Each year, the popularity of online business is growing rapidly, and more entrepreneurs are aiming to enter or expand their presence in the ecommerce market. One of the key steps on the path to a successful launch and scaling is choosing the right fulfillment model. Even if you can handle inventory, packaging, and shipping on your own in the beginning, outsourcing often becomes more cost-effective as order volume grows.
Both dropshipping and 3PL allow you to delegate fulfillment to a third party, helping to optimize costs. However, each approach differs in terms of control, structure, and financial investment.
Below, we’ll compare dropshipping vs 3PL and analyze the situations in which each model might be the best choice for your business.
Let’s start with dropshipping. Dropshipping is a third party fulfillment model where the retailer does not need to physically store the product in a warehouse. Instead, they pass the order directly to the supplier or manufacturer, who then ships the product to the customer. In other words, the retailer acts as an intermediary between the product source and the end customer. This allows the retailer to focus fully on marketing and sales, while all processes related to storage and shipping are handled by the supplier.
How it works in practice:
- The customer places an order through the online store or retailer’s platform.
- The seller forwards the order and shipping details to the manufacturer or supplier.
- Once the manufacturer (supplier) receives the order information, they prepare, pack, and ship the product directly to the customer on behalf of the retailer.
- The seller receives payment from the customer for the product and keeps the difference between the wholesale cost and the retail price.
- The supplier invoices the retailer for the product and services, charging according to the previously agreed terms.
An obvious advantage of dropshipping is the low cost of entering the market. You don’t need to rent warehouse space or purchase inventory in advance. This option is ideal for startups and beyond. Established companies use this model to test the market before purchasing or manufacturing large quantities of products.
Despite the ease of getting started, dropshipping still offers limited control over product quality, the shipping process, and potential issues with product availability.
3PL (Third-Party Logistics) is a model where a business outsources its logistics operations to a third party. This involves a specialized company that manages storage, packaging, and shipping of goods. The seller retains ownership of the products, purchasing or manufacturing the goods before transferring them to a partner logistics company for storage. All inventory management and order fulfillment processes are also handled by the third-party organization.
3PL providers offer a wide range of services, including order processing, warehousing, packaging, shipping, and returns management. As with dropshipping, the business does not have to worry about logistics and operational aspects. Instead, it can focus on key areas such as marketing and product development.
How it works in practice:
- The seller purchases products in bulk from a supplier or manufactures them independently and transfers them to the 3PL partner.
- The 3PL provider organizes storage and inventory management in their warehouse.
- The retailer lists the products on their website and sets the prices.
- The customer places an order.
- After receiving payment for the product, the retailer forwards the order details and delivery address to the 3PL partner.
- The 3PL partner packs the order and ships it directly to the customer.
As for the advantages of 3PL, the primary benefit is full control over order fulfillment, including packaging and shipping. This is particularly important for companies that want to offer a high level of service to their customers. However, using 3PL requires more investment compared to dropshipping. You need to purchase products in advance and pay for the partner’s services.
Both dropshipping and 3PL serve the same goal — to simplify order fulfillment for entrepreneurs. The models share several common advantages that make logistics outsourcing a cost-effective solution.
- Outsourcing logistics processes: Both dropshipping and 3PL relieve businesses from the need to organize and manage logistics on their own. All tasks related to storage, packaging, and shipping of orders are handled by third-party services.
- Reduced storage costs: In dropshipping, the seller completely avoids storage costs, while in the case of 3PL, the logistics partner takes over warehouse management. In both cases, the business is relieved from making large investments in renting and maintaining warehouse space.
- The ability to focus on business growth: Both models involve outsourcing logistics tasks. Entrepreneurs can focus on growing their business, improving products, and increasing sales, without being distracted by warehouse operations.
- Flexibility and ease of scaling: Both approaches allow businesses to respond quickly to changes in demand. As order volume increases, entrepreneurs can expand their partnerships with suppliers or 3PL operators without the need for complex internal logistics restructuring.
Although both models aim at outsourcing fulfillment, they differ significantly in terms of control, costs, and flexibility in management. Understanding these differences will help you choose the strategy that will bring the most benefits to your business.
4.1 Startup capital
Dropshipping allows you to start a business with minimal investment. You don’t need to purchase inventory in advance or rent warehouse space — all storage and logistics costs are handled by the supplier or manufacturer.
In the case of 3PL, the business needs to purchase inventory in advance and store it at the logistics partner’s warehouse. This increases the initial investment but also allows for potentially higher margins through bulk purchasing. This model is better suited for companies that are ready to invest in inventory and seek greater control over stock management and service quality.
4.2 Ownership of goods
A dropshipper typically does not own the product. They simply forward the order information to the supplier or manufacturer, who owns the product and takes full responsibility for it.
In 3PL, the seller purchases products in bulk and becomes the owner of the goods. In this case, they are responsible for the product until it is shipped to the customer. This approach provides greater control over inventory and product quality but requires additional investment and resources for purchasing and storing inventory.
