The boom of e-commerce businesses is indispensable with order fulfillment, which concerns various ways of storing and shipping products. A good order fulfillment strategy is critical to the success of your online business because it can reduce costs, keep your business competitive, build trust, and customer loyalty.
Other than fulfilling orders by yourself, nowadays, various options of order fulfillment come out, among which Fulfillment by Amazon (FBA) and dropshipping are two great options. These two options are compared a lot and heatedly debated. Amazon fulfillment centers are just the tip of an iceberg – there are many other third-party fulfillment providers out there.
Which one is better for your online business, dropshipping, or order fulfillment center? Let's look further into the matter!
To have a better understanding of order fulfillment, you need to know the meaning.
Order fulfillment is throughout the entire process of e-commerce business – receiving, processing, picking, packing, and shipping an online order to customers.
What does each step in the order fulfillment process entail exactly?
Receiving is involved with accepting and storing incoming stock at the fulfillment center. After you process the order, picking starts, which means the collection of the ordered products from their locations. The following step is to get the products nicely packed up for protection. The last step is shipping products by working with different logistics partners on behalf of you.
As mentioned in the beginning, both dropshipping and third-party order fulfillment are popular among online sellers. What are the pros and cons of these two order fulfillment strategies? Let’s find out more!
Dropshipping stands out as a business model that keeps you much more hands-off. The popularity of dropshipping is increasing rapidly these years. However, those who are new to the online business might have never heard of it.
What is dropshipping? After a customer submits an order to you, all details go directly to the dropshipping supplier. The dropshipping supplier fulfills the order on your behalf, delivering products to the end consumer.
Those who do a dropshipping business act as go-betweens with dropshipping suppliers and customers. Nevertheless, since the dropshipping suppliers handle nearly everything, online sellers have very limited control over the product quality, inventory, shipping, and so on.
Dropshipping requires the minimum start-up costs because no inventory is needed - starting a dropshipping business allows you to be the least strapped.
Pros:
√ Minimal capital required
√ Extremely easy to start and scale
√ Flexible location
√ Low overhead expenses
√ More choices of products
Cons:
× Less control
× Slimmer profit margins
Pro Tips:
1. Since choosing dropshipping products is of great importance, you should do product research regularly and focus on selling ever-green products;
2. Working with the best dropshipping suppliers is beneficial for your online business. This is because item availability, prices, product quality, order fulfillment mostly depend on them.
3. Reassure yourself by checking the fulfillment centers and services that your dropshipping suppliers use.
What is third-party order fulfillment? Third-party order fulfillment is also termed outsourcing fulfillment. It includes inventory management, generating picking lists, packing products, shipping orders, handling returns.
Outsourcing order fulfillment streamlines the workflow, greatly simplifying the operation for online sellers. It is like having an extra partner. Fulfillment by Amazon is a typical example of third-party fulfillment.
More importantly, a fulfillment center has the full-fledged infrastructure to deal with larger order volumes, which will contribute to better development of your business.
Pros:
√ A full set of infrastructure
√ Large processing capacity
√ Professional support
Cons:
× Higher fees, especially at peak season
× Difficult to resolve issues
Pro Tips:
1. Work with a trusted fulfillment company to grow your e-commerce business;
2. Check their services, location of fulfillment centers, infrastructure network, logistics partners, and pricing. Additionally, make sure there is no hidden cost and they can handle returns;
3. It's better to insure your products in transit or stored in the fulfillment center to prevent loss.
Dropshipping | Third-Party Order Fulfillment | |
Start-up Costs | ★ | ★★★ |
Scalability | ★★ | ★★★ |
Further Investment | ★ | ★★ |
Order Handling Capacity | ★★ | ★★★ |
Automation | ★★ | ★★★ |
Control | ★ | ★★ |
Customization | ★ | ★★ |
Requirements of Expertise | ★ | ★★★ |
Flexibility of Location | ★★★ | ★★ |
(Low—★; Medium—★★; High★★★)
From the side-by-side comparison above, we can conclude that dropshipping excels in the low barriers to entry – little initial investment is needed; whereas, online sellers depend a lot on the dropshipping suppliers and have very little control over order fulfillment.
Undoubtedly, third-party fulfillment is the unrivaled option, in terms of advanced inventory management and considerable order handling capacity. Nevertheless, not all fulfillment centers can satisfy customization needs, and they hold back small business owners with limits on the minimum storage space, making them tied up with long-term contracts and overstocked products.
Which is a better choice for your online business, dropshipping, or third-party order fulfillment?
