Dropshipping is a sales system when the supplier directly carries the goods to the client, and the online store receives a commission. Such a partnership suits those who are limited in funds and cannot purchase goods in the required volume, buy or rent their own warehouse and arrange delivery.
In fact, this is a good option for starting a business. Dropshipping gives you the opportunity to explore the market without risking large investments. However, starting as a drop shipper you can grow further to become an online store with the complete order fulfillment system in place. Let’s explore what great opportunities can open before your marketplace with order fulfillment!
How does dropshipping work?
Dropshipping works like this:
- An entrepreneur owning a business finds a supplier who offers the desired product at an attractive price and enters into a contract with him.
- The entrepreneur creates an online store, uploads information about products to it, and sets his own price.
- Received orders are transferred to the supplier: the last delivers the goods to the buyer.
- The online store pays out the supplier. The difference between the two prices for the item will be the profit.
The advantages of dropshipping are low overhead costs, business savings and rapid business scaling, the ability to test new products.
Disadvantages of dropshipping are high competition, lack of direct control of product quality, difficulties with product personalization, small profit, possible problems with delivery and suppliers.
Does CS-Cart allow for a dropshipping by default?
The CS-Cart default functionality can be used for a dropshipping platform. At this, vendors act as drop shippers and you as the admin configure suppliers who ship the vendor products. Suppliers cannot access the storefront or the administration panel by default: their accounts only flag products that belong to third-party providers. Vendors are independent companies that sell their own products in your store. Every vendor has its own administration area and manages its own settings and products, configure shipping methods, etc. They place products themselves in your store. All you have to do is promote your store and interact with shippers.
How is dropshipping different from order fulfillment?
It sounds strange but dropshipping is one of the forms of order fulfillment. When a product is shipped via dropshipping, it will never pass through the vendor or retailer. The vendor won’t hold an inventory as it stays with the supplier or a fulfillment center.
When we talk about the order fulfillment, we mean that the order is picked, packed, and shipped to the customer. All these operations can be handled by a third party fulfillment service or the manufacturer itself out of its warehouse. With the order fulfilment, you have greater control of your product inventory.
But which form of order shipping is better? It depends on some factors like cost, location, or amount of products shipped. For example, if you are located in Canada and most of your orders are in the U.S., it may be beneficial to have a third-party logistics system (3PL) to tackle the operation for you. This is where the dropshipping model is the best fit. Partnering with a 3PL, you don’t need to handle shipping directly to a customer, keep an inventory, or run a warehouse. If you’re a manufacturer of the goods that you sell online, and it is more cost-effective to keep the delivery issues with you, why not try fulfilling orders without intermediaries?
How CS-Cart can be expanded with the order fulfillment features?
Let’s take the Yumbles marketplace as an example. This Multi-Vendor store works with several shippers and offers self-made food from their independent manufacturers in Great Britain. Every shipper there is an independent manufacturer of food.
You can repeat their success and turn your Multi-Vendor into a fulfillment system, or do more!
Tip: even with the default features you can have a wholesale system to attract wholesale vendors: create new products or product variations for wholesale vendors and call them ‘batches’, for example. All you will need is to specify this in the product name and/or its description and change the price accordingly.
However, sometimes to grow, expanding the default functionality is required.
Automated management of multiple suppliers
Having multiple suppliers for one item, you don’t want your customers to know that. Thus, hiding prices of diverse suppliers will be required to show only one price.
You can have the internal logic that will define the way an order is distributed between suppliers to make this process almost automatic. For example, a special script capable of routing an order to a supplier with the lowest price or closest location and arrange the others respectively.
Opting for that solution you should be ready for your Multi-Vendor modification.
Hiding order statuses from vendors
You don’t want your vendors to be in the course of other vendors’ order statuses, do you? In this case, you will need to have it hidden from vendors’ dashboards. This modification will include hiding some order statuses to allow your vendors to see the order details that you want them to see. By default, when an order is under processing, the dashboard displays such statuses as Processed, Complete, Open, Failed, Declined, Backordered, Cancelled, and Awaiting Call. But you can disable showing some of them (like Cancelled or Declined) for your vendors to keep that information with the marketplace admin only!
How to allow a storefront to have an overall delivery fee? We can develop such functionality as unified shipping. You will then be able to set a shipping method and apply it to all of your vendors. Since the products will be in your warehouse, the shipping charges will go to you as the admin of the marketplace. At the checkout, customers will see only one shipping cost and the common order for all the vendors.
If your vendors sell the suppliers’ products, they would probably want to upload their feeds to your marketplace via a CSV file and tackle the delivery issues on their own. Why not implement this modification to give your vendors more freedom in shipping their goods using the most efficient way. At this, you will have to allow some limited access to the vendor account for suppliers. By default, suppliers cannot do that.
Vendors will be able to give access to their accounts to suppliers so that the last could upload the product catalogues by CSV files. With this modification, you give your vendors an option to offer the products from the suppliers’ catalogues on your marketplace. Once an item is bought, it will be shipped as drop shipment by the supplier and not by your vendor.
Mixed drop shipment and fulfilment store
Assume, you sell your own products as a manufacturer. It is obvious that your own orders are fulfilled by you. But what if you introduce a vendor plan that includes the storage and fulfillment of the vendor’s products – like Amazon’s Prime Fulfillment. That’s also feasible through modification.
You can elaborate this workflow further and charge the customer for shipping per order that is fulfilled by you and an extra cost per drop shipping order fulfilled by suppliers. Is it an excellent way to diversify your vendor plans?
Let’s examine a case. You’ve got 3 types of products on your market:
Product A is your own product and you are responsible for order fulfillment.
Product B is a product from a vendor that fulfills on its own – Vendor Plan 1.
Product C is a product from a vendor who benefits from your fulfillment – Vendor Plan 2.
With this workflow in place, your platform will need to correctly split all these calculations by the vendor plan: the one self-fulfilled by a vendor and the one fulfilled by you.
When a vendor chooses a plan, the corresponding shipping plan will need to be assigned automatically so that it cannot be changed by the vendor on his own. At this, the shipping cost dependency calculation will have to be reworked. If you plan to expand globally, you will also need to cater for international shipping.
It may seem intimidating, but it is a rewarding modification. Imagine you have a centralized wholesale Multi-Vendor with an embedded fulfillment channel where each vendor can select their best fitting plan. Sounds incredible? Contact us, and we will advise you the best fulfillment solution for your Multi-Vendor!