Everywhere you look lately it seems like someone wants to “get into dropshipping” or “sell on a marketplace", but what does that really mean? How is dropshipping different from a standard e-commerce store? We'll go over the different e-commerce business models in this article to give you a thorough understanding of how they work.
Want to get into dropshipping, but don't know where to start? Check out our completely FREE webinar on how to build a successful dropship business! We'll walk you through the process step-by-step. Or, you can have our expert team at DropshipUSA build a fully automated USA based dropship website for you in less than three days!
Now, there are different types of e-commerce businesses that allow you to fulfill customer demands. Let's review them real quick:
- Dropshipping: Dropshipping is a simple method of a specific type of order fulfillment by a business or individual.
Dropship Program: This is an e-commerce model where retailers can create curated, extended aisles to meet customer’s demand.
- E-commerce Marketplace: An online forum which, like its name suggests, is a place that allows hundreds if not thousands of brands to sell their products.
Let's talk about the difference between dropshipping and marketplaces. Below you'll find a detailed description of each e-commerce model so you can see how they function.
What Is Dropshipping?
The basic dropshipping model is a shipping or fulfillment method where a customer places an order with a multi-vendor retailer. The retailer does not send the products to the customers directly. The manufacturer or brand that the retailer has partnered with is the one who sends the product.
Let's break that down a little more.
- The customer purchases on your dropship retail store.
- You send the order to the supplier you work with.
- They fulfill the order and send it to the customer.
With this dropshipping model, you are not responsible for pre-purchasing or stocking inventory. You don't have to worry about sourcing products directly or managing warehouses. As a dropshipper, you get to offer a wide variety of SKUs from existing suppliers and try out new vendors and product categories easily!
As for the manufacturer, it's beneficial for them to partner with you because they can reach a larger number of people with you selling their products. Dropshipping allows manufacturers to try out SKU mixes and product categories within their listed retailers, a move that would be considered highly risky in traditional wholesale/retailer dynamics.
Dropshipping is an easy way to get into e-commerce. But, like any business, you need to do a little research before getting started so you can come up with a smart launch plan.
Make sure you use the right programs, ad campaigns and do your due diligence when setting up a dropshipping website. You have to work smart and find the right strategy to implement for your site's success.
Now that you know what dropshipping is, let’s talk about dropshipping programs.
The dropshipping programs available today allow retailers to carefully curate, market, and sell specific suppliers’ products online, increasing the range of products on offer.
Not only do drop shipping programs help you expand your inventory, they help you gain new audiences and revenue streams.
Companies that offer drop shipping programs for retailers are usually manufacturers or other big retailers.
This system allows these big wholesalers to get their products out to more people and ensure that they are expanding their reach by working with more and more retailers.
Now that you understand dropshipping and dropshipping programs let's move on and cover e-commerce marketplaces.
E-commerce marketplaces are online forums where thousands of brands sign up to sell their products. Many e-commerce marketplaces offer drop shipping programs for retailers as well.
These marketplaces act as consumer-focused hubs that allow you to sell products alongside a host of different brands. Amazon, eBay, Alibaba, and Walmart are some of the most prominent marketplaces out there.
These marketplaces work as central high-traffic hubs for brands to set up their brands and sell their products.
The brands are responsible for selling and shipping the products within the e-commerce marketplace platforms, so it’s not all about the marketplace.
Individual brands are responsible for their success within the marketplaces. E-commerce marketplaces are a lucrative model with Amazon becoming the 4th most valuable company in the US within 22 years, however, starting an e-commerce marketplace isn’t as easy as setting up other e-commerce ventures.
Retailers often want to retain some merchandising power, carefully-choose brands, and opt to sell third-party products. They do it through an efficient, well-organized dropship program for maximum profit.
Now that you know how each individual system works, let's talk about some critical differences between e-commerce marketplaces and dropshipping.
E-Commerce Marketplace Vs. Dropshipping: 5 Key Differences
You know how both e-commerce marketplaces and dropshipping function, but let’s take a look at some of their main differences:
- People who distribute the product in marketplaces are called sellers, and people who distribute for dropshippers are known as suppliers.
- Marketplaces have to disclose if they use a third party other than the retailer when shipping.
- Marketplaces have reviews and feedback systems that encourage customers to review the seller’s product and services.
- Dropshippers do not disclose the shipping details.
- Marketplaces are a free place, meaning they do not control what products are sold usually. However, dropshippers have full control over what type of products they want to sell.
If you want to learn everything we know about dropshipping, check out our completely FREE webinar on how to build a successful dropship business! We'll walk you through the process step-by-step. Or, you can have our expert team at DropshipUSA build a fully automated USA based dropship website for you in less than three days!
Now you don't have to wonder, “What is the difference between e-commerce and dropshipping?” We hope you've learned a lot from our article and, as always, if you have any questions just reach out to us! We're always happy to chat with you and answer questions!