How Does Drop shipping Differ From Marketplace?

If you’ve been into the retail business for a while, you might have often heard terms like ‘marketplace model’ or ‘dropshipping model.’ So, what do these terms mean and how do they differ from each other? An easy answer would be – Dropshipping is a type of shipping/fulfillment method; an e-commerce model through which retailers can create curated, prolonged openings; an e-commerce marketplace is an online platform where numerous brands or multiple vendors sell their goods.

E-commerce marketplaces and drop shipping are both based on a critical foundation: the entity selling the product does not physically control that product. Both are distributed product supply strategies that allow retailers to increase the supply that they offer to consumers significantly. After the sale, Marketplace, as well as Drop shippers, rely on a third party to fulfill the product to the customer. For both of these models, the flow of virtual product data and physical product logistics are identical.

In this post, we’ll check out the main difference between dropshipping programs and online marketplaces?

Dropshipping Model

Dropshipping is a shipping/fulfillment model where a consumer can place an order with a multi-vendor online retailer, but the product’s brand or manufacturer is the one who ships the order directly to the customer. The drop-shipper does not keep any physical products in its store – it merely sends order information from its website to the manufacturer, who ships it onto the customer.

Dropshipping can be a huge boon for business. It is a streamlined process where retailers can offer a broader array of SKUs from existing suppliers and try out new vendors and product categories without much upfront cost. For startups and small businesses, drop shipping might be a viable direction to take as it can significantly decrease your outgoings in the early stages of your eCommerce business.

Marketplace

A marketplace is an online platform, like Amazon or eBay, where small business owners can host their stores. This allows sellers to sell their products alongside the marketplace’s regular inventory. So, although you may visit the marketplace website to buy your item, it may be sold to you by some other manufacturer.

Most marketplaces are large retailers who use their extensive demand aggregation, to attract the sellers and customers and many start-up E-Commerce traders have taken advantage of these marketplaces in the last few years. The retailers look to move inventory and drive sales to a marketplace model increasingly. This is why such hosted eCommerce stores have become the standard. Many, such platforms like BigCommerce, Shopify, and Volusion, even offer drop shipped hybrids.

5 Significant Differences between Marketplace and Dropshipping

1. The people who distribute their products in Marketplaces are referred with the term ‘sellers,’ whereas ‘suppliers’ in drop shipping.
2. Marketplaces disclose if they’re using a third party other than the retailer.
3. Marketplaces encourage the buyers to review the seller’s performance, so the website visitors don’t feel put off by ordering from a third party through a marketplace. The more the sellers have positive reviews means customers stay loyal to your marketplace products and don’t lose trust in their ability to provide excellent products or services.
4. Drop shippers tend to hide logistic details. The consumer will know that a brand is selling an item, but will not know who is in charge of the processing and dispatching.
5. Marketplaces, typically, will not decide what items are sold whereas drop shippers will have full autonomy with what they sell.

Conclusion

Both the models have pros and cons. While selecting, you should ensure to understand what experience you want to deliver to the end customer. Marketplaces are sprouting like never before, and most marketplaces are large retailers leveraging their massive demand aggregation to attract the product sources to engage. However, in the recent years, there have been many more start-up eCommerce retailers that utilize marketplaces. With this increasingly accelerating trend, online retailers will look to a marketplace model to move inventory, and drive sales.