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Blog / Beginner's handbook / Dropshipping vs. Ecommerce: A Beginner’s Guide to Selling Online

Beginner's handbook

Dropshipping vs. Ecommerce: A Beginner’s Guide to Selling Online

Dropshipping vs. Ecommerce: A Beginner’s Guide to Selling Online
Sandra Ķempele

By Sandra Ķempele

10 min read

Interested in starting an online shop? It’s never been easier to sell products online, and there are several ways you can approach this. As you’re weighing your options, you may have heard of terms like ecommerce and dropshipping, two different methods for order fulfillment.

In recent years, dropshipping businesses have become a popular way to make money online. But how does a dropshipping business model differ from ecommerce fulfillment? In this blog post, we’ll cover:

  • What’s ecommerce and dropshipping?

  • The main difference between both business models

  • Dropshipping vs. ecommerce order fulfillment

Before getting to the ins and outs of the online business ecosystem, let’s start with some key definitions.

What is ecommerce?

Ecommerce describes the process of buying and selling things online. It involves transactions between businesses and customers, where the entire process—from browsing and selection to payment—happens online.

In recent years, ecommerce has transformed consumer shopping habits and how businesses operate. The convenience, accessibility, and global reach of online shopping have made it a key player in the global retail landscape. Global ecommerce sales reached an astonishing $5.2 trillion in 2021, with an ever-increasing number of people making purchases online.

Ecommerce fulfillment describes receiving, processing, packaging, and delivering customer orders placed through an online store. It involves managing inventory, ensuring product quality, and delivering orders to customers.

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What is dropshipping?

Dropshipping is a type of ecommerce where the seller doesn’t keep products in stock. Instead, when a customer makes a purchase, the product is directly shipped from the supplier to the customer. 

The seller acts as a middleman, handling the sale without managing the physical inventory. You only need an idea, a supplier, and a website to start selling products.

Dropshipping market was valued at $222.5B in 2022, a huge increase from pre-pandemic levels. It’s a booming business model that’s expected to reach a $1.5 Trillion global market value by 2030.

Dropshipping vs. ecommerce: what’s the difference?

For beginners looking to start selling online, understanding the fundamental difference between dropshipping and traditional ecommerce is crucial. In traditional ecommerce, sellers stock inventory, meaning they buy products in bulk, store them in a warehouse, and handle the order fulfillment process—picking, packing, and shipping—themselves. 

Dropshipping stands out as a more beginner-friendly business model. With dropshipping, you don’t need to invest in or store any inventory upfront. Instead, you partner with dropshipping suppliers who handle the inventory and shipping. 

While traditional ecommerce provides more control over the entire process, dropshipping offers a lower barrier to entry. This makes dropshipping a popular model for sellers starting an online store with limited capital and resources.

Dropshipping vs. traditional ecommerce fulfillment

Ecommerce and dropshipping, as different business models, offer distinct benefits and drawbacks that can impact the success of your online store. To help you pick the most suitable method, let’s compare dropshipping vs. ecommerce.

With the traditional ecommerce fulfillment model, sellers need to manage and maintain their own inventory—this includes purchasing and storing products and handling the logistics of stock levels, storage, shipment, and returns. That way, you have complete control over the inventory and order fulfillment processes.

When running a dropshipping business, inventory management is outsourced to a third-party supplier. Online sellers don’t need to invest in stock or handle inventory. Instead, the supplier ships products directly to the customer. This crucial distinction makes dropshipping a more hands-off approach compared to other ecommerce business models.

a man in a vest holding a tablet in a warehouse

Source: Pexels

In traditional ecommerce fulfillment, you need to invest in purchasing and warehousing inventory. The upfront investment includes costs like product manufacturing, storage space, and workforce, amounting to significant expenses before making any profit from sales.

Dropshipping, on the other hand, minimizes upfront costs. Although sellers might encounter some fees for using online marketplaces or website hosting, they only buy products from dropshipping suppliers when a customer places an order. This eliminates the need to hold inventory, reducing financial risk and making it a potentially more cost-effective business model. It’s perfect for those looking to start an ecommerce business with little initial investment.

The trade-off between control and risk is a key consideration when choosing between dropshipping and ecommerce fulfillment work.

With traditional ecommerce, businesses commit to buying products before making sales. This poses a financial risk if the products don’t sell as well as predicted. However, you have greater control over the fulfillment process, allowing quicker shipping times, proper quality checks, and handling returns and exchanges directly.

Dropshipping is the other way around: it reduces upfront risks but comes with less control. Sellers rely on third-party suppliers to handle inventory and shipping. While this minimizes financial risk, it may result in potential stockouts and less control over product quality.

With traditional ecommerce fulfillment, profit margins are influenced by inventory costs, warehouse expenses, and potential markdowns for slow-moving products. While buying products in bulk might be cheaper, it requires careful inventory management and a good understanding of the market demands.

Dropshipping is more lucrative and often allows for higher profit margins because there’s no need to buy inventory upfront. However, dropshipping competition can be fierce, and finding a balance between competitive pricing and healthy profit can be difficult.

To identify dropshipping products with high profit margins, do thorough market research. Look for products with consistent demand and less saturation in the market. You could also create product bundles or packages that offer extra value to customers while allowing you to increase the average order value.

Dropshipping is often considered more scalable because it doesn’t require significant investment. As sales increase, the business can easily grow without expanding warehouse space or employing more staff. 

