Dropshipping vs Ecommerce: The Pros and Cons

Are you torn between dropshipping and traditional ecommerce as your business model? Before you start an online store, understanding the pros and cons of each is crucial. This guide delves into ecommerce businesses, fulfillment processes, customer service, and more to help you make an informed decision.

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In this post, we explain:

Dropshipping vs Ecommerce: Definitions

Dropshipping vs ecommerce: What is dropshipping?

Dropshipping is a retail fulfillment method where a store doesn’t keep the products it sells in stock.

Instead, when a customer places an order on the store’s website, the store purchases the item from a third-party supplier, who ships it directly to the customer.

As a store, you are responsible for marketing and selling the products, while the supplier handles the storage, packaging, and shipping.

💡 Want to go into more detail on how to set up a dropshipping store? We have a great checklist for you here.

Chinese marketplaces like Alibaba, AliExpress or DHGate are typically used as dropshipping suppliers. They offer cost-effective solutions and very cheap prices (especially when bought in bulk or during a flash sale).

Key Points About Dropshipping

• Fulfillment Process: The dropshipping supplier takes care of the entire fulfillment process, from packing to shipping.
• Customer Service: You manage pre-sale queries and customer service, but post-sale service might be out of your control.
• Marketplaces for Dropshipping: Suppliers often come from marketplaces like Alibaba or AliExpress, offering competitive prices.

What is Traditional Ecommerce?

E-commerce, or electronic commerce, simply refers to the process of buying and selling products and services online through a company’s own website.

By products and services, we mean literally anything: from physical goods like clothing and electronics, to digital products, like software and music.

What is Traditional Ecommerce?

Traditional ecommerce involves selling products through your online store, where you control every aspect, including inventory management, packing, and shipping, also known as the fulfillment process. Ecommerce businesses often utilize a fulfillment center to streamline shipping and handling.

Key Points About Traditional Ecommerce

• Fulfillment Process: You or a fulfillment center handle the packing and shipping.
• Customer Service: Complete control over the pre and post-sales customer experience.
• Inventory Management: Your responsibility, which can be complex and costly.

E-commerce is now the norm for doing business. It has revolutionized the way we shop, allowing consumers to purchase goods from the comfort of their own homes. From the company’s side, it provides invaluable opportunities to reach customers from all over the world.

Pros and Cons of Dropshipping Businesses

✅ Pros

1. Low Startup Costs: no need for purchasing inventory upfront, or any storage space. Minimal risk when starting your business, in case products wouldn’t sell;
2. Flexibility in Product Offerings: offer a wide range of products without ever being concerned with storage space. You get to see what sells best;
3. No Need for Inventory Management: a great point for peace of mind! The supplier handles all aspects of inventory management, which removes many of the challenges that come with warehousing and logistics;
4. Location Independence: you can run a dropshipping business from anywhere with an internet connection;
5. Supplier vs. Retail Prices: you can usually set your own margins, meaning the price at which you buy the product from the supplier (often cheaper for bulk orders), and the retail price set on your store and charge the customer for.

❌ Cons

1. Dependence on Suppliers: you are reliant on your suppliers to deliver products to your customers. If your supplier runs out of stock, experiences shipping delays, is closed for holiday, this can negatively impact your business;
2. Limited Control over Product Quality: you never have the product in your own hands, and therefore can’t check the quality. Plus, you should beware of the quality of some dropshipping marketplaces, it’s best is to first get samples;

1. Lack of Control over the Customer Experience: the customer experience can be greatly impacted by low product quality, long shipping times, poor customer service – which do not depend on you;
2. Limited Control over Branding: it’s not so easy to customize your products, be consistent in your brand, and stand out from competitors.

Pros and Cons of Traditional Ecommerce Businesses

✅ Pros

1. Complete Control over the Customer Experience: you handle everything from the website design, product offering, shipping process and customer service and therefore have more control over how your customers perceive your company;
2. Ability to Build a Compelling Brand: establish a strong online presence that can differentiate yourself from the competition;
3. Access to Customer Data: have access to valuable customer data, such as purchase history and preferences – that can later be used for retargeting or email campaigns;

❌ Cons

1. Higher Startup Costs: investments for creating the e-commerce store website, for product development, warehousing (for physical products), as well marketing can get quite expensive;
2. Increased Competition: the e-commerce market is quite crowded. New businesses keep emerging, and it can be difficult for you to differentiate from competitors;
3. Inventory Management: compared to dropshipping, you are responsible for managing your own inventory, which can be a time-consuming and complex process;
4. Shipping and Handling Responsibilities: you handle the whole part of shipping and handling products, which means additional costs and liabilities.

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