Drop Shipping 

An order placed on the merchant’s online store is forwarded directly to the manufacturer who produces, stores, packages and ships the product to the customers.   

The merchant never holds the products they sell in their online store. 

• Easy to start as the drop shipper provides the products and does the shipping. 
• Enable expansion of your product catalogue. 
• Lowers overhead 
• Enables testing the viability of new products and markets before committing. 

• Difficult to customize products 
• Lower quality control  
• Difficult to establish a unique brand as the production, quality control, and shipping is handled by the drop shipper 
• Low barriers to entry make it difficult to sustain a competitive advantage  

In-house (Self-Fulfillment) 

The entire picking, packing, and shipping process is handled by the merchant without the help of a drop shipper or third-party logistics (3PL) provider. 

Suits small business with fewer SKUs and small order volumes and Large companies that have resources and more extensive facilities 

• 100% control of inventory, pick, pack, and ship process. 
• Easy and low cost if you have the time and space to store products, labels, and packing resources. 

• Time-consuming for small businesses. 
• As a business grows, it requires significant investment in warehouse space, equipment, staffing, overheads, and order fulfillment software 

Outsource (Third-party logistic = 3PL) 

A 3PL company handles the entire fulfillment process from receiving inventory picking, packing, shipping, and restocking returned products. 

• Frees up time to focus on growing the business  
• Affords bulk inventory purchases improving margins. 
• No need to invest in warehouse space, equipment, staffing, overheads, and order fulfillment software 
• Savings from better shipping rates and efficiencies 
• Easy to scale up geographic footprint with multiple fulfillment centers 

• Less control 
• The quality of service can be compromised as the fulfillment process is handled entirely by a third-party logistics  (3PL) company 

Hybrid Fulfillment 

A company that uses a mix of the above order fulfillment options is using a hybrid fulfillment model. For instance, a company may process some orders in-house, such as custom items or items that must be assembled before shipping, while also using drop shipping services for non-custom items. Some companies choose to use dropshipping for infrequently purchased items or those that don’t want to store in-house, such as large or expensive items. This method is ideal for companies that need more flexibility or if they are undergoing rapid expansion.