Shopify is the ultimate platform that gets new businesses up and running quickly with its cloud-based software to build an ecommerce website. Although, order fulfilment is the backbone of any Shopify store that defines the customer experience, builds credibility, creates loyalty, and leads to success.
However, the road to order fulfilment can take on very different paths depending on the type of Shopify store you run and what kind of method you choose.
Efficient Shopify fulfilment is indeed crucial for gaining a competitive advantage. But, not all Shopify store owners can make a huge capital investment trying to attain seamless fulfilment. For that, they are always on the lookout for varied methods for their Shopify store—one of them is dropshipping.
In this blog, we'll take an in-depth look at Shopify dropshipping, the pros and cons of Shopify dropshipping, and a more profitable alternative, i.e. a 3PL provider.
Shopify dropshipping is a method of order fulfilment in which Shopify merchants sell products online on their Shopify store but don’t physically store these products or ship them directly to their customers. Instead, they purchase these products from a manufacturer or a third party and ship them to the customer via a dropshipping provider.
In other words, the Shopify merchant or the dropshipper handles marketing and sales for their Shopify store, and the dropshipping supplier handles the order fulfilment.
Thus, Shopify dropshipping allows Shopify store owners to start an online business and sell products to their customers without actually stocking the products themselves.
Here’s an example to highlight the difference between a normal Shopify store with and without a dropshipper,
You source products from a manufacturer or a supplier or manufacture them yourself. You store these products in a warehouse and maintain the inventory. When you receive an order from a customer, you process the order by picking, packing and shipping it directly to the customer or use a 3PL provider.
When you receive an order from a customer, you pass the order information to your dropshipper. Then they process the order, package it and ship it directly to the customer.
Sounds great, isn't it? But before concluding to Shopify dropshipping, let's take an in-depth analysis with all the pros and cons of dropshipping as an order fulfilment method for a Shopify store.
Here are some advantages and disadvantages of adopting dropshipping for your Shopify store:
1. Minimum capital
The key highlight of a dropship business model for your Shopify store is that you don't have to worry about massive capital investment. The startup cost is low since you don't have to manufacture the product yourself or stockpile the inventory. It limits your expenses by focusing on marketing and driving sales on your Shopify store.
2. Minimal overhead
Apart from not investing in infrastructure like a warehouse for storage, you also reduce overheads, such as workforce, machinery, equipment, tools, packaging supplies, maintenance of the infrastructure, and more.
3. No inventory to manage
You don't have to acquire, move, or hold on to inventory in any quantities. Additionally, you don't have to coordinate freight, track or manage inventory, or invest in an inventory management system (IMS).
4. Low risk
Dropshipping is an excellent way of starting a Shopify store with low costs. As the stakes are not too high, the risk is low. You can test new products without sinking all your resources into them. You can also focus on core business segments like product development, product design, marketing, sales, and more.
1. Minimal profit margins
When you rely on dropshipping for your Shopify store, it is very difficult to sell premium products or build a strong brand. Typically, dropshippers sell products that are cheap to manufacture to take advantage of high markups.
However, in this competitive ecommerce landscape, online shoppers are looking for the lowest-priced products. Thus, dropshippers have to sell individual units at low prices while keeping costs as low as possible. Unfortunately, this means it takes a significant amount of time to earn a significant profit by selling a higher volume of orders.
Moreover, dropshipping suppliers will cost a lot more than typical manufacturers because they have to incur various costs related to inventory storage, shipping insurance, and shipping— further reducing the profit margin.
2. Difficult to build a brand
Branding is essential to establish an identity that sets your Shopify store apart from the competition. In dropshipping, you have no control over your brand image. If your customers like the products you are selling, they won't recognise your brand if your dropshipper provider doesn't use brand-specific packaging.
Your customers may forget about the shopping experience entirely. This way, you won't get repeat purchases needed to sustain an online business, especially a dropshipping one.
3. No control over the supply chain
When you partner with a dropshipping provider, you have to rely on them for inventory management and shipping. This generally means that you have no control over the supply chain. Therefore, if they fail— you also fail with them.
For instance, if there is a delay in fulfiling an order, you cannot do anything about it, but you have to face your customers for their shortcomings. It will tamper your brand image and hamper customer loyalty. Moreover, you don't even have complete inventory visibility, as you have to depend on them for accurate inventory levels— increasing the chances of overselling.
