How Does Dropshipping Fulfillment Work? [Guide in 2024]

The Basics of Dropshipping Fulfillment

There are lots of ways to run a successful dropshipping business and make big profits. But if you desire increased control over product quality and decreased responsibilities in terms of order fulfillment, you might benefit from working with a dropshipping fulfillment partner instead.

Today, let’s take a look at what exactly dropshipping fulfillment is, how it works, and some example dropshipping fulfillment companies for you to partner with.

What is Dropshipping Business?

A dropshipping business is one in which a retailer or merchant (i.e., you) serves as an intermediary or third party between product purchasers and manufacturers.

In a nutshell, with dropshipping:

• A customer orders a product from your online store. Your online store is populated with products made by a distant manufacturing company
• When the order gets placed, you take the customer’s money and use it to purchase products from your dropshipping partner
• Then, your dropshipping partner fulfills the order by taking the ordered products from its warehouse and shipping those products to the end-user/consumer

There are pros and cons to the dropshipping business model. For example, dropshipping merchants benefit from the infrastructure, product variety, and storage capabilities of dropshipping companies. Dropshipping companies, meanwhile, benefit from the marketing and customer service of merchants/retailers.

However, when you use a  dropshipping business, you never own any of the products that you sell to consumers. Because of that, you can’t always tell whether the product quality will be great (and oftentimes have to rely on third-party reviews).

Furthermore, running a dropshipping business means that you have to take care of the lion’s share of customer service and marketing efforts. If your dropshipping supplier is less than stellar, this can result in you spending many dozens of hours per week chasing down product orders, making sure the suppliers have received all orders, etc.

What is Dropshipping Fulfillment?

Dropshipping fulfillment is a fulfillment method often used with dropshipping. 

Put simply, a dropshipping fulfillment service is a dropshipping company that fulfills orders placed by your customers. You don’t keep goods in stock but instead transfer customer orders and shipment details to a third-party supplier, who then ships the products directly to the customer. In other words, you act as a middleman between the supplier and the customer.

In dropshipping, the merchant does not have to handle inventory, packaging, or shipping and only needs to focus on marketing and selling the products. On the other hand, the supplier takes care of fulfilling the orders, which includes picking, packing, and shipping the products to the customer.

Dropshipping fulfillment is popular among online retailers because it allows them to start a business without needing significant upfront costs in inventory or warehousing. It also offers the flexibility to scale up or down as needed without managing additional inventory or warehouse space. However, it also means that an entrepreneur has less control over the product quality, shipping times, and customer experience compared to traditional retail models.

What are Dropshipping Fulfillment Benefits?

Dropshipping fulfillment offers several benefits for merchants, including:

Low start-up costs: Since the retailer doesn’t need to purchase inventory upfront, dropshipping fulfillment can be a low-cost way to start an online business.

No inventory management: Dropshipping fulfillment allows retailers to avoid the cost and hassle of managing inventory, such as storing products, tracking inventory levels, and handling returns.

Wide product selection: Because the retailer doesn’t need to purchase inventory upfront, they can offer a wider selection of products without the risk of being stuck with unsold inventory.

Scalability: With dropshipping fulfillment, it’s easy to scale the business as demand increases without worrying about running out of inventory or investing in more storage space.

Location independence: Dropshipping fulfillment allows retailers to run their business from anywhere, as they don’t need to be physically present to handle inventory or shipments.

Flexibility: Dropshipping fulfillment offers the flexibility to test new products without committing to a large inventory purchase and to change the product mix quickly based on demand.

Dropshipping fulfillment is a low-risk, cost-effective way to start and grow an online business, with minimal investment in inventory and infrastructure.

What are the Challenges for Dropshipping Fulfillment?

While dropshipping fulfillment offers many benefits, there are also several challenges that retailers may face, including supplier reliability, limited control over the product, low profit margins, shipping and handling issues, competition, customer service challenges, and branding challenges. These challenges can impact the customer experience and the merchant’s profitability, making it important to carefully research and choose reliable suppliers and to be prepared to handle the unique challenges that come with this business model.

Dropshipping Fulfillment VS. Bulk Order Fulfillment

With minimal investment in inventory and infrastructure, dropshipping fulfillment presents a cost-effective and low-risk approach for starting and expanding an online business. In other words, dropshipping business model allows merchants who doesn’t have significant capital to have an online business in a flexible way. Meanwhile, entrepreneurs with substantial capital can choose to hire an order fulfillment partner to fulfill customers’ orders.With bulk order fulfillment, you purchase and own products from a manufacturer. The fulfillment company stores and ships your products to your customers once you make sales.

Think of bulk order fulfillment as a service where you pay for access to infrastructure, such as storage facilities and shipping capabilities. The fulfillment company doesn’t make or own the products you sell to your customer – you own them.

The order fulfillment process requires you to buy the goods you sell, which also means that you need to handle product sourcing and procurements. Then you store them with your order fulfillment partner and route customer orders to the fulfillment partner when the time comes. The fulfillment partner then handles the customer service and shipping part of the process. However, if you are a dropshipping beginner, aside from the dropshipping fulfillment service, you may also need a full-service dropshipping provider, such as HyperSKU, who can help you choose the right product suppliers.      

