Most of us are familiar with an E-commerce market with the idea. EBay was a pioneer of the model. The most famous market is Amazon, which enables third parties to sell products in addition to Amazon regular inventory. Many other retailers – such as Sears, Walmart, Staples and Rakuten, NewEgg, even Toms shoes – launched market places on their own.
Similarities: Drop shipping vs. marketplaces
E-commerce marketplaces and drop shipping are both on one important basis: the company does not physically control the sale of the product to the consumer, that the product. Both are distributed product supply strategies. After the sale, both models via a third party set to meet the product to the customer. For both models the flow of virtual product data and physical logistics of goods are identical.
Marketplaces found in the distributed sources of supply as drop shippers- she called you “Suppliers/manufacturers.” Hits brands and manufacturers are often involved with two models: you have seller accounts with marketplaces and drop-shipping dealers work as a salesman.
Differences: Drop shipping vs. marketplaces
There are however important differences between E-commerce marketplaces and drop shipping. These differences relate to the purchase and point-of-sale experience and the underlying business model.
Source: With marketplaces, there is transfer to the consumer that the product is physically located and controlled by someone other than the retailer. As already mentioned, it’s “sold & shipped by eForCity” notation. In addition, most markets take an additional step and produce ratings and reviews the performance of the seller. Also, a seller providing many marketplaces showcase within the broader E-commerce Web site, so that you can see all products, the seller in the market brought.
Let shipping conceals these facts. The consumer sees a brand, but not identify can, that is someone other than the dealer this product meet. In the early days of E-Commerce-drop-shipping, it was called “blind drop shipping”, because the consumer is, in fact, blind to this dynamic.
Selection: With a market, retailers typically controlled not curate the products from third-party providers. With drop-shipping, but retailers pastor, to select and merchandising products in a similar way, as they approach shopping and buying.
Pricing: With marketplaces, sellers set the price to the consumer. With drop shipping, but the dealer prices to control.
Fulfillment: With two models, the retailer has not compliance with care. The retailer cannot offer or inserts delivered box packaging. With marketplaces, usually, the seller sets the shipping carrier, what and procedure will be to support it. In most cases, leave shipping dealer to dictate these methods to their suppliers.
Customer service: Return a product, both models require an authorized return to get the customer. But for a market transaction, the customer contacts of the seller direct. With drop-shipping, the customer contacts of the retailers who then coordinates with its upstream suppliers.
Business model: The business models are different. Marketplaces are collecting money from customers, and then keep a part of it and send the rest to the seller. With drop shipping, collects the dealer, the customer transfers the previously negotiated wholesale amount (plus fulfillment costs) to the supplier – and keeps the difference.
Accounting: If a marketplace sells party a $100 articles, and his market fee is 10%, what matters is only $10 as sales. Therefore, almost 100 percent of the gross margin are third-party business Amazon. With drop shipping, would rather the dealers traditionally account, and record the $100 sales, then subtract the cost of goods sold.
Both models offer pros and cons – especially to transparency. Smaller and new traders can determine that product suppliers have more credibility in their brand (in comparison to the retailers own brand) and could therefore be sure marketplaces. Moreover, for certain product categories (such as clothing) with a high proportion of revenues, marketplaces can make easier for you, your suppliers and customers all moving parts.
It is really you, what experience would deliver you to the end customer. Consumers today are familiar with the idea of “sold and shipped by eForCity.” So selling on markets seems to accelerate. Most marketplaces are large retailers use their massive demand aggregation, to entice the product sources to engage. But in the last one or two years, there were many more start-up E-Commerce traders, to take advantage of the marketplaces. I see that trend accelerated. Increasingly, online retailer to a marketplace model will look to move inventory, and drive sales.
Hope this article to understand better between drop shipping and marketplace establishment. For any questions, reply here.