Comparing Dropshipping vs Ecommerce for New Entrepreneurs

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Running an online store can be a lucrative way to earn extra income or replace your full-time job. Nevertheless, before you can reap the rewards, you must choose a suitable business model for your shop. There are many options available, and the decision can be overwhelming. For example, should you start a dropshipping business, and if so, how to find dropshipping products? While both models fall under the umbrella of ecommerce, they have distinct differences that affect how your business will operate. In this article, we'll compare dropshipping and ecommerce to help you better understand their differences, advantages, and challenges.

As you’ll see, there’s much to consider when choosing between dropshipping and ecommerce. One way to make your decision more manageable is to focus on the numbers. Shophunter's Shopify sales tracker helps you do just that by giving you a clear picture of your ecommerce store’s financial performance so you can determine your next steps, whether that’s scaling a dropshipping business or moving to a different model.

Are Dropshipping and Ecommerce the Same Thing?

Before going into the definitions of each business model, it is essential to point out that dropshipping is another form of e-commerce. E-commerce covers all electronic commerce, although there are several differences.

What is E-commerce?

E-commerce refers to selling products and services over the Internet. It covers all online business transactions. The top six e-commerce business models are dropshipping, private labeling, print-on-demand, third-party fulfillment, in-house fulfillment, and drop servicing. According to Statista, global retail e-commerce sales will hit $8.1 trillion in 2026!

How Does E-commerce Work?

Regarding e-commerce vs. dropshipping, the traditional e-commerce way of doing business is to store large quantities of your products at fulfillment centers or a warehouse and ship them out whenever you make a sale online. To sum up, here is how traditional e-commerce works compared to dropshipping in 2024:

You buy or manufacture more significant quantities of your product.

Store the product at a warehouse or fulfillment center.

Pack and ship each product whenever you make a sale in your store.

Your chosen delivery company sends the product to your customer.

What are the Advantages and Disadvantages of E-commerce?

Like most other business models, e-commerce has advantages and disadvantages. Let’s focus on them a little bit:

Advantages

Low Overhead Costs: E-commerce saves you money on utilities because you can sell products online without a physical shop.

Global Reach: The internet allows e-commerce store owners to reach customers from all over the world.

Data Tracking and Analysis: The best e-commerce platforms have built-in data analytics tools that allow you to track vital business metrics.

Quality Control: Handling inventory in-house allows you to verify product quality and streamline the order fulfillment and delivery process.

Inventory Control and Management: Handling inventory in-house makes it easier to be on top of things.

Disadvantages

Shipping and Handling: E-commerce stores handle every aspect of the business. This can be time-consuming and costly.

Competition: E-commerce is very competitive, with many well-established global players. This can make standing out difficult.

Customer Service, Complaints, and Returns: E-commerce business owners handle everything, which can be incredibly challenging and resource-consuming.

Capital Intensive: Investing in website development, marketing, product sourcing, warehousing, etc., can be capital-intensive.

Time-Consuming: Depending on business size, e-commerce requires substantial time and resources.

What is Dropshipping?

Dropshipping is an e-commerce fulfillment model where you do not physically stock the goods or handle the order fulfillment process as a dropshipping store owner. Instead, dropshipping store owners transfer customer orders and shipment details to a dropshipping supplier who fulfills and ships the said order. The dropshipping supplier could be:

Manufacturer

Retailer

Wholesaler

Dropshipping agent

When working with white or private label dropshipping suppliers, you can ask them to ship your products in branded packaging. As a dropshipping business owner, your core role is to market your products, make sales, collect customer payments, and then forward the orders to your dropshipping supplier, who will fulfill and ship the order directly to the customer.

How Does Dropshipping Work?

The dropshipping fulfillment process works as follows:

Choose a product to sell.

Find a good dropshipping supplier for it.

Build an online store using Shopify or other Shopify dropshipping alternatives.

Advertise your products.

Purchase them from the supplier one by one when you make a sale.

Pay the supplier their share and collect your dropshipping profits.

What Are the Advantages and Disadvantages of Dropshipping?

