Is Third-Party Fulfillment the Same as Dropshipping?

E-commerce growth continues to reach fresh all-time highs with each passing year. Total online retail sales exceeded $1 trillion in 2022, hitting a record, according to Comscore. Consumers are shifting their behavior, choosing to buy online rather than in-store. With demand higher than ever, newcomers to eCommerce might find it challenging to manage the logistics of their business. One of the most common errors is confusing dropshipping and third-party fulfillment.

Is Third-Party Fulfillment the Same as Dropshipping?

This article explores the difference between third-party fulfillment and dropshipping to help you plan your production cycle and logistics effectively and efficiently.

What is Dropshipping?

Dropshipping is a popular business model used by eCommerce entrepreneurs and involves many elements to ensure effective operations and profitability. Dropshipping companies establish a relationship with the manufacturer and ship the goods directly from their warehouse facilities to the consumer. In this process, the retailer never puts their hands on the product.

Dropshipping is an incredibly popular eCommerce model thousands of entrepreneurs use in their online stores. The increase in internet availability and ease of starting an eCommerce business means more people are starting drop shipping companies each year.

The main benefit of dropshipping is that the eCommerce entrepreneur doesn’t have to keep any inventory on hand. They don’t need warehousing facilities and don’t handle any logistics themselves. That’s huge for entrepreneurs looking to bootstrap their businesses.

Dropshipping is ideal for eCommerce entrepreneurs that want to sell other people’s products. It allows them to select a niche and start selling products quickly. However, choosing the right suppliers and building relationships is crucial to receiving good service and satisfying your customer’s experience.

Pros of Dropshipping

  • Lower capital requirements to start the business
  • Plenty of niches to choose from and product offerings
  • Product and supplier flexibility
  • No need to hold inventory
  • No logistics requirements
  • Easy for a single person to operate

Cons of Dropshipping

  • Lower profit margins than 3PL
  • Competitive market
  • No control over the supply chain
  • Challenge to build brand awareness in the target market

What is Third Party Fulfillment?

Third-party logistics (3PL) is a form of outsourcing your product fulfillment using a third-party fulfillment company. For instance, you could ship your products to a 3PL if you’re a manufacturing brand. They’ll warehouse it for you, process your orders, pack your inventory for shipment, ship it, and handle customer parcel tracking and service.

In exchange for their services, you pay the third-party fulfillment service partner a commission on sales. This strategy is similar to drop shipping, but you have more control over the logistics process, options for custom packaging, and low-cost warehousing from local areas, allowing for faster shipping times.

Instead of the customer waiting for two to three weeks for products to arrive, customer orders arrive in two to three days – that speedy delivery time makes a huge difference for your customers and their repeat business.

Pros of Third-Party Logistics?

  • Save money on logistics costs
  • Get professionals to handle your logistics and warehousing
  • No requirement to carry inventory
  • Improve customer service
  • Faster delivery times for customers
  • Ideal for scaling online businesses fast

Cons of Third-Party Logistics

  • It can take time to find the right 3PL partner
  • Logistics software and dashboards can be confusing to navigate

MAI Fulfillment | 3PL Warehouse Chicago, Illinois

Warehouse | Cross Docking | Fulfillment | Kitting | Inbound/Outbound Voice | Freight Broker

Established in 1981, MAI is a privately-held 3PL company in Chicago specializing in warehousing, fulfillment, and omnichannel contact services. As an experienced outsourced provider, we provide value-added solutions designed to help companies build and maintain relationships with their customers.

The MAI business model offers clients the efficiency and convenience of dealing with a single accountable resource for a wide range of services. MAI areas of specialization include:

  • Custom B2B and B2C warehouse/fulfillment solutions
  • Omni-channel contact center services
  • Technology support

A wide range of service offerings, strategic problem-solving skills, and experience make MAI a valued partner to a broad range of Fortune 500 companies. “Quality” is more than just a word here – it’s the foundation of how we conduct business and an integral part of the processes and metrics we use to deliver value to our clients every day.

Contact MAI today to learn more!

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