Comparison between Dropshipping and Traditional Online Selling

Earning money through e-commerce is a highly popular trend in today’s technological age. There are various ways to make money, but among them, dropshipping and traditional online selling on platforms like Facebook or major e-commerce marketplaces (Shopee, Tiki, Lazada, etc.) are more prevalent. In this article, I will compare these two models to help you choose a suitable business format.

Firstly, let’s briefly review the basic concepts.

Dropshipping

  1. You receive orders and payments from customers.
  2. You place orders and make payments to suppliers.
  3. Suppliers arrange for direct shipment of goods to customers.

Traditional Online Selling

  1. You purchase a large quantity of goods from suppliers and store them in a warehouse.
  2. You receive orders from customers. Payments can be made in advance or upon delivery (COD).
  3. You arrange for the direct shipment of goods to customers.

Comparison between Dropshipping and Traditional Online Selling

FeaturesDropshippingTraditional Online Selling
InventoryNo need to store goods, so no costs for warehouse rent, loading, and shippingRequires storage of goods, leading to costs for warehouse rent, loading, and shipping
GoodsNo concerns about loss, damage, breakage, etc., as you don’t handle the inventoryRequires inventory management system to ensure goods are not lost, damaged, broken, etc.
Shipping to CustomersSuppliers are responsible for shipping in dropshipping; dropshipper is not involved in this processSeller is responsible for shipping
Capital InvestmentNo significant investment in inventory, reducing risks if products sell slowly and capital is tied upSignificant investment in inventory, with the risk of slow-moving products tying up capital; may result in selling at a loss
Control over Sales ProcessLess control over order processing and shippingFull control over order processing and shipping, allowing for quick order fulfillment
PaymentCustomers pay in advance to dropshipper, who pays suppliers before deliveryCustomers may pay in advance or upon receiving the goods (COD); sellers may not have to pay suppliers in advance if granted credit terms
Profit MarginGenerally lower compared to traditional online sellingBulk purchasing for inventory may lead to discounts, resulting in lower purchase prices and higher profit margins
MarketMostly focuses on the international market; dropshipping on platforms like Shopee is less commonPrimarily focuses on the domestic market
Handling IssuesIn case of issues (damage, wrong items, non-delivery, etc.), dropshippers are often passive and dependent on suppliers; may proactively refund customers to avoid negative reviewsProactively addresses and quickly resolves issues to maintain customer satisfaction
Brand BuildingDifficult to build a distinct brandEasier to build a distinct brand

Based on the above analysis comparing dropshipping and traditional online selling, you likely have a clearer idea of which model suits your business. If you have additional insights, please feel free to leave a comment below.

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