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Ecommerce Marketplace vs Dropship Model

If someone is asking “what is the basic difference between the 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 needs to be.

It’s 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 merchants don’t need to manage the warehouse or shipping management.

The dropship model is super beneficial for the startups where they can not hold a huge amount of managing warehouses, shipping management, and delivery.

we can understand dropship in a much better way by the following examples.

For example – let’s say there is a shop “Online Cloth Store “ which works in mainly b2c domain that means the buyer will come into the site and the buyer can make the purchase so here OCS ( Online Cloth Store ) is a merchant or store owner.

The second entity is supplier/producer/manufacture we will call them a supplier in this example. The third entity is the 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.

The simple process will be if OCS holds the inventory then simple OCS will dispatch the order using standard shipping method but imagine.

if the OCS is getting 100 orders every day in a month 3000 orders will consume a good amount of space for the 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 the buyer will make an order after the successful order, notification will be received by the 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 suppliers.

There are multiple types of dropship I would strongly suggest for reading 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 the dropship model , We will discuss the marketplace model now.

What is an online marketplace  ( As I am taking an example of Magento2 Marketplace )? Online Marketplace is a platform where vendors/sellers will be able to sell their products.

The marketplace is a super complex system where many vendor/seller provides shipping from their end and the various marketplace provides shipping based on vendor behalf .

So you may say inventory management will be at the vendor panel also it can be a store owner as well.

Most of the big marketplaces are delivering the goods on behalf of vendors that means let’s say when a buyer purchase any item store admin and vendor are notified automatically.

The marketplace shipping agent will collect the item from the vendor if they don’t have any stock and will deliver the item on behalf of the 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 the marketplace dropship can be applied fully example let’s say vendor A with product PA, and PA will be delivered by supplier warehouse SA this model also works.

So as per the above study, you may find even the marketplace is also working based on mixed dropship or fully dropship model, it totally depends on which kind of marketplace you are running and what kind of goods you sell.

Still have any queries or questions please email us at [email protected] Thanks

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