Third-party fulfillment services including warehousing, picking&packing and shipping goods to customers, are provided by third-party logistics providers, called 3PL. The sellers buy goods in bulk, then they contract with 3PL to store their goods and other aspects of order fulfillment. The sellers don’t have a warehouse but they want to keep their own inventory. Once a buyer places an order in your online store, the seller contacts his 3PL company to process the order, pick and pack the products, and ship them to the buyer.
Dropshipping is a supply chain management method which the sellers don’t need to keep the goods in stock, because the drop-shipper(normally the manufacturer or the wholesaler) will send the goods to the buyers directly. The sellers don’t spend any money on holding inventory for their ecommerce business for inventory. But the dropshipper will charge the sellers a higher wholesale price for each item.
What’s the differences between third-party fulfillment service and dropshipping?
Third-party fulfillment service is suitable for online sellers who have enough money to buy and keep inventory, and their turn over rate of inventory is relatively high, while dropshipping is a good choice for sellers who don’t have enough money to buy inventory for their online business and don’t want to maintain inventory.
In comparison, third-party fulfillment providers do more. They do kitting/assembly, value-added services, and give you more shipping method to choose.
One of the advantages of dropshipping is you don’t need to handle the packages, which reduces a lot of hassle. But this also makes the packing customization impossible. Third-party fulfillment providers can do a lot of work for the store owners before the packages are shipped, such as kitting, assembly, adding marketing inserts, because they receive products from multiple suppliers and process them together.
About carrier selection. The drop shippers send the products directly to the buyers, but most of them only cooperate with a few express carriers, and normally will not bother to find cheaper or faster shipping method for the store owners. This may not be a problem at ordinary days, but during holiday season, such as from November to January, when most of the store owners received tons of orders, that’s the time when problems emerged. Consumers will not be happy if they receive their Christmas gift in January. Third-party fulfillment providers can make more flexible shipping solutions for the store owners, because global shipping is what they do , they have more experiences than the suppliers.
Third-party fulfillment is more controllable
Inventory management has been a headache for the store owners who drop ship products from multiple suppliers, and it will be even harder when the owner gets a lot orders in a short time. The solution is to let all of the suppliers send the products to one place and deal with them centrally. Once you let third-party fulfillment providers handle your inventory, every shipped-in and shipped-out will be recorded, there is no need to contact different suppliers just to update the inventory. Another meaning of the word controllable is that the store owner can monitor the shipping status in real time. Professional inventory management software will return a tracking number for each shipped package, you can deal with the problem on time if something went wrong.
Third-party fulfillment service brings better customer satisfaction
The consumer can get different products in one package if the store owner uses third-party fulfillment service. This is particular important for the owner who sells quite different kinds of products in one store or owns multiple stores. Besides the products the consumers buy on their own initiative, the store owner can also send them gift kits on holidays with the help of the kitting service third-party fulfillment company provides. This is an effective marketing strategy which will deepen the brand awareness and increase customer satisfaction.
ChinaDivision is a full service third-party fulfillment provider, which not only provides quality fulfillment services as mentioned above, but also as controllable as your in-house fulfillment team. With multiple years of experiences in b2c business, ChinaDivision can provide much more professional and customizable services than dropshippers.
Editor’s note: This post was originally published in November 2020 and has been revamped and updated for comprehensiveness and accuracy.