Ecommerce sellers often face the dilemma of choosing the right distribution model. Figuring out which order fulfilment method is best for your ecommerce business is essential as it ensures cost-effectiveness and profitability in the long run.

Direct shipment and drop shipment are two popular distribution models that ecommerce sellers have difficulty choosing between. However, the decision can be taken easily by understanding the advantages and disadvantages of each model and then assessing which one is appropriate for their fulfilment goals.

What is direct shipment?

Direct shipment is a type of distribution model in which a product is shipped to the customer by the ecommerce seller himself. The ecommerce seller maintains inventory, picks, packs and ships orders and handles returns if any.

What is drop shipment?

Drop shipment is a distribution model in which an order is shipped by the manufacturer or a third party, not the seller. In drop shipping, an ecommerce seller doesn’t maintain inventory; instead, when an order is received, he forwards it to the drop shipper, who ships and delivers it.

What is the difference between direct shipment and drop shipment?

The major difference between direct and drop shipment is in terms of inventory management. In a drop shipment, the ecommerce seller does not store inventory, and instead, the order is directly shipped from the manufacturer or third party. In a direct shipment, on the other hand, inventory is sourced, maintained and replenished by the ecommerce seller to fulfil orders.

Which distribution model is best for you?

To choose the appropriate distribution model for your ecommerce business, one must assess the benefits and drawbacks of each and then choose the one that achieves their fulfilment goals. Let’s have a look at the advantages and disadvantages of both models:

Advantages of direct shipment

• Greater control over inventory

• Better control over the supply chain

• More control over the packaging

• Faster shipments

• Easier to build a brand

• Safer for orders

Disadvantages of direct shipment

• Higher administrative costs such as leasing an ecommerce warehouse, inventory management, manpower requirements

• Ecommerce seller handles returns and exchanges

Advantages of drop shipment

• Very easy to start

• Minimal capital is required

• Lower overhead charges

• No inventory management

• No need for storage space

• More time to focus on core business functions like marketing

Disadvantages of drop shipment

• Lower profit margins due to a range of extra costs

• No control over the supply chain

• Shipping inefficiencies which harm your reputation

• Poor quality checks

• Difficult to build a brand

Drop shipment is suitable for businesses that are just starting out and have a low cash flow, as they may not have the resources to maintain their own ecommerce warehouse and inventory.

Conversely, direct shipment is a good choice for ecommerce sellers that have a large daily order volume and have the resources to maintain their inventory.

Ecommerce sellers can ensure a higher quality of order packaging and delight their customers with faster delivery.

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