There’s no denying that online retail has a bright future. More and more sales are made online, meaning that eCommerce has no other choice but to evolve with the times. Being in search of additional ways to sell, retail store owners often become intermediaries and begin dropshipping. I.e. by offering third-party products on their online stores, they make additional money off reselling goods.
On this page, we’ll gladly explain the details of the supply chain, as well as share how dropshipping and order fulfillment work in eCommerce.
The Supply Chain: Key Constituents
Let’s start with the supply chain. Simply put, it describes the product journey from being created to being delivered to the buyer. Mentioning it as a model of business, in the case of dropshipping, merchants don’t need to have the items they’re selling physically in their inventory, they can pass on the order details to the wholesaler (or even producer of the product) who’ll in its turn carry on with assembling the order and shipping it to the client.
That said, the major constituents here are the merchants (online store owners if we’re speaking about eCommerce), wholesalers, and manufacturers. But where are the dropshippers?
Dropshipping & Fulfillment In a Nutshell
Actually, all of the constituents mentioned above can take on the dropshipping role. Simply because dropshipping is the process of direct supply and delivery, it’s somewhat a service.
If we’re taking the dropshipping in eCommerce case in point, a merchant adds external goods to their online store, so those who are browsing the store can buy them. When a client submits an order online, the merchant receives the payment for the goods from the customer, as a rule, the prices are retail. Being a mediator, the retailer then purchases the item that was selected by the client from the wholesaler or manufacturer at wholesale price and passes them the order data and client details.
The wholesaler/manufacturer is responsible for all the operations that’ll follow (the reception, storage, packaging, and shipment of goods). Nevertheless, the supplier is “invisible” to the client, in case something is wrong with the order, clients work all the matters out with the merchant they’ve paid.
Benefits & Downsides of Dropshipping
The undeniable advantages of dropshipping include:
- you provide your shoppers with a richer range and selection of products;
- you don’t spend money on stocking products and maintaining an inventory and warehouse;
- there’s no need to handle the product (i.e. packing, delivery, etc);
- it’s not that difficult nor costly to start dropshipping;
- the overhead expenses are low.
Naming some drawbacks of dropshipping:
- there’s no control over the order fulfillment process, and in case something goes wrong on the side of the supplier (f.e. the client receives an incomplete or wrong order), the merchant has to deal with the problem;
- partnering up with the suppliers isn’t free; even though they get the benefit of their products being displayed on additional space, generally, there are fees or payment terms (like paying for shipping) for the collaboration.
Order Fulfillment vs Dropshipping Fulfillment
Let’s take a closer look at what is order fulfillment. Fundamentally it revolves around the actions that are taken after a client makes an order (assembling and packing it, what is done to deliver it, etc). To get things straight right away, there exist several ways to handle the order fulfillment process:
- self-fulfillment (when a business takes care of fulfillment on its own);
- partnering up with third-party organizations (f.e. handing it over to a logistics company);
- dropshipping (the whole process is the responsibility of the manufacturer).
It is also worth mentioning that there are many dropshipping suppliers out there, as well as platforms that were designed to simplify the process and help you to stay organized. As such, to name a few examples, among the popular ones are Oberlo, AliExpress, and SaleHoo. Importantly, when seeking for the right one to partner up with, make sure to pay special attention to compatibility with your store and the platform it’s built on, for instance, Magento dropshipping suppliers may differ from those of BigCommerce and Shopify.
The Fulfillment Process Explained
Without a doubt, every eCommerce business differs and has its own necessities. That said, even if you’re dropshipping, the website that the client sees is on you, so everything needs to work properly. Similarly, fulfillment should also work perfectly from the technical side irrespective of the platform that your online store is established on (Magento, Shopify, BigCommerce, etc), as you certainly want to avoid any mix-ups. If you’re not sure how to set things up properly, it makes perfect sense to turn to the professionals for assistance, as, for example, with expert Magento dropship integration services it’ll become simpler to carry on with the operations.
To make sure that everything is clear about the steps of a dropshipping fulfillment process, let’s line it out a hypothetical scenario.
Le Fleur Universe is an online retail store, offering a wide range of products for houseplants, flowers, and gardening. They’ve partnered up with the manufacturer of goods for gardening, FertilSoils Inc., to dropship fertilizers and other items that they produce directly to customers from their warehouse.
Steps of the Fulfillment Process
- New order from the client. A shopper pays for the order on the Le Fleur Universe online store, containing the goods of FertilSoils Inc. Le Fleur Universe notifies the buyer that the payment was received.
- Ordering the items from the manufacturer. Now that Le Fleur Universe has the funds to actually purchase the products from FertilSoils Inc, they make the order with attached client details and forward the data to the supplier (usually this is done automatically by the system).
- The manufacturer assembles and ships the order. Whenever all the requested items are available in the warehouse, the manufacturer packs the order and sends it to the customer. At this point, FertilSoils Inc lets Le Fleur Universe know that the order was shipped and shares a tracking number.
- Delivery process. Le Fleur Universe then notifies the customer that the order is on its way, passes on the tracking number. Finally, the customer receives the order.
Wrapping up, dropshipping is a robust branch of eCommerce sales. It offers many additional opportunities to make a profit and tailor to the needs of customers. The order fulfillment process differs in dropshipping from the regular merchant or third-party fulfillment scenarios, yet the supply chain and how effectively the process is handled from A to Z will in much depend on the strength of the supplier-retailer partnerships.
About the Author
Alex Husar, Chief Technology Officer at Onilab with 8+ years of experience in progressive web application development, Magento migration, and Salesforce development. He graduated from the Czech Technical University and obtained a bachelor’s degree in Computer Software Engineering. Alex’s expertise includes both full-stack dev skills and a strong ability to provide project-critical guidance to the whole team.