Dropshipping vs Ecommerce: The Ultimate Guide (2023)

Dropshipping vs Ecommerce: How do you choose the right option for your business?

Thanks to the internet age, it’s never been easier for would-be entrepreneurs to start selling online. However, before you can start making money as an ecommerce retailer, you’ll need to decide what type of business model you’re going to pursue.

Dropshipping and ecommerce each have their own unique benefits and drawbacks. Ecommerce gives you more freedom to take control over your company and brand, but requires a greater investment of time and money from day one.

Dropshipping offers a low barrier to entry and low risk, but limits your ability to differentiate yourself from other brands.

Here’s everything you need to know about the differences between ecommerce and dropshipping, so you can choose the strategy that’s right for you.

What is Ecommerce?

Let’s start by defining ecommerce. Ecommerce is the art of selling goods and services through the web. Retailers exploring the world of ecommerce can sell virtually anything online, from physical products like clothes and smartphones, to digital downloads and webinars.

In general, the term “ecommerce” is most commonly used to refer to online retail stores. You’re probably already familiar with a few major ecommerce giants, such as Amazon, ASOS, Alibaba or Wayfair. For years, the ecommerce landscape has been growing at a rate of knots.

Revenue in the ecommerce market is expected to reach a value of around $6.35 trillion by 2027, as more customers move online to purchase goods and services.

When companies start an ecommerce business, they choose an ecommerce platform or website builder to design and run an online store, where they list a variety of products, either produced in-house, or sourced from a third-party manufacturer.

With traditional ecommerce, the retailer is responsible for managing the whole fulfillment journey. It’s your job to not only choose and promote products, but also track orders and inventory, manage picking and packaging processes, and ship orders to customers.

You may have your own warehouse for storing and managing products, or you may work with a third-party company to store goods on your behalf. One of the biggest benefits of ecommerce is you have complete control over the products you sell, and the experience you deliver to customers through your fulfillment strategy and supply chain.

However, there’s a lot of work involved in running this kind of store, from tracking stock levels, to dealing with shipping and refunds.

What is Dropshipping?

Dropshipping, on the other hand, is essentially a “subsection” of the ecommerce market. With dropshipping, you still sell products online, either using your own online store, or a storefront on a well-known marketplace like Amazon or Ebay.

However, with dropshipping, you don’t produce your own products, or store them yourself. Instead, you use a dropshipping platform or directory to choose products from a range of options offered by third-party wholesalers or manufacturers.

When you run a dropshipping store, you’ll work with a dropshipping supplier (or multiple), who handles everything after the sale on your behalf. While you still need to promote your products and manage your online store or storefront, whenever a customer places an order on your site, you’ll use an integration or app to automatically pass that order to a third-party.

The dropshipping supplier you choose then handles the fulfillment process on your behalf, picking and packaging goods, and shipping them to your target audience.

You’ll handle all of the customer service and run your business, but unlike with traditional ecommerce, you never touch or handle the product. This generally reduces the initial costs of starting a store, and the work you need to do.

Like ecommerce, dropshipping is growing in popularity at an incredible rate. The market is set to reach a value of $931.9 billion by 2030, thanks in large part to the simplicity of getting started.

With dropshipping, you don’t have to purchase or hold large amounts of inventory yourself. You can even purchase items one at a time, whenever customers make an order.

Dropshipping takes a lot of the risk out of running an online store, but gives you less freedom. You have limited control over the items you can access, and virtually no control over the logistics and fulfillment process.

The Pros and Cons of Ecommerce

Ecommerce is considered by many to be the “traditional” method of selling and shopping online. It’s the ultimate alternative to creating your own physical retail store, allowing you to sell to customers all over the world, provided you can create the right partnerships with logistics companies.

Pros 👍

More options: With ecommerce, you can sell just about anything online. You have the freedom to choose between creating your own products, sourcing from wholesalers, or even selling digital items. You can sell products in any industry, to any audience.
Branding: Ecommerce gives you the freedom to build a unique brand. Because you have control over the products you choose, and the way you serve customers, it’s easier to build a relationship with your target audience and differentiate yourself from competitors.
Control: You’ll be able to maintain control over the entire sales process. You don’t have to worry as much about suppliers dropping the ball or failing to deliver items on time. This means you can more effectively protect your online brand.
Greater profits: Because you’re creating your products yourself, and building a brand, there’s an opportunity to charge more for your products. You might find you can earn higher profit margins with an ecommerce store than a dropshipping store.