Like e-commerce, dropshipping has advantages and disadvantages you should know:

Advantages

Low startup costs: Dropshipping has a low startup cost since many dropshipping suppliers have low minimum order quantity requirements, and you can start an online store with little capital.

Dropshipping stores are easier to set up: Most dropshipping platforms and e-commerce marketplaces that support dropshipping have easy-to-use systems that make getting started easy.

Saves time: Dropshipping stores outsource the entire inventory management, handling, and shipping process to a dropshipping supplier, thus saving time.

It’s easier to experiment and scale: Since dropshipping has no inventory and inventory management, it’s easier and cost-effective to experiment with your product volume to match growing demand.

Disadvantages

Oversaturation: Because dropshipping has become very popular, niche markets can get saturated. That's why it's so important to do ample market research.

Low-profit margins: Because dropshipping stores are a go-between between the customer and dropshipping supplier, your profit margins may be lower than with other e-commerce fulfillment models.

Difficulty building a brand. Building a solid dropshipping brand can be challenging when you only control some aspects of the business.

Lack of quality and product control. Dropshipping store owners rely on a dropshipping supplier. This gives them reduced control over the product and brand quality.

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Side-By-Side Dropshipping vs. Ecommerce Comparison

Dropshipping and ecommerce share many similarities that make them both exceptional ways to sell products online:

They're Both Online-Based

First, both dropshipping and ecommerce businesses operate from online stores. For instance, an ecommerce site that sells clothes may produce those items under its brand. That same site could also offer dropshipping services to other resellers.

They Both Sell Goods to Customers

Both ecommerce and dropshipping involve selling products online. For example, an ecommerce store sells products it produces or purchases from a supplier. In comparison, a dropshipping store sells products from a third-party supplier and never handles the merchandise directly.

Both Have Worldwide Reach

An example of this could be a US-based ecommerce or dropshipping store that sources products from a China-based manufacturer. This store owner could hold some inventory for local order fulfillment while their dropshipping supplier fulfills all other orders.

Both Don’t Require a Physical Storefront

In both cases, but especially with dropshipping, you do not need a physical storefront. With ecommerce, a physical store is optional.

Dropshipping vs. Ecommerce: The Key Differences

There are several fundamental differences between dropshipping and ecommerce:

Inventory Management

As discussed earlier, dropshipping stores have minimal inventory management needs. You, the dropshipping store owner, do not handle products physically. Your dropshipping supplier handles and ships the merchandise.

Some suppliers can also brand the product and packaging at your request. With ecommerce, you are responsible for purchasing and managing inventory, including product development in some cases, fulfilling orders, shipping products to customers, restocking products, etc.

Product Control

In dropshipping, you have limited control over the product quality because you do not directly handle the product in your day-to-day business life. Instead, your dropshipping supplier handles everything related to the product, which gives you lower control over product quality. On the other hand, with ecommerce, you have much more control over product quality because you have an in-house inventory sourcing and management system.

Capital Investment

With ecommerce, you need more capital to buy your products in bulk or wholesale, manage your stock and warehouse, fulfill and ship orders, and so much more. This all requires capital.

On the other hand, unlike a purely ecommerce store, a dropshipping store has lower capital requirements since you do not need to handle or manage stock, at least not in the traditional sense. With dropshipping, you only need to hold the product periodically to check for quality. With ecommerce, you’ll have an in-house order fulfillment system requiring you to handle your products as you fulfill every order.

Profit Margins

We’ve previously covered everything you would need to know about dropshipping profit margins. Fundamentally, dropshipping can have lower profit margins than conventional e-commerce and hold inventory because of supplier fees. Bulk buying often offers better product prices than on-the-fly purchases from a supplier. This reduces the profit margins, especially in highly competitive niches and industries.

Time Investment

As business owners, time is our most valuable resource. Thus, we need to use it well. Dropshipping requires less time than ecommerce and holding inventory because your dropshipping supplier handles everything related to the product. This includes:

Storing and managing inventory

Fulfilling and shipping orders and, in some cases, customer service, including returns.

In comparison, eCommerce requires substantial time allocation to manage inventory, fulfill orders, and handle customer service.

