourcing cost. In light of this, it’s reasonable to conclude that the traditional eCommerce business has the upper hand due to its greater profit potential.
Ease of Operations
Dropshipping eliminates the need to maintain stock and handle shipping for customers.
Finding a trustworthy vendor and support team still requires some effort, but it pales in comparison to the ordeal that is running a conventional online store.
The first step is to establish a fulfillment center, where orders will be stored and packed before being shipped.
Outsourcing order fulfillment doesn’t relieve you of the responsibility of managing and keeping tabs on your stock. Consequently, it is easy to become overwhelmed by your responsibilities if you don’t maintain some semblance of order.
However, the main advantage of a classic online shop is the increased ability to guarantee high-quality goods. By stocking an inventory, you can check each item for defects before they make it to customers’ hands.
This, however, isn’t enough to compete with the overall convenience of a dropshipping store.
Establishing a name for your company is the quickest route to success. It makes you more credible and sets you apart from the copycat stores.
In the context of dropshipping, establishing a private label dropshipping store is not difficult. Of course, you’d need outside help with this because you aren’t keeping an inventory.
Also, you may or may not be able to get custom packaging from your supplier. For this reason, it is preferable to collaborate directly with a service that not only assists you in sourcing your products but also private labels them.
Private labeling a standard online store is a lot less work. You are free to put your own label on the products you already have in stock so long as you aren’t infringing on anyone else’s copyright.
Building a dropshipping brand is similar to opening an online shop, but it does require you to rely on others more. To that end, this is yet another factor contributing to the adoption of an online storefront fulfillment strategy.
The quality of a company’s customer service can make or break its success. That’s why major corporations are paying attention to it so much.
As a dropshipping business owner, providing satisfactory customer service is not always easy. You can’t monitor the quality of every shipment from your supplier, even if you test the products before they leave the warehouse.
You would have to rely entirely on the supplier to initiate a return in the event that a customer received a damaged or defective product. If that doesn’t work, you’ll have to pay back the cash yourself.
To add insult to injury, if your supplier is uncooperative, fixing the problem will be even more of a hassle than it already is, which could result in a bad review.
FAQs about Dropshipping and eCommerce
Is eCommerce Fulfillment More Profitable than Dropshipping?
A more conventional online store appears to be more lucrative than one that relies on dropshipping. The former is preferable because it allows for greater profit margins thanks to bulk purchases of products at a lower cost.
However, this does not guarantee that you will make more money with eCommerce fulfillment than with dropshipping.
However, if you decide to sell high-priced items, you may find that you can actually make more money as a dropshipper than you would otherwise.
Should Beginners Go for Dropshipping or eCommerce Fulfillment?
Because you don’t have to worry about stocking an inventory, dropshipping is a more accessible business model for newcomers. It’s possible to lose a reasonable amount of money even if you pick the wrong product or fail to promote your store effectively.
The stakes are high, though, if you want to succeed at eCommerce fulfillment. Depreciation and other costs must be considered alongside the obvious need to sell off all stock.
Dropshipping vs. eCommerce Fulfillment – Which Is Better for the Long-Term?
If you’re serious about building a brand, either dropshipping or eCommerce fulfillment will serve you well in the long run.
Dropshipping, on the other hand, may be preferable if you just want to operate a generic online store, mainly due to its adaptability.
Can the Fulfillment Process Be Avoided in an Ecommerce Business?
You don’t have to personally handle packing and shipping orders even if you run a conventional online store.
While it is possible to have a third-party logistics service handle your order fulfillment, doing so will add to the overhead costs of running your company.
Dropshipping vs. eCommerce Fulfillment – The Final Verdict
Taking a look at the stats, it would appear that dropshipping and eCommerce are deadlocked.
In various respects, both business models are superior to their rival. Which one you choose to pursue is largely determined by your available resources, level of expertise, and willingness to take risks.
However, a dropshipping store is the better option if you don’t have a lot of spare time because of how simple it is to run.