If you are an entrepreneur who would like to create and grow a business online, e-commerce is an excellent venue because of the many doors it opens.
When you start creating your e-commerce business, the first decision you will likely be faced with is deciding whether to pursue dropshipping or a more traditional approach.
Both options have their pros and cons, but your decision on which one to go forward with will depend on factors like your goals, budget, and the amount of time you are ready to invest in the process.
Shopify has been the favorite option not only for dropshipping businesses but also for traditional e-commerce. This is because it’s so straightforward to operate and extremely user-friendly, as well as having customization abilities. So if you intend to build an online store, that’s your best option.
Getting professional guidance from a Shopify web development company will make that process even quicker and easier.
Dropbuild is one of the leading Shopify Web Development Agencies that enables businesses of different scales to make incredibly beautiful yet functional Shopify web stores.
Before deep diving into Shopify tips or choosing a development agency, let’s have a look at which model suits your business; dropshipping or traditional e-commerce.
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Understanding Dropshipping vs. Traditional E-commerce
The first step involves knowing some of the basic differences between these two business models.
Dropshipping is a retail method of order fulfillment in which the store never keeps the items it sells in stock. Instead, the store buys an item that it sells from a third party – sometimes a supplier or manufacturer – who then ships directly to the customer.
This means you, as a store owner, never have to handle products yourself and are free to focus on more important aspects of your business, like marketing, customer service, and brand building.
In the traditional e-commerce method, the products are bought in bulk and inventoried, stored in a warehouse of some type, or maybe even a fulfillment facility.
When a customer places an order, the product gets shipped to them either directly from your storage facility or it’s outsourced from third-party logistics.
When doing the traditional method you have to make an upfront investment for inventory, warehousing, and logistics, but it does allow you to have full control of quality products and shipping time.
Key differences between Drop Shipping and Traditional E-commerce
Now, let me throw light on some basic differences between dropshipping and traditional e-commerce to help you make up your mind about the model you should choose for your business.
1. Pre-Investment
Dropshipping:
The first advantage is a very low barrier to entry. You are not investing in inventories, warehousing, or shipping.
Your most significant costs are probably going to be setting up your online store, maybe doing a little marketing to get customers in, and whatever fees that any third-party supplier or platform – maybe Shopify themselves – may charge you.
Traditional e-commerce:
A lot of upfront investment is required in inventory. The items have to be purchased in bulk and then stocked in a residence of your choice or any third-party fulfillment center.
Above that, there are many more costs related to shipping, packaging, and storing. This may cost you more, but one upside of this is definitely having greater control over your business.
2. Less Control Over Product and Quality
Dropshipping:
You have less control over the quality and fulfillment of the product since you never come into contact with it. This alone could be one of many reasons for low-quality products, delayed shipment, and low consumer satisfaction.
Traditional E-commerce:
In traditional e-commerce, the merchandise belongs to you. At the time of shipment, you are capable of having the product in stock allowing you to check its quality and be assured that there will not be any returns or complaints.
3. Profit Margins
Dropshipping:
Profit margins are usually thin. This is because you will be depending on a supplier in order to fulfill your orders, taking a share in the sale price, meaning that to achieve an equivalent amount of profit as those that would do the traditional e-commerce business, you would need to sell big volumes.
Traditional E-commerce:
You will have higher margins in traditional e-commerce because you can buy your stock at the wholesale price and then sell at retail. You may even be able to get more control of the price and increase your margin.
4. Shipping and Fulfillment
Dropshipping:
The supplier fully assumes the responsibility of shipping and fulfillment. While this reduces your work, it also reduces your control over the time of shipment and any delays.
International shipping can also increase delivery time and cost, depending on where your supplier is located.
Traditional E-commerce:
You will have to run your inventory and shipping. You will have full control over delivery time, but you will be investing in either building in-house logistics or outsourcing.
5. Scalability
Dropshipping:
With dropshipping, it’s highly scalable, and you literally do not have to care about inventory or logistics.
This makes it pretty easy, when your business starts to grow, to add a bunch more products into your store without having to purchase bulk inventory or manage more fulfillment resources.
Traditional E-commerce:
Traditional e-commerce can be scalable; however, in the process, it does need an increase in infrastructure. As the business grows, you may have to invest in more warehouse space, increased staff, and enhanced customer service requirements.
Which Model Is Right for You?
When deciding between dropshipping and traditional e-commerce, everything depends on your business objectives and personal inclination.
Your biggest deciding factors will be budget and investment. If your business does not have a big budget to spend then dropshipping would be the better option because minimal risks are involved and it takes very minimal investment to start off.
On the other hand, traditional e-commerce would bring long-term financial benefits if you can invest more capital from the very beginning, along with the capability and handling of inventory and logistics on your part.
Operational Control
In a typical e-commerce setup, you are in complete control of the product you sell, its quality, and the experience of your customers. You usually take care of inventory and fulfillment in such cases.
Dropshipping is the easier way out because you do not handle any inventory or even fulfillment. You focus on marketing and growing your business. In this way, dropshipping involves less manual activity.
Growth Potential
While both dropshipping and traditional e-commerce can be scalable, dropshipping probably has more flexibility in expansion.
You can easily scale your business pretty fast with the addition of new products in your line-up or entering new markets without limitations that may be there because of the inventory or fulfillment constraints.
Traditional e-commerce businesses, while scalable, many times require heavier resources to scale effectively.
Risk Tolerance
In dropshipping, the investment is minimal, but so are the risks: the quality of suppliers, shipping delays, and customer satisfaction.
Traditional e-commerce, although riskier in terms of inventory and initial costs, gives more control and generally yields higher profit margins.
How Does Shopify Fit into the Equation?
Shopify remains your best shot at setting up an online store – be it dropshipping or with whatever other e-commerce model you choose.
Shopify, at this point, can easily set up, operate, and scale your store with whatever business model you may be working with. Out of the box, it supports dropshipping with various apps.
A few examples are Oberlo, Spocket, and Printful, and these can all be easily integrated with your suppliers.
These applications allow you to import products directly in your store to enable the automation of order fulfillment processes, making dropshipping easier.
From maintaining a record of conventional online store inventory to adding payment gateways or shipment records, or even changing the look of the store, Shopify has an excellent way of doing it.
Whether it’s small or scaled up, Shopify provides all the necessary tools that anyone could ever need to run a successful business.
You may be wondering, but how does a Shopify store work? If you want the best out of Shopify, then working with a professional Shopify agent from an agency such as Dropbuild will be a huge help.
Being one of the best Shopify development agencies in the world, Dropbuild can help you in designing and developing a great store that will fit your needs. They will guide and assist you in setting up a store, provide Shopify tips, advise you on what should be done, and fully optimize your store for success.
Conclusion
So what model is right for you? That depends fully on your personal preferences, financial capabilities, and business goals.
Dropshipping is perfect if you are looking for an option that has low risks and requires low investments.
Traditional e-commerce can bring much more profit margin-wise, and give you greater control over every aspect of your business.
Whatever model suits you, Shopify web development agencies like Dropbuild are professionals who can help you create functional, scalable Shopify stores that are perfectly suited to your requirements.
They’ll help you fully understand how Shopify works and how you can use it to maximize your online store.
Whichever way you choose to go, e-commerce can be very successful when you have the proper tools and materials!
