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Fulfillment and dropshipping, two logistics models which are often confused but are different. In this article, we'll show you how it works, features, advantages and disadvantages in the world of ecommerce.
Ecommerce logistics is not the same for all stores, depending on the size, number of orders and number of people who make up the team, you can choose between internal or outsourced operations.
In addition to the above, online sales are generated under different modalities, which also influences the way in which the logistics operation is carried out. Let's see what role they play Fulfillment and Dropshipping in Online Sales and how to implement them in your ecommerce, the convenience between one model and the other will be determined by your type of business and objectives in the medium and long term.
What is fulfillment?
Fulfillment for ecommerce is a process that can be carried out internally or outsourced, its purpose: to expedite the delivery and fulfillment of online orders, as quickly and quickly as possible.
In this case, we will talk about the operation carried out by an external supplier, a fulfillment center, which, thanks to its strategic location in major cities, can be closer to the customer's delivery locations; an attribute highly valued by current online shoppers, for whom shipping speed is today a shopping hook.
In terms of its operation, fulfillment addresses the entire process that is required to carry out the delivery of an order. The online store that contracts the fulfillment services delegates the entire logistics operation to the latter, leaving the sole responsibility of selling.
Let's discuss the process in detail with a simple example. The e-commerce called A1 sells sportswear, although it has been in the market for a relatively short time, the volume of its orders has been increasing, which, on the one hand, is a very positive result for business growth. Fantastic! But on the other hand, it has made the logistics issue a headache, since they don't have the experience, the time or the equipment to carry it out efficiently.
Also read: Fulfillment, the solution for loyalty in ecommerce
Faced with the wear and tear caused by the enlistment of orders, the A1 manager decides to hire the services of a fulfillment center and completely disengage from the logistics operation.
From now on, A1's responsibility is to generate the sale, fulfillment will be responsible for receiving the e-commerce products in its warehouse, for the storage and assortment of them, for the enlistment (picking and packing)) and order transport, to provide real-time traceability to the customer, customer service and return management, that is, each of the steps involved in the logistics operation.
The following illustration clearly shows the step-by-step fulfillment process for completing a delivery.
In the fulfillment operation, ecommerce, which in this case acts as a seller, has its own inventory and sends it for storage to the fulfillment center, this is one of the main differences with the dropshipping model, which we will explain later.
Benefits of Fulfillment
E-commerce that contracts fulfillment services generally register the following benefits when they have a specialized supplier in this field:
- Loyalty and Repurchase: The good delivery experience is decisive in customer satisfaction. A customer who received their order within the promised time, which is also the time it meets their expectations, who had their purchase tracked at all times and received good service, is a customer who not only has a high chance of buying again but also of recommending your brand.
- Lower operating costs: in many cases it is more expensive to have the equipment and internal infrastructure necessary to carry out a good fulfillment operation, than to develop it outsourced.
- Better use of time to focus on strategic business decisions. By not having to carry out the tasks of enlisting and delivering the product, the team can focus on growing ecommerce.
- Lower transport costs: thanks to an economy of scale that allows fulfillment companies to have lower delivery costs due to a higher volume of orders.
- Full backup and efficient response faced with peaks of high demand such as the different seasons of the year.
In addition, choosing a Fulfillment in Mexico City or in strategic hubs such as Guadalajara or Querétaro, it allows ecommerce to reduce delivery times and optimize costs thanks to its proximity to the main consumer centers. This strategic location is key to competing in a market where fast and reliable shipments make the difference.
Disadvantages of fulfillment
- You must adjust your delivery times to the options offered by fulfillment, if it is not a fulfillment that provides you with differentials in this regard, it will not be the most suitable, since the customer will always prefer short delivery times, even if they have to pay more. Before hiring your fulfillment provider, you should evaluate this aspect and find added values in their value offer.
- Lack of control over delivery. Your brand is your letter of introduction to the customer, and if your fulfillment provider doesn't provide a good delivery service, it will be the image of your ecommerce that will be affected. For this not to happen, it is important that you make sure you choose a supplier whose core business is ecommerce. Being a specialist in this area, you will be provided with a high quality delivery service.
What is dropshipping?
El dropshipping It is the modality in which e-commerce does not keep the products it sells in stock, that is, it does not have its own inventory stored with a third party, as is the case with Fulfillment. In this case, the e-commerce buys the product from a supplier who stores it and delivers it. The online store sells the product, but does not handle it directly or takes over the delivery process.
This model is especially common in e-commerce at birth that they don't have their own brands or the budget to invest in their own inventory, storage and logistics; their responsibility is to sell and carry out the after-sales service.
The following illustration clearly shows the step-by-step process of dropshipping to complete the delivery process.
Advantages of dropshipping
Ecommerce that opts for dropshipping, obtain the following benefits:
- The possibility of offering its customers a wider portfolio of products.
- They do not require investment in product, storage or transportation.
- They avoid the risk of having dammed products, which were purchased but not sold, or deterioration of the product due to storage conditions.
- For new ecommerce, investment will be limited to setting up the store and developing advertising strategies to bring qualified traffic to the site.
- When you have the support of a consolidated supplier such as AliExpress, for example, who operates under the dropshipping modality, e-commerce will hardly have problems with a lack of stock.
- In most cases, the supplier is able to respond to high demands, meeting delivery times.
Also read: Marketplace, partners to boost your ecommerce
Disadvantages of dropshipping
- If the dropshipper or supplier doesn't provide a good service, it's your ecommerce brand that will be affected. Make sure you choose a good supplier and verify that it meets your expectations.
- The profit margin is usually lower for ecommerce under the model of dropshipping, where you depend on the supplier's margin.
- It's highly likely that your ecommerce will share dropshipper with other ecommerce, so, by offering the same products, you must implement recruitment strategies to differentiate yourself from the competition.
Both the Fulfillment like dropshipping, have advantages and disadvantages for ecommerce, the use of one or the other model is strictly linked to the type of online store, its level of growth and its objectives. Now that you know the operation and differences of each operation, you can choose the one that is most convenient for your online store.
Are you looking for an ally that enhances your delivery process, compliance and customer satisfaction? Don't hesitate to contact us, we are the best Fulfillment center for ecommerce in Mexico, Colombia and Brazil, just click Here.
During 2021 in Cubbo:
* Our registered customers Savings of 21% in operating costs
* 97.1% of the products received, were processed and were ready to sell In 24 hours.
* We had a 99.7% shipping compliance
* We are registered at Precision in Order Preparation of 99.9875%, that is, 1 error for every 8,000 shipments.
* 60% of our deliveries in CDMX were made The Same Day
* We Carry Out Nationwide deliveries in 1.3 days Average
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