4.3 Control over inventory and quality
In dropshipping, the seller fully relies on the supplier for storage and product quality. This means the entrepreneur cannot directly influence the inventory process, inspect the quality of products before shipment, or control product availability. If there are quality issues or product shortages, they may face customer complaints with limited ability to resolve these issues quickly.
In the 3PL model, the business purchases products independently and stores them at the logistics partner’s warehouse. This provides more control over inventory. The seller can inspect product quality, monitor product availability, and prevent supply disruptions. Additionally, using 3PL allows the seller to control the packaging process and improve the customer experience. This is crucial for companies aiming for a high level of service and flexibility in managing their brand.
4.4 Delivery speed and order management
A logistics partner often provides the flexibility to manage the order fulfillment process and use optimal delivery options. Modern 3PL operators utilize automated order management systems, enabling them to ensure fast and accurate processing and reduce potential delays.
In dropshipping, delivery can take longer as it is entirely dependent on the supplier’s capabilities. You cannot guarantee precise shipping and delivery times, which may impact the customer experience.
4.5 Branding
Third-party 3PL companies typically allow businesses to customize packaging and add branding elements. This helps strengthen the connection with the customer and create a unique customer experience.
Dropshipping, in this regard, is less flexible, as the seller uses the supplier’s standard packaging. This limits the opportunities to create a branded experience, which can impact how customers perceive the brand and reduce its memorability.
Dropshipping and 3PL serve different business needs. Therefore, to make the right choice, you first need to define your company’s goals: do you want to save on storage and delivery, expand your product range, or do you need more control over logistics and a unique customer experience?
5.1 Who is Dropshipping Suitable For?
Dropshipping is most attractive to beginner entrepreneurs who want to enter the market quickly without large financial investments. The model allows them to work with a wide variety of products without worrying about storage or inventory management. It’s a good option for businesses that want to offer a diverse range of products but can’t afford to purchase and store the entire assortment. For established businesses, dropshipping also offers the opportunity to test a new product and assess its demand in the market without the need to purchase and maintain inventory.
5.2 Who is 3PL suitable for?
The 3PL model is better suited for companies that have reached a certain level of growth and aim to increase control over quality, delivery speed, and logistics processes. 3pl vs dropship, 3PL allows businesses to independently control product quality and inventory levels, as well as offer customized packaging to enhance branding.
Both models can be combined. For example, dropshipping is a convenient start for a new business with minimal investment. Once the company has explored the market and begins to receive consistent orders, it can purchase products in bulk and transition to a 3PL business model. Fulfillment-Box is perfect for such solutions. We offer both high-quality 3PL services and support for dropshipping.
For dropshipping, Fulfillment-Box offers:
- Supplier inspection in China;
- Product quality checks;
- Consolidation of products from different suppliers into one shipment;
- Removal of supplier information from the order.
We will receive the goods from the supplier, inspect them, and ship them directly to the end customer. At the same time, we will exclude the supplier from the contact chain to ensure the privacy of your business.
Our 3PL services include:
- Storage of goods at one of our warehouses;
- Order picking, packing, and shipping;
- Returns processing;
- Additional services upon request.
All inventory management processes are fully automated. You will have complete control and transparency at every stage—from inventory management to delivery.
With the right approach and careful selection of partners, you can create an efficient and flexible fulfillment system capable of meeting the demands of even the most discerning customers. Regardless of the chosen model, Fulfillment-Box will help you build a stable and reliable logistics infrastructure, ensuring a high level of service and supporting your brand at every step.
1. What are the advantages of dropshipping?
Dropshipping allows businesses to start selling with minimal investment. You won’t need to purchase products in advance or rent warehouse space. This model is also convenient for testing new product categories and expanding the range without significant financial risks.
2. What advantages does 3PL offer?
3PL partnerships provide businesses with access to higher logistics standards, including the ability to offer fast delivery, customize packaging, and manage large order volumes. With control over inventory and product quality, 3PL is especially beneficial for brands aiming to increase customer loyalty and improve service quality.
3. For which companies is dropshipping the most advantageous?
Dropshipping is suitable for startups, small online stores, and companies with a limited budget that need to minimize initial expenses. It is also relevant for businesses testing the market or working with small order volumes.
4. Which companies benefit most from 3PL?
3PL services are more suitable for medium and large businesses that are ready to invest in inventory and need advanced logistics capabilities. It is also the optimal choice for brands aiming to strengthen control over logistics and customer service quality.
5. Dropshipping vs 3PL: how to choose the fulfillment model?
When choosing between dropshipping and 3PL, it is important to evaluate your budget, logistics control needs, and expected order volume. Dropshipping is ideal for starting a business with minimal investment, while 3PL helps optimize logistics and scale the business. You can also combine both models: start with dropshipping and transition to 3PL over time for greater control and growth.
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