All About Drop Shipping & Fulfillment Services
88% of consumers say it takes three or more purchases to build brand loyalty. Price is the top factor keeping customers loyal to their favorite brands.
Delivering products to customers successfully has become as important as the product itself. As a result, we're investigating how different product fulfillment options can help you diversify and expand your business.
Let's consider the numbers for a second
In 2021, retail e-commerce sales amounted to approximately 5.2 trillion U.S. dollars worldwide. This figure is expected to rise by 56% over the next few years, reaching approximately 8.1 trillion dollars by 2026.
The numbers are clear. E-commerce will only get bigger and more competitive and you can't afford to fall behind. It's time to evaluate the various shipping options available to help you meet your businesses objectives.
Drop Shipping Vs Fulfillment Companies
People often refer to them interchangeably, but it's important to know that order fulfillment services and drop shipping are two very different things. However, they are similar in the sense that they both involve a retailer looking for an outsourced fulfillment solution.
If you sell your own products/inventory and want a third-party to handle storage, packing, and shipping for you, you’re looking for an order fulfillment company.
But if you don’t have any products/ inventory and want to sell someone else’s products in exchange of a commission then you're looking for a drop shipping company. In this case, the product owner/manufacturer or wholesaler, handles the storage, packing and shipping.
The 4 most used order fulfillment methods
Order fulfillment involves storing, packing and shipping products to your customers. This process, that begins right after your client has made a purchase, is critical to your business success.
However, sometimes it can become so time-consuming and labor-intensive that many new and growing e-commerce brands prefer to outsource the task. This way they can focus on marketing and product sales. It's up to you to decide which of the following alternatives is best suited for your growing needs.
1. In-house or Self-fulfillment: This is the most common method used by brands. This is when they carry out warehousing and shipping operations themselves employing their own staff.
2. Outsourcing: This when brands employ order fulfillment centers like Fulfillment by Amazon or Third-Party Logistics (3PL) companies to store, stock, pack and ship orders for them.
3. Drop Shipping: Brands use drop shipping companies like Modalyst and Oberlo that ship orders directly to customers.
4. Hybrid Order Fulfillment. This approach can combine some or all of the above.
Watch ▶︎
Here's a simple explainer by Amazon on how fulfillment service works.
Is self-fulfillment right for my brand?
With in-house or Self-fulfillment you're in complete control but you also handle:
- Warehouse organization and staff.
- Orders.
- Packaging.
- Shipping.
- Customer service.
The great thing about it is that you control the branding, packaging and are responsible for delivering the products on time.
The downside is it will significantly consume more time and economical resources. You must handle and pay your staff and pay for the warehouse regardless of whether it's a slow or a good season.
When to outsource fulfillment
Ok so you're in that point that you're not sure whether to do it yourself or get some external help. It's not a simple decision for sure, but it's important to ponder whether using an order fulfillment company will allow you to sell many more products than you are able to effectively store, pack, and ship yourself.
Here are three things to consider and when to outsource help:
If you have capital limitations, an order fulfillment company can offer their services for a lot less money, compared to setting up the same infrastructure yourself.
Geographic reach and effectiveness is essential to be more competitive and for quicker delivery. Ideally, you'd have your products stored and shipped from a location closer to the customer.
Fashion's unpredictability makes it hard to know if it's worth investing in a warehouse and shipping operation of your own, especially when you're starting out. This is where an order fulfillment company can take some of that pressure off.
It's Time For Help When
When fulfilling orders is taking too much time and resources and not allowing you to focus on growing your business.
If you are launching a new product line or targeting a new demographic, you might require a fulfillment company that is better suited to handle your new business model.
There are other reasons like maximizing your customer reach and speed of delivery or not having to deal with returns. In any case you may want consider the right location for a fulfillment center.
The pros of a fulfillment service
Lower shipping costs. If the company has a solid national and international infrastructure it may be able to offer bulk delivery discounts and lower shipping rates.
Reduced operating costs. Paying a steady amount for services is easier than handling payments for storage and workers on your own. Some companies offer pay as you use fulfillment services.
Extended customer reach. Good companies have logistics and distribution networks with access to a global platform that can extend your reach and grow new markets.
Improved customer service. Having a reliable company handle customer support and an easy return and refund policy can boost your reputation with your customers.
More focus on the business. Frees up time and energy allowing you to promote, market and sell your products.
There's a lot more to learn about the benefits of outsourcing.
How Drop Shipping Can Help Brands
As mentioned earlier, in this method the store doesn't keep the products it sells. For example, stores like Garmentory or Shopbop serve as a storefront, but don't physically hold the brands' inventories. It's the brands that fulfill the orders received from these sites.
Having your products sold on other merchant's storefronts while you fulfill the order can be an excellent way to have more brand visibility and reach more customers.
This is becoming increasingly popular now even among traditional stores. For example Nordstrom which has traditionally held inventory now also has a way of working with suppliers through drop shipping.
Watch ▶︎
Here's a simple explainer about how drop shipping works
Where to Find Drop Shipping Suppliers
- Product catalogs, features, support, pricing, and shipping options are important aspects to consider. With that in mind, here's the Top Ten Drop Shipping Platforms in The U.S.
- Don't miss Fit Small Business' guide on how to find drop shipping wholesalers and suppliers.
- Big Commerce's updated Dropshipping Companies & Suppliers List.
We recommend Shopify's guide with everything you need to know about drop shipping with the full infographic.
