Third Party Shipping Solutions Vs Drop Shipping Explained
Do you need to use third party shipping or drop shipping? In this guide you’ll better understand differences between the two.
As a business owner or manager, deciding on the best way to ship your product is an important business decision. There are several ways to deliver your products to customers, but some are popular than others.
Third party shipping and drop shipping are some of the most popular methods of shipping for businesses. These options are often pitted against each other.
Read on to find out the differences between the two.
This model allows you to operate without investing funds in warehouse, inventory, and fulfillment. Once a customer purchases from your online store, the product is shipped directly to them from the manufacturer or vendor.
Your business fulfills an order by simply letting the manufacturer or vendor know the preferred delivery address.
Discussed below are the advantages and disadvantages of drop shipping:
Advantages of Drop Shipping
The key advantage of drop shipping is that you don’t have to handle the products. You are not involved in the shipping hassles or retail fulfillment issues.
It allows your e-commerce business to operate on very low overheads. You can even operate without a website.
Disadvantages of Drop Shipping
Drop shipping encourages more merchants to adopt this model, and it eventually becomes a rat race to the bottom. Finding a reliable drop shipper can be difficult, and thus, you put your business’s reputation at risk.
You have no control over the products you ‘offer’ and there is possible quality control issues. You might end up selling commodities that are no longer in stock.
Due to stiff competition, some competitors may reduce their prices to gain more customers. When business rivals lower their prices, you can ignore or compete and win the price war.
In coming up with a winning strategy, consider if it’s possible to segment your customers based on pricing, understand why the competitor reduced their prices, and if your customers are aware of the drop in the competitor’s prices.
Will Drop Shipping Work for You?
It is evident that drop shipping is not the highway to success that many think. You have to put in the effort.
Don’t think all you need is to create a system that operates itself, where customers place orders, the vendor delivers, and you pocket the margin.
Most likely, you’re one of the online stores working with the same drop as your competitors. All sellers are chasing the same buck, and only the best will pocket it. It’s survival of the fittest.
Third party shipping involves you sending your inventory to a fulfillment center.
When a customer purchases a product from your website, you inform the fulfillment party who delivers the product to the customer. The third party does all the hard work. These are tasks such as keeping track of the inventory, receiving, packing, and shipping.
As much as small businesses strive to grow, very few are able to achieve this goal. Growth means high product demand from customers, which comes with significant logistical challenges.
There’s a good chance that your business lacks the skills, resources, and expertise needed to handle the increased logistical needs. You need a third party shipping partner to transform your dreams into reality.
Check out the advantages and disadvantages of 3PL shipping below:
Advantages of Third-Party Shipping
Outsourcing helps your business penetrate new markets by taking advantage of your 3PL’s provider infrastructure.
If your business is a start-up, an experienced partner will act as a guide to the new market. This is also useful if your business is expanding quickly, working globally, or aims to do so.
The established logistical infrastructure allows your business to scale to reach new customers while meeting the demands of the existing market. This will help your business secure existing profits and prepare for future as well.
A third party fulfillment provider allows your business to avoid the costly trial and error tactics of penetrating new markets.
This model saves your business time, energy, and resources needed to develop your own fulfilling network.
Your 3PL provider may be providing services to other clients as well. This gives you an opportunity to benefit from economies of scale along the logistics chain. The 3PL partner manages your entire inventory.
This includes printing labels, finding the right postage for all your packages, and shipping them. You create more time to focus on the core functions of your business.
Disadvantages of Third Party Shipping
One of the drawbacks of outsourcing is that it is more costly than shipping products in-house.
If you’re a startup, it is very difficult to produce profits on low level orders, and as such you may end up disadvantaged. Such spending may not be justifiable.
For this reason, most small start-ups are not a good fit for Fulfilltopia, or any other fulfillment center. The math just doesn’t work out.
Will Third Party Shipping Work for You?
Clearly, you have seen many reasons to choose third party shipping to handle your logistics. You have also seen reasons against it.
The right decision is dependent upon your business needs.
Put Your Products in the Hands of a Third Party Shipping Company Today
It isn’t enough for your business to have the right product – you’re also expected to put that product into the hands of your clients when they need it.
In the above case, a third party shipping will provide the much-needed help for your business to grow. They have warehouses and logistics expertise that will handle your growth. As a business, this will give you the competitive advantage you need to expand your business.
A reliable third-party logistics will provide excellent customer service, and this will strengthen your brand.
Get in touch with us if you’re looking for a reliable partner as you transition from doing your own fulfillment to third party shipping.