The many facets of the e-commerce industry give birth to new business models: Drop shipping, Print on demand, Warehousing and Fulfillment.
The Growth of E-commerce Industry
India saw a catapulting growth in the e-commerce sector in the last decade and the reasons behind this are many. The value of e-commerce industry is expected to touch the 200 billion dollars mark by 2026.
An upward growth is predicted for Indian e-commerce industry which will surpass the US by becoming the 2nd largest e-commerce market in the world by 2034.
The sector has already established its success by allowing industry tycoons to build vast empires and experiment with consolidation. E-commerce is now seen as a long term business plan rather than an emerging market because the world has moved to digital.
Your products/services are easily accessible, available and convenient to purchase because the customer is ordering while sitting at home. You are providing the customers with maximum delight by bringing everything at their fingertips.
If you are someone who is looking to set foot in the e-commerce industry, it can be very intimidating considering the level of competition and the unfamiliarity of the digital space. But, there is not much to worry because along with difficulty of creating brand awareness, e-commerce gives you a million options on how to go about your business.
Let’s read about them.
Understanding Drop shipping
Why Drop shipping?model that works without an inventory. There are 3 parties involved: Seller, Buyer and Drop shipping Company. The seller owns an online store from where customers place an order. Once the order is placed, the seller buys this product from the drop shipping company which makes the product and delivers it to the end customer. The package can or cannot be in the name of the original seller.
Seller gets an order for a product
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Seller buys product from the dropshipping company
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Drop shipping company delivers the product
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Customer gets the product with original seller name (optional)
Why Dropshipping?
Most businesses have to use up huge amounts of their funds for the initial investment of space and inventory, but with dropshipping you are saving on that cost. It is cost-effective and easier to manage for new companies.
You will be able to afford a wider range of products and services since they will be outsourced from a company that already makes them. The risk level in dropshipping is minimal in comparison to other business models.
The Drawbacks
You have less control over the operation of the business since you are dependent on the third party to make products for you. There is definitely a profit but you need to decide the margins very intelligently so that you don’t shoo your customers always.
Another problem is that if the demand increases and your drop shipping supplier isn’t able to supply the products to your customers on time, it questions the efficiency of your business.
You can read extensively about the pros and cons of Drop shipping here.
Understanding Print on Demand
The term is quite self explanatory. Print on Demand is when the designs are printed only when orders come in.
Just like drop shipping, there is no need to keep a stock in place because even the products are bought based on the demand quantity.
Customer places an order
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Printing is done
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Shipped to customer
Why Print on Demand?
- Less Technical Requirements: If you have outsourced printing then your Print on demand partner will look after maintaining the correct technology and printing system because of their expertise in the field. So, you don’t have to worry about the technical aspects of it.
- It is similar to drop shipping so it would also be a good option to consider when you are beginning with your business model dimensions. There will be no excess inventory lying in your storage space. Even though the profit margin is less, you can ensure that you don’t bring upon yourself a huge loss.
- Experimental Freedom: Since you haven’t already printed designs on your products, you have more liberty to experiment with the design and its placement on the product. There is a lot of space to try out new things since you won’t be investing as much. You can ascertain if it’s doing well based on the demand it garners. If not, you can move to try the next design.
- Customization: When your customers are able to get exactly what they want, they like you. The option of customization of design as well as product is available for you as a seller, so you don’t have to depend on any ready made designs. You are able to personalize the product so the buyer is happy.
- Saving Space and Environment Friendly: When you aren’t keeping a bull stock, you won’t be needing a storage space. If you are printing notebooks, then it becomes an environment friendly option as you won’t be printing more than required.
The Drawbacks
- Your are paralyzed without your printing partner: If you are running a business that is reliant on an external source, it can be a little risky. Your business operations and smooth shipping will be stalled if your partner does not give you the right products on time and in good quality. However, if you’re handling the printing in-house, it’ll be fine.