Cons 👎

Complexity: With an ecommerce store, you’ll need to learn how to run an entire business yourself. It’s up to you to make sure you’re working with the right fulfillment providers, creating amazing products, and delivering fantastic customer service.
Time: Fulfilling orders yourself, which includes packaging, shipping, and working with third-party logistics companies takes time. It can also take a lot of time to find products you want to list on your site, or create them from scratch.
Initial costs: The costs of running an ecommerce store can be quite high initially, as you need to purchase goods, or materials to make your products, as well as handling all of the production and store running expenses yourself.

The Pros and Cons of Dropshipping

Dropshipping shares many of the same benefits of ecommerce, such as the ability to access a wide market of customers, and sell a variety of products, but it also has its own unique pros and cons to consider for new business owners.

Pros 👍

Low startup costs: With dropshipping you don’t have to purchase goods and materials, you just pay for the base cost of items and handle shipping costs when they’re sold. You also don’t have to invest in warehousing, or deal with as many production costs.
Simplicity: There are fewer moving parts to worry about with a dropshipping store. You hand a lot of the more complex parts of running your business over to a third-party, such as fulfillment, warehousing, and logistics, so you can focus on growth.
Fewer tasks: You won’t have to worry as much about managing inventory or stock levels, or making sure items are made according to customer expectations, provided you choose the right supplier to work with.
Global reach: Because dropshipping suppliers work with logistics companies around the world, it’s much easier to ship items anywhere, without having to worry about setting up partnerships with other companies.

Cons 👎

Less control: You won’t have any control over the storage, or fulfillment processes connected to your store. This means it’s harder to ensure the items you sell to customers will be high-quality, and delivered on time.
Reputation: If your dropshipping partner fails to deliver items according to your customer’s expectations, it’s your brand that takes the hit, not the supplier’s. This means you need to be cautious about who you choose to work with.
Differentiation: It’s much harder to build a memorable brand with dropshipping, as you’ll be selling the same items as many other companies, and they’re likely to be packaged without any references to your brand.

The Costs of Dropshipping vs Ecommerce

One of the most significant major differences between dropshipping and ecommerce is the cost associated with both methods. While starting any business will require some initial investment, the startup costs for a dropshipping store are generally a lot lower.

With a traditional ecommerce store, you need to account for the costs of:

Creating your products from scratch (materials and production), or purchasing items in bulk from a wholesale supplier.
Storing and managing your inventory, which could mean paying for warehouse storage space, or purchasing your own warehouse location.
Building partnerships with logistics companies, and monitoring your supply chain, to ensure the maintenance of product quality.
Shipping costs, and the costs of dealing with returns and refunds when customers send a product back to you.
Creating your online store, running your website, and designing product pages which draw attention to your items.
Marketing and promoting your business, delivering exceptional customer service, and tracking customer orders.

While dropshipping also requires you to market and promote your business yourself, build your online presence, and deal with customer service, there are no initial costs associated with purchasing products in bulk or storing them yourself.

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What’s more, because dropshipping suppliers tend to have existing relationships with logistics companies, you can often save money on shipping.

How to Start an Ecommerce Business: The Basics

The good news for any would-be online seller is that starting an ecommerce store, or a dropshipping business can be relatively simple. If you choose to start an ecommerce store, the first step is coming up with an idea of what you want to sell, and how you’re going to source products.

You’ll need to research your market, decide on a niche, and determine whether you’re going to produce items in-house, or purchase goods from a wholesaler or third-party manufacturer. Once you’ve chosen your goods and how you’re going to produce them, you’ll need to build a website. You can use a range of tools to help with this.

The most common options are to either use an ecommerce platform, like Shopify, Wix, or Squarespace to build your store with a hosted service, or create your store from scratch using an open-source solution like WordPress and WooCommerce.

You’ll need to list your products on your website (with engaging photos and descriptions), market your products to customers, and implement payment processing and checkout tools to take orders. Whenever a customer places an order, you’ll be responsible for updating your inventory, picking and packaging the order, and shipping it to your customers.

This means you’ll also need to choose couriers to work with in regions where your customers are located, such as DPD, or USPS. You may need to hire members of staff to help you with customer service, marketing, production, shipping, fulfillment, and more.

Learn more about starting an ecommerce business here.

How to Start a Dropshipping Business: The Basics

Starting a dropshipping business is quite similar to launching an ecommerce store at first. You’ll still need to do market research and decide which products you want to sell. However, rather than producing items yourself, or buying from manufacturers, you choose a partner from a dropshipping directory who already produces the items you want.

