Successful Online Selling
 

Drop Shipping vs. Order Fulfillment

order fulfillmentIt is perhaps the most important thing when selling on an online market place: how to store and ship your products.

Of course, it’s not a very easy decision to make because it has a direct effect on your profit margins and shipping time.

Among the available options is drop-shipping and order fulfillment. In drop-shipping, a seller has to relay customer orders to the wholesaler for handling, packaging and shipping.

On the other hand, order fulfillment requires the retailer to purchase and handle the storage, packing and shipping of customer orders all by himself. If you’re a seller, you need to clearly understand the pros and cons of each of these options so that you can make an informed decision in choosing one.

Merits and demerits of Drop-shipping

One of the greatest benefits of drop-shipping is that as a seller, you do not have to buy and stock merchandise. That means that you will not have to spend money on warehousing or tools that assist you to track your stock.

Additionally, you will eliminate the need to spend time and effort packing and shipping customer orders. Since these are handled by the supplier on your behalf, you can focus your time and energies on something else, like devising ways to improve customer experience. The extra freedom also allows you more flexibility in the range and type of products you can offer- basically, you can offer varying product sizes, colors, among others.

You also have the freedom to experiment with various product types with greater ease and less risk. This allows you to re-invent your stock with minimal effort than if you were handling your own inventory.

As convenient as drop-shipping is for a seller, it has its own set of problems. Firstly, you will have to put up with stiff price competition from other drop-shippers. You also have to contend with the challenges of not being in control of your stock.

You will not be able to readily know the amount of stock that’s available, something that can cause problems when customer orders have been placed. Any customer dissatisfaction due to unavailability of a product is directed to you. Also, some wholesales have prohibitive policies regarding product returns, which most likely infringes on your freedom as a retailer.

Merits and demerits of order fulfillment

pros and cons of dropshippingOrder fulfillment puts you in direct control of your inventory, as well as the shipping details of a customer’s order (date, condition, etc). You could either have your inventory nearby for better supervision, or outsource your inventory to a third-party company to do the order fulfillment.

The drawback of managing your stock is that you need to keep accurate records of the available stock and replenish in time. You’ll realize that majority of small individual sellers do not have the resources to manage all the inventory management work.

It means that you’ll spend a lot of time just managing your inventory, and therefore, you will not have time to focus on other business areas that can help your business expand. It is also not easy to experiment with different products because any changes necessitate appropriate adjustments to your inventory budget. If a product doesn’t sell, you make a direct loss.

Conclusion

Making a decision between drop-shipping and order fulfillment will largely depend on how knowledgeable you are about either option, or what your priorities as a retailer are.

If you value flexibility and product variety, consider drop-shipping, but if you think that having control over your inventory will work best for you, choose order fulfillment.

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