Thursday, 26 January 2017

What are the differences between a normal eCommerce business and a business using the dropshipping model?

Some of the differences between a retailer using a dropshipper and an eCommerce business are as follows:

  • Operation margins – This is the ratio that companies use to measure the pricing strategy and the operating efficiency.  It’s the proportion of the revenue that is left over once all costs have been taken off.
  • Operational logistics – There’s no need to carry inventory or ship products when using dropshipping. This means you’re able to run your business from anywhere and you don’t have to worry about running a warehouse or replenishing stock or coordinating the shipping.
  • Costs – Traditional eCommerce business has many additional costs compared with a dropshipping, such as warehousing, staff, handling, customer service and shipping.  As a dropshipper you only need to worry about taking the orders and sending them over to your supplier.
  • Profit velocity – It’s quicker to make profits when carrying your own stock as profit margins increase when bulk buying products and selling them at higher prices.
  • Barriers to entry – High startup costs are one of the barriers to entry. These and other barriers make it difficult for new competitors to enter the market. It’s easier for those using dropshippers to gain entry.

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