You’ll still build your own ecommerce store, or storefront on a marketplace, but you can list your products on your site using photos and descriptions provided by your supplier.

You’ll also generally use an integration or app to automate the process of sending orders through to your supplier whenever a customer buys something from your store.

You’ll be responsible for promoting your products, and delivering customer service throughout the sales process, but when an order is placed, your dropshipping partner will manage fulfillment and inventory for you. They’ll package your goods, and work with existing logistics partners to ship them to customers around the world.

This means all you need to focus on is mastering digital marketing to boost the presence of your ecommerce website or storefront, and delivering customer support.

However, you will need to maintain a close relationship with the dropshipping companies you work with, to ensure they’re delivering quality to customers.

Learn more about starting a dropshipping business here.

When to Choose Ecommerce

There’s no one-size-fits-all strategy to choosing the right model for your online business and fulfillment method. However, you can generally expect to have to invest more time, effort, and money into running a traditional ecommerce store.

The standard ecommerce fulfilment method and business model works best for people who already have extensive experience running their own business. You should know how to run a team of employees, have skills with order and inventory management, and have a decent budget to invest in your store.

You may also prefer the ecommerce business model if you:

Want to sell your own custom, unique products
Want to develop a strong relationship with your customer base through branding
Feel comfortable managing logistics and fulfillment
Need to maintain complete control over the order fulfillment process

When to Choose Dropshipping

While you can learn how to optimize your ecommerce workflow and reduce your financial and time investments in your business over time, the dropshipping model will give you a much easier way to start your own small business.

Dropshipping often appeals to store owners who want to focus on marketing strategies like SEO, facilitating growth and customer service, rather than order fulfillment.

The dropshipping business model works best when you want to launch a low-cost, low-risk store quickly. You should consider this method if you:

Feel comfortable searching for reliable suppliers on platforms like AliExpress
Want to minimize your involvement with fulfillment and logistics
Are happy selling products made by another company (instead of your own product ideas)
Know how to communicate consistently with a third-party supplier
Want to reduce the upfront costs of running your business

Dropshipping vs Ghost Ecommerce: A Quick Insight

If you’ve been exploring the different types of ecommerce available to business leaders today, you might have come across the concept of “ghost ecommerce”. This nascent concept is quickly gaining attention in the digital world, as a type of dropshipping business model.

With Ghost ecommerce, you also don’t have to deal with the challenges of ecommerce fulfillment. Instead, you act as a kind of middleman between a customer and a supplier or manufacturer.

You take orders from a customer, and place them with suppliers, who handle the rest of the service. You don’t necessarily need to have a physical storefront or website, instead you just need a way to connect with your audience and collect orders for new products.

Is Dropshipping or Ecommerce Right for You?

Ultimately, it’s up to you to decide what type of online business is best for your needs. Ecommerce makes sense if you want to build your own website selling custom products that you create or source yourself. If you’re happy to take control of the fulfillment process involved with online shopping, then ecommerce can give you the freedom to build a memorable brand and make a great profit.

If you’re limited in available startup funds, and you don’t know how to run a fulfillment center, taking advantage of the benefits of dropshipping could be a better strategy. You’ll be able to earn money selling items online, without handling production, shipping or fulfillment yourself.

FAQ

Which is better: dropshipping or ecommerce?

There’s no clear answer to this question. A traditional ecommerce model gives you more control than a dropshipping business, and more scope to build a brand and earn significant profits, but a dropshipping business can be cheaper and easier to run.

What is the most profitable dropshipping or ecommerce?

In general, ecommerce is usually more profitable than dropshipping, as it gives you more opportunities to control manufacturing and shipping costs, and differentiate yourself from competitors with unique items. However, your profits will depend on your sales and marketing strategies.

Is Shopify good for Dropshipping or Ecommerce?

As one of the most versatile ecommerce platforms available, Shopify is ideal for both dropshipping and ecommerce. It allows companies to build virtually any kind of ecommerce store, selling any products they choose.

Plus, there are plenty of dropshipping and POD apps on the Shopify marketplace to help you build your business model.

What is the success rate dropshipping?

It’s difficult to know for certain, but some companies, like Shopify, suggest that around 10 to 20% of all dropshippers succeed in creating a profitable business. To boost your chances of success, make sure you work with reputable suppliers, market your brand, and deliver great customer service.