Whether you are beginning to sell products online or if you have been doing it a while, you want to make sure that your fulfillment operation is efficient and cost-effective. Your overall business goals will determine what fulfillment option makes the most sense. Maybe you want an automated business where a lot of the work is outsourced. Perhaps you want to focus on growing your business to distribute worldwide and need help to scale. To understand which fulfillment method is right for your company, you need to define your business goals. We will discuss the differences between third-party fulfillment and dropshipping to determine what makes sense based on your company’s goals.
Dropshipping
Dropshipping is when the products you are selling are shipped from the manufacturer directly to the consumer. You’re able to start selling your products online quickly and have a lower setup cost. The setup cost is much lower than using a 3PL because you purchase the products as orders are placed. This allows you to easily start shipping your products to consumers.
However, there are a few downsides. As the seller, it’s your responsibility to manually pass the orders through to your manufacturer to ship. You do not have as much control over the shipping process like you would with a 3PL. Plus you cannot customize your packaging or add promotional inserts. This makes it harder to separate yourself from the competition. It’s easier entering the market by dropshipping, but it is more difficult to establish a unique brand without having control of the shipping process.
Third-Party Fulfillment
Third-party fulfillment is when you work with a 3PL to manage your product’s storage, packaging, and shipping. Your product is shipped from the manufacturer to the 3PL to be stored in their warehouse. As orders are placed on your website, they are sent to the 3PL to pick, pack, and ship the items to your customer based on your instructions. These instructions can include customizing your packaging and adding promotional items to your shipments. 3PL’s are also able to help with customer service and returns if something happens to the product upon delivery and resolve the issue quickly.
This type of fulfillment can be very helpful if you are establishing your brand or if you are trying to scale your business. With third-party fulfillment you can make your product more unique and separate yourself from the competition. You also have the advantage of having a team of experts to help you with the workload. However, you will have a larger upfront cost with this method because the products must be purchased before the sale.
With third-party fulfillment you get more value on the money you spend. Having more control over the shipping process means it’s easier to establish your brand, it’s easier to fix any mistakes that may happen and by delegating the work you can spend more time focusing on growing your business. This will set you up for greater success in the long run.