Just Google the word “Dropshipper” and you will undoubtedly be inundated with dozens, if not hundreds, of results ranging from small “mom and pop shops” to multinational giants. It is at this point that people are usually frozen by the sheer deluge of information. Where do I even start? There are so many choices. The following is an attempt to condense the data, categorize the various options, to compare solutions and highlight their features. We begin with the big boys, which ironically caters to the smallest form of business.
Marketplaces with Dropshipping Capabilities
Ebay. Amazon. These two giants of the industry have undoubtedly revolutionized the way business was done on the internet. Both companies excel at delivering goods, with ease, to the at-home consumer. Ease of use, short delivery times and a ridiculously huge inventory of goods are all synonymous with Ebay and especially with Amazon, which has essentially boiled this model down to a science. In the context of dropshipping and selling Ebay was initially created as and still mainly serves as a way for an individual to sell an item to another individual. Very personal and very small scale.
Albeit, there are small companies that sell several items on the platform, the majority of sellers on Ebay are still individuals that auction or direct sell to other individuals. Amazon, on the other hand, took the whole model and scaled it up to a whole new level. With dozens of distribution warehouses across the globe and a bullet train-like delivery network, Amazon has now made it that much easier for sellers to get their products to customers. However, if you are a company that moves products by the hundreds or thousands Ebay and Amazon may not be the best platform to conduct business.
Ebay and Amazon’s robust and stable platform works against the company in this case, as it allows for little to zero customization, control or automation. Also, the ease of access to Ebay and Amazon means that these marketplaces are very, very crowded. We’re talking about hundreds and thousands of vendors on Amazon and upwards of a million small business/individual sellers on Ebay. Competition of this magnitude always leads to smaller and smaller margins as prices are pushed down to bare minimums to attract consumers.
SaaS Platforms for Dropshipping
Moving up in size we begin to move out of the big box solutions and start to look at a more specialized set of solutions. Software as a Service (SaaS) products have been used in the popular space for well over a decade. Centrally hosted and utilizing a subscription fee model, SaaS storefronts focus on ease of use and are popular with smaller startups. There are literally dozens of SaaS stores to choose from online. Let’s take a look at a handful of notable and prevalent names in this space; Shopify, Bigcommerce, Volusion, Demandware and Squarespace. The draw with this storefront, otherwise known as hosted storefronts, are their user friendly interfaces and quick deployment. You can literally have your store up and selling within an hour.
For those familiar with the options and features of Ebay and Amazon, in particular the inventory management and marketing features, you will find that the majority of hosted storefronts have imported the same look and feel in the control consoles and dashboards to help ease the transition. Price also plays a major factor in the appeal of hosted solutions. From Volusion’s “$9/month Mini plan”, there is an affordable price point for every level and scale of your business and output. But these solutions are, in the end, just storefronts.
When looking at it through the lens of a sales channel, hosted storefronts mainly house seller or reseller points. Taking this into account, a SaaS dropshipper (e.g. Dropship.com, Hublogix, Logicbroker) is required to get the products from the supplier/manufacturer to the storefront. A hosted dropshipper comes with its own setup time and costs. You would also need to implement and integrate the dropshipper with your storefront to ensure that the inventory is translated to your storefront. But this was always an inevitability, as utilizing a hosted solution has always meant that both hosted storefronts and dropshippers are needed. Just like Ebay and Amazon, customization also becomes an issue as all you data and code are hosted off site, meaning that you will require several plugins to access them. This further increases the costs of doing business as each plugin usually charges on a regular schedule. All of a sudden the quickly deployed, “out-of-the-box” storefront seems less appealing when doing business at over 1000 transactions per month.
A Self-Managed Dropshipping Solution
To cope with a higher volume of transactions, a self-hosted approach is required. As the name suggests, a self-hosted approach handles everything in-house and that means you host, control and have access to your data and code. Like hosted storefronts there are plenty of self-hosted stores to choose from. The big movers in this space are Prestashop, Woocommerce and Magento, all of which share some common traits. The upfront costs of implementation are much higher than their hosted counterparts with a good portion of the budget towards server rental or purchase.
Those looking at this solution usually require technical knowledge or need to hire those with technical knowledge. In general, the launch period for self-hosted solutions is usually longer than hosted solutions as well. But, the trade-off for higher initial costs comes in the form of unparalleled customization since all data and code are accessible. Maintenance costs tend to be less as well since you don’t have to subscribe to a third-party host. Self-hosted storefronts still need some sort of dropshipping component. We are already familiar with one of the dropshipping options in SaaS dropshippers, yes, the very same used by hosted storefronts. SaaS dropshippers are already established, but the same problems persist, even with a self-hosted storefront. Customization and data access decrease and therefore negating the strides gained by implementing an in-house store.
The other option is an in-house dropshipping solution, while not the most popular this solution allows for greater customization in the dropshipping process and allows for a customized approach to the integration of the dropshipping with the storefront. Requiring more time and technical know-how, in-house dropshipping is usually utilized by companies with hundreds of orders and several thousands in turnaround. In this regard, Magento sticks out in especially with the Exto Dropshipping extension. Chock full of features including auto inventory syncs, PO and payout management, and delivery tracking, Exto Dropshipping marries Magento’s outstanding storefront with high efficiency remote inventory capabilities.
Final Thoughts and Verdict
Determining the correct storefront and dropshipper combination is an exercise in the Goldilocks Theory, Which one is just right? There are a myriad of options, dozens of permutations, and each has its pros and cons. Ebay and Amazon are great if you’re selling something out of your dorm room, basement or garage. You can reach a massive audience but your margins are often hammered by the equally massive competition. SaaS Storefront and Dropshipper solutions like Shopify and Volusion allow small businesses to handle more customer orders but sacrifice customizability.
Relatively easy to setup and deploy, but you are constantly haunted by subscription fees and worries regarding data access. And finally the In-House solution, marked by greater upfront (often one-time) costs and the requirement of greater technical knowledge (or need to hire an individual with the know-how), but with the ability to handle a greater volume of orders and transactions. You can choose between utilizing a traditional SaaS dropshipper, such as HubLogix, or going the in-house dropshipper route and utilize extensions to connect your dropshipper to your storefront, a space spearheaded by Magento and its Exto Dropshipping extension. So many to choose from…which is the right one for me? Before you can even begin to ask for a solution you must first identify your problems by asking yourself these three questions.
How do I do business at this very moment? Answer honestly as it sets the foundation for the next two questions.
Where do I see my business heading? If you are looking to stay small there is no reason to splash $5K on server rental and implementation. But if your transactions are trending upward and no signs of stopping then it may be time to move your business out of your spare room and look into Magento or Prestoshop. And finally…
What solution do I choose to ride to get there? This is the easy part. Armed with answers from the two previous questions you can map out your progress and transitions, and choose the right platform to get you there.