However, the reliance on third-party suppliers means that growth is also influenced by the supplier’s capacity and efficiency. As order volumes rise, shipping times and costs can become problematic, impacting customer satisfaction and profit margins. Maintaining brand consistency can also become challenging if products come from various dropshipping suppliers.

Scaling traditional ecommerce fulfillment requires careful planning and investment in inventory management systems, storage facilities, and logistics as the business grows. You must excel at demand forecasting, maintain sufficient stock levels, and manage all the associated costs to scale successfully.

Scaling an ecommerce business is more challenging, but the rewards are worth it if done successfully. Buying in bulk and streamlining fulfillment processes can result in lower costs per order and higher profit margins.

Within traditional ecommerce, businesses have more control over their brand. This extends to the quality of products, packaging aesthetics, and personalized touches. As a result, it’s easier to deliver a consistent, branded customer experience and build trust. 

From the moment a customer visits your ecommerce website to the arrival of the packaged product, you can ensure that every touchpoint reflects the values of your online business.

Dropshipping can present challenges to brand control. Since sellers rely on third-party suppliers, this generally means less influence over packaging, product quality, and shipping times. Maintaining a strong and consistent brand image can be more difficult, as the supplier often determines these elements.

But, there’s a workaround: branded dropshipping. With Printful, you can add branding elements, including packaging inserts, printed labels (inside and outside), and even custom packaging.

Traditional ecommerce methods are well-suited for online businesses that want to deal directly with customer inquiries, provide order updates, and be in charge of resolving issues promptly.

When dropshipping, handling customer inquiries may involve communication with multiple suppliers, adding complexity to customer service. For example, coordinating returns or addressing product issues might take more effort to get right. 

Since dropshipping products are shipped directly from suppliers, shipping times may vary. Managing customer expectations and providing realistic delivery time estimates are critical to avoid disappointment.

Running an ecommerce business requires diverse skills—from market research to inventory management and effective use of online sales channels. You need to be organized to keep track of supply chains and logistics and ensure smooth coordination with suppliers.

The appeal of a dropshipping business is that it requires very few specialized skills. However, you’ll need to hone your marketing and customer service skills to grow an online business successfully. If you’re using print-on-demand services like Printful, having a good grasp of design trends and product customization options is also helpful.

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The traditional ecommerce fulfillment model can limit your product offering. Space constraints and commitment to bulk purchases typically lead to a decision to offer a limited product range.

In contrast, dropshipping allows for a more extensive and flexible product range. It’s well-suited for testing the demand for certain products without being stuck with unsold inventory. With dropshipping, you can quickly change course even if a product doesn’t perform well. 

Dropshipping is a more suitable business model if you aim to sell trending products. Let’s say you know the ins and outs of the latest pop culture trends and want to start selling apparel. With Printful, you can sell custom t-shirts and custom hoodies with original prints that speak to a niche audience.

What’s more, you can experiment with text, graphics, and images to create designs for all kinds of items, from tech accessories to home decor. Check out Printful’s product catalog of 300+ items to discover a range of bestselling print-on-demand products.

Dropshipping vs. ecommerce: The verdict

The choice between dropshipping and a traditional ecommerce business model depends on the needs of your online business. Below, we’ve highlighted some key aspects to help you decide which one suits your business best.

When should you go for dropshipping?

For beginners in ecommerce, dropshipping offers a lower barrier to entry. You can quickly set up an online store without the complexities of managing inventory. If you have limited upfront capital and prefer not to invest heavily in manufacturing or purchasing stock, dropshipping allows you to start with minimal financial risk.

Dropshipping is helpful for testing the demand for new products or entering different markets without committing to bulk purchases upfront. It’s a good fit for a business owner eager to experiment with new product designs and offer seasonal, trending items.

Running a dropshipping store suits those who want a more hands-off approach to logistics and order fulfillment. With dropshipping, you can focus on other areas of your online business, like marketing and product design.

When should you consider traditional ecommerce fulfillment?

If maintaining control over product quality is essential for your brand, a traditional ecommerce business model is a good fit, allowing you to directly oversee and manage inventory. This control extends to the entire order fulfillment process and the overall brand experience, from packaging and product presentation to customer interactions.

For ecommerce companies that are well-established in the market, have enough staff, and are good at predicting product demand, traditional ecommerce fulfillment may be the better option.

Dropshipping vs. ecommerce: Which one will you choose?

Both dropshipping and ecommerce are efficient order fulfillment methods. Hopefully, you’re now clear on their main differences, advantages, and drawbacks. Just to recap:

  • With ecommerce fulfillment, you need to keep stock.

  • Ecommerce typically requires more initial investment than dropshipping.

  • Scaling is easier with dropshipping.

  • It can be more difficult to ensure product quality when dropshipping.

  • Ecommerce gives you more control over every aspect of your business.

While choosing between dropshipping and ecommerce, carefully consider aspects like initial investment, brand control, and product offering. Both models can be profitable online businesses but it's important to pick the one that works best for your needs.

Are you ready to take the next step with your online business? Good luck and let us know how it’s going in the comments below. Happy selling!

Read also: 10 Tips on How to Grow Your Dropshipping Business

author

By Sandra Ķempele on Jan 4, 2024

Sandra Ķempele

Guest author

Sandra is a freelance writer and educator with a background in art and communication. She holds an MA in Art Museum and Gallery Studies, and in her free time enjoys reading, museum visits, and outdoor adventures.

Sandra is a freelance writer and educator with a background in art and communication. She holds an MA in Art Museum and Gallery Studies, and in her free time enjoys reading, museum visits, and outdoor adventures.