Before you decide on the order fulfillment strategy, you should consider aspects as follows:
Your primary concerns should be business size and model. Ask yourself the following questions:
a. How many products do you sell?
b. How do you source them?
c. What's your business plan for the future?
If you sell a large number of products by bulk ordering them, you need a large space for storage. Additionally, managing the inventory is exhausting and time-consuming, investment in facilities will shrink the existing profit margins. What's more, expertise in other fields like inventory management will distract your attention on sales and marketing.
In contrast, if you dropship products, inventory management is none of your business, because it is the dropshipping suppliers' job.
All in all, both dropshipping and outsourcing order fulfillment greatly relieve your workload, allowing you to be focused on boosting sales and improving customer satisfaction.
Small or big the order volume is, dropshipping remains as the most flexible, cost-effective way of order fulfillment because you don't need to initial investment before a product is sold. However, your business is at the mercy of dropshipping suppliers.
Professional third-party order fulfillment providers boast the high order handling capacity - they ship all orders within the same day. What's more, the processing status is visible in real-time, under great control.
The selling sites and technical support also determine the way of order fulfillment. Where do you sell online, an online marketplace, your own e-commerce website, or both?
To integrate with the selling platforms, you will have to check the compatibility of order fulfillment software provided by a third-party fulfillment center or order management system offered by your dropshipping suppliers. It is especially important if you sell through over 1 channel.
Ask yourself these questions:
a. Where are most of your customers located? In major cities, certain regions, remote areas, or they spread across the country evenly?
b. Do you have a great number of international customers?
c. What products do you sell, domestic or imported goods?
d. How do you source products, replenish inventory, and ship products? By air, sea, train, truck, or else?
A great geographic location means convenient transportation, which is essential for the development of businesses. Customers want fast delivery and reasonable price tag, so sellers need fast and affordable deliveries to meet customers' expectations and prevent orders from being canceled due to delays in shipping. That's the reason why location matters for order fulfillment.
Shipping to and from rural areas incurring extra shipping costs. To reduce the shipping costs and fulfillment time, you should choose central, urban areas with developed transportation networks. The strategic location is critical to the survival and development of your online business, despite different types of order fulfillment.
Whether you decide to work with a third-party fulfillment provider or a dropshipping supplier, verifying the location of the fulfillment center is equally reassuring.
a. Do you sell private label products?
b. Do you promote customization as a key selling point of your products?
Those sell custom-made, fragile products, with high requirements for special gift wrapping often choose to fulfill the order by themselves because quite a lot of fulfillment providers are proven to be less responsible when handling the products. However, this approach limits the future development of their businesses.
Working with a trustworthy third-party fulfillment providers makes it different - they keep your products safe and secure throughout the whole order fulfillment process, and ensure that they are delivered in optimum condition. Some of the best ones also provide labeling, bundling services, and much more!
In comparison, customization seems out of the question for the dropshipping business, but it is the dropshipping supplier's responsibility to ensure the intactness of products.
From the above, you can see that working with a trustworthy dropshipping supplier or a reliable order fulfillment center is vital for the success of your online business. If you haven’t found one yet, you’d better start looking for one right now.
Super Smart Service has 3 fulfilment centres in the UK with a network of 20 fulfilment facilities worldwide, handles 100,000+ orders per day, and ships 100% orders within 24 hours. Our system can be perfectly integrated with Amazon, eBay, Wish, and more online marketplaces, as well as ERP systems for you to automate everything effortlessly.
Our well-developed logistics network and fulfilment centers in Eastern, Western US to ensure fast last-mile deliveries; sister fulfillment warehouses located in Germany, France, and the Czech Republic guarantee coverage of Europe. We offer more competitive fulfillment and distribution rates to support your strategic moves to obtain more market shares.
From pick-up to delivery, Super Smart Service ensures that your products reach the destination on time and in perfect condition.
Choosing Super Smart Service, you won't be tied up to a long-term contract but benefit from Flexi Terms with monthly plans. No inbound fees, no limit or minimum order size, no hassle with processing returns.
Moreover, various value-added services are provided, including relabeling, quality checks, repacking, photographing, bundling, and much more. We can also provide customized inserts and labeling to meet customization needs.
All things considered, Super Smart Service's comprehensive solution is unrivaled in comparison with other third-party fulfillment providers - it gives you much more control over the order fulfillment process while providing fast delivery across the US and Europe. Moreover, you can effectively lower the costs without limiting the future development of your start-up.
In comparison with the completely hands-off approach, dropshipping, Super Smart Service is a better choice if you decide to build a brand, sell through a variety of e-commerce platforms, get more control of your products and maximize the order handling capacity.
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