Ecommerce Marketplace vs Dropship Model – If someone is asking “what is the basic difference between marketplace and dropship ?“ the easy answer would be in dropship model merchant or store owner does not need to hold the inventory but in the marketplace it need to be .
Its not always correct but for basic understanding it may work . First of all DROPSHIP term must be very clear .
Dropship Model allows merchant or store owner to start their online shop without holding the inventory that means online merchant don’t need to manage the warehouse or shipping management . Dropship model is super beneficial for the startups where they can not hold huge amount of managing warehouses , shipping management and delivery . we can understand dropship in much better way by following example .
Example – lets say there is a shop “Online Cloth Store “ which works in mainly b2c domain that means buyer will come in to the site and buyer can make the purchase so here OCS ( Online Cloth Store ) is a merchant or store owner . Second entity is supplier / producer / manufacture we will call them as supplier in this example . Third entity is Buyer or customer .
So what will be the simple process of buying ? buyer will come to the OCS and he / she will make an order now OCS will receive the order and will process that . Simple process will be if OCS hold the inventory then simple OCS will dispatch the order using standard shipping method but imagine if the OCS is getting 100 order everyday in a month 3000 order will consume a good amount of space for warehouse as well as shipment of those goods will be a big pain at the same time . SO is there any alternate way to manage that out ?
Yes it is here comes the dropship model , whenever buyer will make an order after the successful order , notification will be received by supplier as well now supplier will dispatch the item on behalf of OCS to the buyer looks easy right ? Yes the complex part is to manage the integration between OCS and supplier . There are multiple types of dropship i would strongly suggest to read Matthew Carroll explanation on it – https://www.quora.com/Retail-Distribution-Is-drop-shipping-the-best-way-to-bootstrap-an-e-commerce-company/answer/Matthew-Carroll
I hope now you have a better understanding of dropship model , We will discuss marketplace model now .
What is an online marketplace ( As i am taking an example of Magento2 Marketplace )? Online Marketplace is a platform where vendors / seller will be able to sell their products . Marketplace is super complex system where many vendor / seller provides shipping from their end and various marketplace provides shipping based on vendor behalf . So you may say inventory management will be at the vendor panel also it can be at store owner as well .
Most of the big marketplaces are delivering the goods on behalf of vendors that means lets say when a buyer purchase any item store admin and vendor are notified automatically . Marketplace shipping agent will collect the item from vendor if they don’t have any stock and will deliver the item on behalf of vendor . So marketplace work mix of a dropship that means inventory will be managed at vendor end but shipping will be managed from the marketplace .
Even in marketplace dropship can be applied fully example lets say vendor A with product PA , and PA will be delivered by supplier warehouse SA This model also work . So as per the above study you may find even marketplace are also working based on based on mix dropship or fully dropship model , its totally depend which kind of marketplace you are running and what kind of goods you sell .
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