Online business is a dynamic environment comprised of various forms of commerce that are developing new strategies and tactics. Two opportunities notable for those who want to start their own business right now are eCommerce and dropshipping. Both are associated with selling online; however, they present two different ways of achieving success.
This article will take you through the differences between dropshipping and eCommerce and arm you with all the information you need to choose which model can potentially power your online business vision.
Learn the definition
eCommerce (the abbreviated form of electronic commerce) can be defined simply as the sale of products or services through the use of the Internet. This is a rather general term that encompasses virtually any kind of company, from warehouse-filled retailers with thousands of pieces of inventory to one-off sellers on an eCommerce platform such as Etsy or eBay.
eCommerce stores may focus on a specific category of products, such as clothing, electronics, sports, and recreation, or they can contain pieces from all the niches. They can also specialize in selling tangible, digital goods like an ebook or software or even deliver a service over the Internet.
Whereas eCommerce refers to a broad range of businesses involved in buying, selling, and distributing goods and services on the Internet, dropshipping is a particular type of fulfillment mechanism. In this model:
- You, the owner, sell products on an online store without having to physically lay your hands on any of them.
- When a customer places an order on your store site, you pass an order summary and other specific details on to the third-party supplier.
- This supplier can then package and directly deliver the product to your customer.
To put it simply, you serve as a broker by linking customers and suppliers by managing a storefront.
Suppliers such as Oberlo and AliExpress are considered to be some of the most famous dropshipping platforms. They help you access thousands of products from multiple vendors, and thus, you can incorporate as many products into your online store as you wish. They deal with the aspects of storing the products you sell and packing and delivering them to the customers, freeing you from the intensive work of organizing the inventories.
Difference Between eCommerce and Dropshipping
Dropshipping is a sub-category of eCommerce. As seen in the previous section, it is the inventory management that is the key difference.
In traditional eCommerce, you order goods in large quantities, which are then held in a distribution center, and manage order shipment alone. Dropshipping helps in avoiding the overhead costs of inventory and warehousing, which can be utilized in marketing and customer relations:
| Feature | eCommerce | Dropshipping |
|---|---|---|
| Inventory management | Requires managing and storing your own inventory | No inventory management; products shipped directly from suppliers |
| Startup costs | Higher initial investment for inventory and storage | Lower initial investment as no inventory is needed |
| Risk | Higher risk due to investment in inventory | Lower risk as there is no need to purchase products upfront |
| Profit margins | Potentially higher margins due to bulk purchasing | Typically lower margins due to higher per-unit costs from suppliers |
| Control Over products | Greater control over product quality and customization | Less control as products are handled by suppliers |
Dropshipping vs. eCommerce: Pros and Cons
Deciding whether it is right to engage in dropshipping or eCommerce depends on several factors. Here is a comparison of their advantages and disadvantages:
Pros and Cons of eCommerce
| Ecommerce Pros | Ecommerce Cons |
|---|---|
| More control over inventory and branding | Higher upfront costs, inventory management, warehousing needs |
| Potentially higher profit margins | More complex logistics (managing inventory, packaging, shipping) |
| Greater ability to offer customer service and returns | Less flexibility in scaling up or down |
Pros and Cons of Dropshipping
| Dropshipping Pros | Dropshipping Cons |
|---|---|
| Lower startup costs, less risk | Lower profit margins |
| Easier to start and manage | Less control over product quality and branding |
| Wide variety of products to choose from | Dependence on reliable suppliers |
Choosing Between Dropshipping and eCommerce
Factors to Consider
There are a few things that you need to consider when selecting a business model, and they include:
- Budget
It is worth noting that entry into dropshipping is relatively low. It is suitable for beginners because it allows your business to start without purchasing goods in bulk. You can order from the wholesaler as they make the sales.
On the other hand, traditional eCommerce entails the holding of inventory, which means that you have to invest in warehouses, and thus, costs are likely to be higher at the beginning.
- Desired level of control
In dropshipping, you are somewhat limited in what you can do regarding issues such as the quality of products, packing, and delivery time. Here, the dropshipper takes responsibility for order fulfillment, and your opportunities to shape the buyer’s experience are quite limited.
Traditional retains end-to-end control over inventories, brands, and fulfillment, providing you a niche persona for the purchases.
- Long-term business goals
Are you thinking of a scalable business organization that is inclined towards a brand image? The traditional kind of eCommerce has a higher profit margin since you are in a position to order goods in bulk. Marketing and packaging also play an important role in establishing a better brand image and identity for the customers. While dropshipping may be ideal for newcomers, its lower margins will restrict operations’ growth.
Case Scenarios
Let’s see how these factors play out in real-life scenarios:
- When Dropshipping Might Be More Suitable
Sarah, a college student eager to embrace vintage clothing, takes the challenge to the online realm to sell carefully selected thrift wear.
It is valuable for her to list a wide range of vintage styles from multiple suppliers without the upfront expense of ordering products for resale. This model allows her to gauge the tendency of consumers towards a particular type of wardrobe without having to go all out for a particular style or buy physical stock.
- When Traditional eCommerce Might Be More Suitable
David, using his skills, carved handmade wallets from leather and has a lot of experience making wallets. When he looks at the future, he dreams of creating an organization that will offer top-quality products and services that are acknowledged by its clients.
In traditional eCommerce, David gets a hold of all of them, from sourcing materials to packaging and transit. It also puts him in a position to maintain quality and extend the branding of his work when creating the furniture.
Conclusion
It is imperative to know the differences between dropshipping and eCommerce before launching your online store. you should estimate your budget, control, and objectives to achieve the best result. Last but not least, do not shy away from approaching sources like Tech-One to help you navigate the expansive world of eCommerce!