- Less control over demand fulfillment: If you are dependent on a third party to fulfill the printing demand, you will be helpless when there is more demand and not enough inventory of raw products to speed up the process.
- Time Consuming: The one thing customers absolutely love is when they order and receive it immediately. Time is a very important aspect of business and delays are looked down upon terribly. Since you are printing on demand it will take a while before you can deliver your product. This can hamper your brand image.
- Return Policy: You will be investing a lot in the shipment, both in terms of money and time. When there are returns on your product, your return policy framework should be thorough where you should add the situations where you will accept and won’t accept returns. This way you can ensure that you don’t attract a huge loss.
Understanding Warehousing and Fulfillment
Your inventory is stored at your warehouse or your partner’s warehouse from where all the orders you receive will get fulfilled. This means that this business model is third party logistics but it can be done individually too.
Seller receives order
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Partner packages inventory from warehouse
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Order is shipped to end customer
Why Warehousing?
- Saves time: With a responsible warehousing partner, your packaging and shipment is looked after by them, so you are not lagging behind on schedule. You will get more time to concentrate on your marketing and business plans.
- It is cheaper: If you have a warehousing partner then you won’t be needing a place and employees to run your business. You can handle all your operations from home and the warehouse takes care of the rest. Your business grows and hence you earn a good profit.
- Saves space: You don’t have to build a physical office space to have regular business operations in place. Storing in a warehouse helps you track your stock and keep the business going.
- Ease of shipment: The packaging and delivery are done at the same place so there are less chances of in-coordination. The more orders you ship, the more reasonable shipping rates you get. This way you save a lot of money.
The Drawback
- Customer experience: Regardless of where your products are delivered from, the essential marketing and customer experience efforts rely on you. So you will need to invest a lot of time in that on your own.
- Less control: At the end of the day, you are highly dependent on the third party logistics to float your business. You have less control over the packaging and delivery operations. There will be no inventory accessible to you on-hand.
- Underutilized Inventory: If a product does not perform well, you are left with a huge stock inventory that won’t be used and it will be a loss for the business. Until your finished products are sold, they are still a huge investment.
- Difficult without a partner: If the responsibility to fulfill the orders completely rests on your shoulders, then it can be a herculean task. Warehousing is better only when you partner with someone to distribute the work.
Which is the Better Option: Drop shipping and Print on Demand or Warehousing and Fulfillment
If you are a new store, then we recommend:
Drop shipping
Since you are just starting out, it will be an ideal choice to choose a model that will not eat up much of your capital investment. You will have more freedom to experiment and manage your expenses. You can fix your own profit margins if you market your brand well.
Print on Demand
It is similar to drop shipping so it would also be a good option to consider when you are beginning with your business model dimensions. There will be no excess inventory lying in your storage space. Even though the profit margin is less, you can ensure that you don’t bring upon yourself a huge loss.
If you are an established company, we recommend:
Warehousing and Fulfillment
You already have a lot of orders coming your way and warehousing would be a great option to deliver products on time. It helps you divide the delivery operation and regular business operation into different segments so there is equal attention on both. You just have to be careful about your reliance on a third party logistics partner.
How it Works for Our Merchants
Printrove is a combination of Drop shipping and Print on Demand model. We have a variety of products that are printed upon when there is an order placed on our seller’s store. Once the printing is done, we package the product and deliver it to the end customer under the brand name of the seller.
Seller gets an order
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Seller informs Printrove
(Printrove offers integration with Shopify and Woocommerce store to make the order placing process quick and easy)
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Design is printed on the product at Printrove
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Your Brand Packaging is also done
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Printrove’s Delivery partners deliver to the end customer
To find out more, you can visit our website. To start a dropshipping business, read this.
Let us know if this post has helped clarify the concepts of drop shipping, print on demand, warehousing and fulfillment for you in the comments section below. Also, if you need any help making a decision, we are here.
