Dropshipping is widely adopted by more than 40% of retailers even before COVID-19, making it one of the most common types of eCommerce order fulfillment.
Dropshipping means that the retailers don’t store the products but instead rely on a third-party vendor to provide supplies to fulfill an order. When a customer purchases one product from the retailer, the retailer then buys that item from the third-party supplier.
The supplier is responsible for managing all the orders and delivering them to customers. This approach is suitable for startup sellers with limited capital.
While dropshipping is quite common for eCommerce order fulfillment, it might come with some challenges:
- Lack of control over product’s quality: The merchant totally depends on the vendor in choosing, packaging, and labeling the products.
- Additional fees: In case the products are damaged or don’t meet the client’s expectations, the merchants will have to replace the product and pay additional fees.
- Possible delays: Merchants have to reach a required number of items to fulfill orders. Sometimes, waiting to gather large amounts of orders can take up to several weeks. Consequently, the customers will be more likely to cancel the orders due to the long period of delivery.
As the name suggests, self-fulfillment means that you’ll have to carry out the whole order management by yourself without the intervention of 3rd-party companies. This can save costs and allow more control over operations. This method is most suitable for startups, family businesses, or medium companies that need to optimize costs. If you want to manage all operations independently and activel, and get more insights into your business performance, this might be a good choice for you.
However, you could encounter some challenges:
- Time-consuming and resource-intensive: Self-fulfillment means you have to spend time training your employees to process orders.
- Potential delays: Delays can happen if there’s a need for more resources and infrastructure in place.
- Finding sufficient storage: Businesses will have to plan to hire the appropriate storage depending on season sales and different events.
3. Outsourced order fulfillment
Outsourced order fulfillment means a third-party or contract logistics (3PL) provider will manage your orders. When you need extra storage spaces or employees, you can adopt this type.
While it sounds similar to dropshipping, the difference is that with an outsourced method, you’re managing your inventory through your logistics partner, not vendors.
Outsourced order fulfillment is predicted to increase its adoption in the next 3–5 years, when 18% of retailers expect to outsource the process completely and 48% utilize a mix of insourcing and outsourcing.
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