Dropshipping is a popular e-commerce business model where sellers don’t keep any inventory in-house and don’t need to worry about the costs of storing products or paying for shipping. Instead, they partner with a dropship supplier who fulfills the customer’s orders on the seller’s behalf.
But which segment of the market is dropshipping aimed at? Is it for business-to-business (B2B) or business-to-consumer (B2C) buyers? Read on to find out.
Understanding B2B and B2C
B2B (sometimes referred to as business-to-business) and B2C (business-to-consumer) are the two major categories of commerce.
- Business-to-Business (B2B): In this type of commerce, two or more businesses work together in an agreement or partnership to facilitate transactions e.g. Wholesaler and retailer
- Business-to-Consumer (B2C): In this type of commerce, businesses sell a product or service directly to the consumer, cutting out any other intermediaries e.g. Amazon and eBay.
Dropshipping – B2B or B2C?
The dropshipping business model is a hybrid of the two types of commerce.
The seller is the one who interacts directly with customers. They are the ones responsible for marketing and promoting the products, managing customer service inquiries and collecting payments. The supplier is the one who fulfills the orders on the seller’s behalf.
This hybrid model means that dropshipping is both a B2B and B2C business. It’s a B2B model in the sense that there is a partnership between the supplier and the seller. But it’s also a B2C model in the sense that the seller directly interacts with the customers, who are the end users of the product.
To summarise, the dropshipping business model is a unique hybrid of both a B2B and B2C model. The supplier provides the fulfillment services for the seller, who is then able to focus on marketing and customer service to make a successful business.
What are the benefits of B2B dropshipping?
- Low Setup Costs: Dropshipping is an inexpensive business model since all you need to launch a business is an internet connection and a laptop – no warehouse or inventory necessary.
- Low Risk: Since there is no inventory investment, there is little financial risk associated with running a B2B dropshipping business.
- Low Overhead: Operational and administrative expenses are much lower with dropshipping since you don’t need to hire staff to manage inventory and fulfillment.
- Flexibility: B2B dropshipping businesses can offer a wide range of products since they don’t need to keep them in stock. This also makes it easier to scale up or down as needed and adapt to market trends or customer demand.
- Geographic Reach: Dropshipping allows you to reach customers around the world, as orders can be placed and shipped directly from your supplier to your customer.
What is the difference between B2B dropshipping and direct-to-consumer dropshipping?
B2B dropshipping involves selling products to other businesses who, in turn, resell the products to their customers. Direct-to-consumer dropshipping involves selling products directly to the consumer, usually with no intermediary. B2B dropshipping allows a business to target a specific market, while direct-to-consumer dropshipping allows a business to target customers across a broad consumer base.
What are the advantages and disadvantages of B2B dropshipping and direct-to-consumer dropshipping?
- Lower risk of stock holding as the dropshipper takes care of the management of inventory and goods.
- Lower shipping costs as multiple goods from multiple suppliers can be combined into one shipment and pooled together.
- Ability to access goods from multiple suppliers and distributors in one convenient location.
- Cost effective as there is no need for holding any stock or acquisition of large numbers of goods.
- Greater availability of products, as the dropshipper is able to access a vast array of suppliers and products.
- Quality control of goods can be difficult to carry out.
- Higher cost to the seller due to payment processing charges and commissions/fees.
- Difficulty establishing relationships with suppliers and distributors.
- Longer delivery times as goods must be shipped from the dropshipper to the customer.
- Lower financial investment as there is no need for inventory or warehouse storage.
- Chance to reach customers worldwide as goods are shipped directly from the supplier to the customer.
- Greater flexibility for the seller, as orders can be shipped quickly without the need for a warehouse.
- Lower shipping costs, as there’s no need for an expensive shipping and handling service.
- Higher profit margins as goods are typically priced lower than retail prices.
- Lower reliability as goods often come from overseas suppliers.
- Lower selection of products as the selection will only cover what’s offered by the supplier.
- Increased risk of fraud and payment processing issues.
- Higher fees due to payment processing charges and commissions/fees.
In either case, you need reliable suppliers and trustworthy supplier. With Globallyfulfill, you can be assured of genuine products at the best possible price. These dropshippin sourcing and fulfillment agents also offer other services such as quality checks, dedicated logistics and custom packaging.