Risk

The dropshipping fulfillment model is not as capital-intensive as other ecommerce models. Thus, it is less risky because most of your upfront costs will go into building your store, ordering samples, and marketing campaigns.

On the other hand, a purely ecommerce business is much more capital-intensive because your capital investment has to cater to inventory, setting up your ecommerce store, warehousing, and inventory management. Thus, ecommerce is riskier than dropshipping, mainly because it’s not as easy to pivot and change products fast because of warehoused inventory.

Ecommerce is More Than Just Selling Products

E-commerce includes services and other things like SaaS. Some examples of ecommerce websites are:

Auction and retail websites

Online marketplaces

Subscription-based services

Social media

Any business that can conduct its business on the Internet and sell products and services for profit technically falls under the ambit of ecommerce. In contrast, dropshipping is only about selling products from dropshipping or third-party suppliers.

Scope and Scale

Ecommerce is much more scalable and covers a broader scope because it includes B2B, B2B2C, B2G, B2C, C2B, and C2C models. In contrast, dropshipping is mainly B2C and C2C.

Data Analytics

Ecommerce metrics and data analytics are readily available because most ecommerce platforms have built-in tools that analyze the data. Dropshipping data consolidation is challenging to track and analyze, especially when working with multiple suppliers or platforms, using different analytic solutions.

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Which Model Should You Choose?

When starting an online business, you have a couple of different options. You can start a dropshipping business, which allows you to sell products online without handling any inventory or shipping. You can also start an e-commerce business, selling products directly to consumers and managing the fulfillment process yourself.

We've outlined two business scenarios to give you an idea of which model would work best for your business. One that would be a good fit for dropshipping and one that would be a great fit for ecommerce. Read both scenarios to see which sounds the closest to your specific situation.

Dropshipping

Imagine a budding entrepreneur, Alex, who wants to start an online business with limited funds. Alex is drawn to a trending niche like eco-friendly products but doesn’t have the capital for inventory. Dropshipping is perfect for Alex, allowing experimentation with different products and markets without the financial burden of stock.

Why Dropshipping Makes Sense for This Business

New Entrepreneur with Limited Capital: Ideal for individuals like Alex who want to start an online business but lack the funds for inventory.

Experimenting with Market Trends: Perfect for testing various products in real time to gauge market interest.

Flexibility in Product Offerings: Allows for quickly adapting to changing consumer preferences without inventory constraints.

Low-Risk Trial for Business Concepts: Minimizes financial risk while exploring the viability of different business ideas.

eCommerce Fulfillment

On the other hand, Sarah has been crafting unique, handmade pottery for years. She has a loyal customer base and a clear brand vision. Ecommerce is the way to go for Sarah. It allows her to control the quality of her products, build her brand, and cater to her niche market, even though it requires a more significant initial investment and inventory management.

Why Ecommerce Makes Sense for This Business

Established Businesses with a Specific Niche: Suited for entrepreneurs like Sarah, with a unique product line like handmade pottery.

Need for Brand and Quality Control: Ideal for those who want to maintain high standards in product quality and customer experience.

Has Long-term Business Vision: Best for those aiming to build a lasting brand with a loyal customer base.

Ready for Higher Investment and Risk: Suitable for those who can manage the initial investment and are prepared to handle inventory-related risks.

How do you decide which type of business to run between eCommerce and dropshipping? The answer is quite simple. You don’t have to guess, you don’t have to think about which one will make you happier, or things like that. All you have to do is look at the facts and your current state.

Ask yourself the following questions:

Do I have my product to sell that I can brand and grow for years to come? (Yes or No)

Do I have plenty of money to risk without knowing if I will succeed? (Yes or No)

Do I have enough time to manage a warehouse, fulfill and package orders, and run a big business? (Yes or No)

Can I allocate more than half of my day to a new business? (Yes or No)

If the answer to most or all of these questions is Yes, you are much better off starting an eCommerce business.

If the answer to most or all of these questions is No, then you will thank the gods for starting a dropshipping business.

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ShopHunter aims to streamline product research and reduce the risk of investing in low-performing items, whether you're:

A dropshipper

A Shopify store owner

Someone looking to enter the eCommerce space

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