Since the terms –online marketplace and dropship – are mostly used interchangeably, there is a lot of confusion about the differences between them. Therefore, it is important to know the major differences between the two and also about how the two models work together along with knowing the importance of having a marketplace.
In the case of dropshipping, a party can sell goods whereas another party like a wholesaler can deliver it on behalf of the first party. The consumer could get the product from the wholesaler, but all the labels and branding on the products will be having the logos and contact information of the retailer.
In the case of an online marketplace, a party would be able to sell goods whereas a different party such as a retailer or a manufacturer delivers the goods on behalf of the first party. The customer can get the products that will have the shipping labels and branding of the third party.
Dropshipping has allowed retailers to sell products that are bulky and that fail to fit the fulfilment capabilities of the retailers. It has an approach similar to a supply chain which is not similar to a merchandising approach.
Most confusion regarding a marketplace and a dropship start from the indifferences in a frame of reference. For example, some of the sellers in a marketplace might use dropshipping as a method of fulfilment.
Taking the point of view of a retailer is the best way to get to know more about the real differences between a drop ship and a marketplace. In the marketplace, a trusted third party is allowed the direct selling of products by the retailer. The retailer would be mostly using the platform to connect sellers and buyers.
After making the sales, the third-party seller is supposed to ship the goods along with providing the needed service for customers. The package of products would be having the branding and contact information of the supplier.
Some of the other key differences take place in –
With the use of a dropship, a retailer would reflect the topline revenue of the products that are sold along with recording the overall cost of the products that are sold, which goes into the profitability of their business. A retailer who uses a marketplace would have no cost of goods sold, which only reflects the commission it takes as revenue on the sales.
A retailer who makes use of a dropship should know how much to price, how to service, etc. Sellers on a marketplace usually sell the products in a few hours.