Here’s a more detailed breakdown of the bulk order fulfillment business model:

• You purchase goods in bulk, typically at wholesale prices, to improve your profit margins, then list those products on your e-commerce shop. Meanwhile, your order fulfillment partner stores the goods in a warehouse
• A customer orders a product from your online store. Since you own the products in question, you don’t have to pay the fulfillment partner – instead, you pay them a regular monthly or yearly fee for their services
• You route the order to the order fulfillment company, which then tackles product retrieval and shipping to the final user

From this breakdown, you can see the key differences between dropshipping fulfillment and bulk order fulfillment in the table below.

Order fulfillment allows you to have better control over the quality of the products you sell to your customers. Furthermore, order fulfillment companies usually handle more customer service work compared to dropshipping suppliers such as AliExpress.  However, the bulk order fulfillment model requires an upfront investment from retailers, such as product fees, shipping fees to warehouses or fulfillment centers, shipping fees overseas, custom fees, and oversea warehousing fees since you have to purchase the products you sell in your store. However, if you work with HyperSKU, they will help you handle order fulfillment, and you only need to pay product fees and shipping fees to the end destination.

Dropshipping Fulfillment Companies

Although dropshipping fulfillment can be a profitable and beneficial business model, many entrepreneurs look for quality, experienced dropshipping fulfillment companies to help them boost their shipping processes and produce greater customer experiences. Here are some top dropshipping fulfillment centers and companies to consider for your entrepreneurial endeavors.

HyperSKU 

HyperSKU offers high-quality and client-focused dropshipping fulfillment services to business owners just like you. It’s an ideal choice whether your business accepts 10 or 1000 orders per day and allows you to source products from over 2000 vetted factories. Even better, HyperSKU also offers order-sourcing services to help you find the best products for your customers in a given niche. With express shipping options and 72 shipping destinations, it’s a perfect choice for growing dropshipping fulfillment partners 

• Pros: Excellent price, very versatile, fast shipping times, products all sourced from good companies
• Cons: Still growing its shipping destinations and experience
• Price: Zero subscription fees to start with

ShipBob

Shipbob is a 3PL or third-party logistics company that offers dropshipping order fulfillment capably and efficiently. It features an affordable pricing structure and discounted ground shipping with a wide fulfillment network that utilizes 23 US and seven international warehouse locations.

• Pros: Very wide fulfillment network, fast shipping, low-cost shipping, no order minimums or extra fees for packing
• Cons: Relatively high storage fees, no refrigeration available
• Price: $975 for subscription for standard users, then additional fees for receiving and storage

Shippo 

Shippo is a versatile and multicarrier dropshipping fulfillment company that specializes in providing services to small to midsize businesses, as well as subscription box companies. Thanks to a rate comparison tool, so you can always select the most cost-effective shipping solutions, and a host of automation capabilities and additional features, Shippo is an excellent partner if you need a comprehensive dropshipping fulfillment service that offers much more than just shipping 

• Pros: Lets you select from multiple shipping carriers, typically has discounted shipping rates, makes branded emails and text notifications, comes with some automation and inventory in order management features
• Cons: Has surcharges for certain labels or brands, and customer service isn’t the best
• Price: $10 to $200 per month for 60 to 10,000 shipments, respectively

ShipStation

ShipStation is available for a subscription and is ideal for e-commerce businesses that have diverse marketplaces and customer bases. It’s especially well known for its ability to handle high return volume. It works with 53 shipping carriers in total.

• Pros: Integrates well with e-commerce sites, comes with a mobile app, good returns management features
• Cons: Not available for free, customer support is less than stellar
• Price: $9.99 per month to $159.99 per month

Niche Dropshipping

Niche Dropshipping is a top-tier order fulfillment service that stores products in Chinese and US warehouses. It includes product sourcing services and bulk inventory storage pricing to help growing brands cut down on operational costs.

• Pros: Can be relatively affordable, offers branded e-commerce services, white label services, automated features, and a variety of other benefits
• Cons: Only sources products from suppliers in China, resulting in questionable quality
• Price: Variable pricing based on products sold

Order Fulfillment Companies Service Comparison 

Want to get a quick look at which dropshipping fulfillment companies are most worth your time? Here’s a brief breakdown for you to peruse.

Final Thought

All in all, dropshipping fulfillment is an excellent option for those who want to start an e-commerce business from scratch without the need for a lot of retail infrastructure. With dropshipping fulfillment, you can focus on marketing and customer outreach while also having more control over your products and benefiting from the experience and customer service of dropshipping fulfillment companies.

If you are new to dropshipping, consider working with a professional company like HyperSKU. They can help you with product sourcing and even product or packaging customizations. HyperSKU has a mature supply chain network with vetted suppliers in various areas, making it easier for you to find the right suppliers for your business.

Alternatively, suppose you are a big player or a D2C brand owner. In that case, HyperSKU can help you with all aspects of your dropshipping needs, including inventory management, shipping, product sourcing, procurements, and quality control. This is something that 3PL order fulfillment companies cannot offer, but HyperSKU provides a comprehensive solution for merchants of all sizes.

Ready to get started? HyperSKU is a one-stop-shop for all your dropshipping fulfillment needs. Try it today!

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