4. Poor quality control
All manufacturers experience a percentage of defective finished goods to a certain extent. Typically, manufacturers perform quality checks to ensure that they don't send defective products to you. However, manufacturers may skip this quality check in dropshipping as you won't be receiving the product for conducting further quality checks. Such instances increase the possibility of your customers receiving defective products and increase the chance of returns.
5. Shipping inefficiencies
Speedy order delivery is a standard service that your customers expect from you. Your customers can be from any state across the country, and you cannot reach them fast if your dropshipping provider is shipping orders from one or a few locations. In order to ensure speedy deliveries, you need to tie up with multiple suppliers. But this will increase the shipping cost.
At this point, you would be wondering if Shopify dropshipping is worth the shot. The truth is, dropshipping can be a useful tactic when applied correctly. However, if you want to scale your Shopify store and build a strong brand identity, you can't rely on it for the heavy lifting!
If you don't want to make heavy capital investments, manage inventory and handle the order fulfilment, but you still want to enhance the customer experience with speedy order deliveries, you can outsource your order fulfilment to a 3PL provider. Working with a tech-enabled 3PL provider like Eshopbox to streamline Shopify fulfilment can have a range of benefits for your brand's success, such as:
As mentioned earlier, dropshipping limits your ability to create a branded experience for your customers. Eshopbox offers you the ability to customise your post-purchase experience by incorporating powerful workflows.
A self-service portal is an online tool that offers information and resources to help customers find answers and resolve their issues. As a Shopify business owner, you can empower your customers with a self-service portal to facilitate the following:
Real-time order tracking
Your customers can track their orders in real-time, anytime— giving them complete visibility of their order status. This kind of stress-free experience can help you to increase customer satisfaction and loyalty.
Easy returns and exchanges
Your customers can initiate a return on the self-service portal within a few clicks—leaving hassles out of the return process. You can also turn your returns into exchanges with one-click exchanges. Such an easy process can enhance the customer experience and build everlasting confidence of your customers in your brand.
Proactive order updates
You can send order updates to your customers in order to set clear expectations about when the order is placed, confirmed, shipped, in transit, and out for delivery via email and SMS—eliminating any shipping anxiety.
Custom packaging is a great way to stand out in a saturated ecommerce space. You can choose to use branded boxes and marketing inserts such as coupons, free samples, and more to curate highly personalised unboxing experiences for your customers and differentiate your brand. Moreover, you can opt for eco-friendly packaging to minimise your carbon footprint and build a strong reputation.
Eshopbox offers you more control over your inventory along with deep insights across all it's fulfilment centres. As a result, you have the complete visibility of your inventory at any point in time —so that you can analyse sales and actively replenish inventory to avoid stockouts. You can also expect timely notifications to plan the re-stocking of inventory.
Additionally, Eshopbox ensures on-time order processing to expedite order delivery for every order. You can also choose priority pick and pack for orders that require faster turnarounds (TATs). Thus, enabling you to provide on-time order deliveries without a miss.
Eshopbox ensures that a quality reject product does not reach your customers and ruin your credibility. Eshopbox performs quality check at the time of receiving your inventory in the fulfilment centre and order processing to ensure order accuracy. You can either choose Eshopbox’s standard inspection criteria or add custom criteria for inspection like expiry dates, colour, product hygiene and more.
Eshopbox has a distributed network of fulfilment centres spread across India, which allows you to split your inventory and store it closer to your customers. This allows you to reduce shipping costs as well as transit times—enabling you to afford 2-day shipping on your Shopify store.
Moreover, Eshopbox handles high order volumes and has strong tie-ups with domestic courier companies. Thus, it means you can avail services with national carriers at substantially discounted shipping rates.
Shopify dropshipping is a great way to test a new product range or supplier. However, if you are looking for a viable long-term business model, it has many limitations. Order fulfilment is a crucial aspect of a Shopify store and customer experience. Dropshipping may seem cost-efficient but may not prove to be the best solution if you want to scale your Shopify store and win your customers. There are many reasons to scale your Shopify store by partnering up with a 3PL provider as a profitable alternative. You can simply transition to seamless order fulfilment with the right partner.