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E-commerce vs Dropshipping: All You Need To Know About The Business Model

The ability to buy and sell online. Internet  marketing and business transactions that involves the use of mobile data. Have you ever heard of Jumia, Konga, Ali baba and co? Well, e-commerce has become one of the most profitable online business today. Gone are the days when nature made it compulsory for man to sweat through the nose before he could eat. The reality on ground is revolutionary based. Internet has changed everything. Every man’s wish is freedom of financial boredom. Yes,  education is the key but it’s no longer the situation of without it you are a failure.

Today, it’s very much possible to create a business that gives you that liberty to own the life style of your choice by sitting at home while the cool comfort of your air-condition. With this, it wouldn’t be an exergeration to say that internet is the mother of all online sources of income, drop shipping inclusive.

This post will be sharing more light on both e-commerce and drop shipping with the sole aim of reviewing the qualities possessed by the duos as well as the potentials and benefits to enjoy from them.

To avoid confusion and easy digestion, discussing each one after the other will be the best option. Careful attention from the beginning must have acquainted you with the fact that we started this work with an intro to e-commerce.

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One don’t need to be a business expert before knowing that e-commerce has reshaped the ways marketing in recent years. E-commerce is often referred to the sale of physical products online.

It can also be described as any kind of commercial transaction that is facilitated through the internet. Compared to the traditional form of marketing, both the seller and the buyer must be physically present with the goods at their disposal before trading can take place.

Kudos to the guy named Phil Brandenberger who on the 11th of August 1994 used his master card to buy sting’s Ten summoner’s tales through the internet for the rate of 2.48 dollars. This was an eye opener to the reality that the sales of market goes beyond physical meetings.

7 Classification of e-commerce according to parties involved


Marketing online can be done in different ways; 

  1. Business to consumer (B2C): This is just when a business company or firm sells goods or services to an individual consumer. E.g buying a wrist watch from jumia. 
  2. Business to business (B2B): Here we have business to business transactions. E.g slack, a platform for communication between remote businesses and xero, a cloud based accounting software for business. 
  3. Consumer to consumer (C2C): This is the easy and frequent lifestyle we live these days. Maybe anytime you are ‘broke’, you may decide to sell one of your property at a reasonable income to meet your needs. Instead of looking for who to buy,  you can snap,  video and post whatever online to draw other’s attention. The bottom line is that you can sell goods to another consumer through online platform like eBay. 
  4. Consumer to business (C2B): When a consumer sells his own products or services to a business or organization. E.g a photographer licenses their photo for a business to use. 
  5. Government to business(G2B): The G2B e-commerce model happens when the government provides companies with goods and services. Government procurement, data centers and e-learning are all part of this model. 
  6. Business to Government(B2G): In this model, companies and businesses provide goods and services for the government agencies at the federal, state and local levels. The procedures is always that businesses bid for contracts by submitting proposal to agencies and the contracts are granted based on the proposal. 
  7. Cosumer to government (C2G): The services consumers rendered to government are inform taxes,  health insurance, electronic bills or request information regarding the public sector they are engaging in.

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    How to start a successful e-commerce business in Nigeria  

8 Examples of e-commerce

  1. Retail: this is the sale of a product by a business directly to a customer without any third party or middleman. 
  2. Drop shipping: this is another form of e-commerce whereby the manufactued products are shipped to the consumer by a third party. 
  3. Wholesale: the sale of products in bulk often to a retailer who in turn sells in pieces to the final consumers directly. 
  4. Services: this is a skill or set of skills provided in exchange for compensation. The service provider’s can be patronized for an amount to be paid for. 
  5. Physical products: this form of e-commerce deals with any tangible goods that need inventory to be renewed and demands to be shipped physically to customers as sales are made. 
  6. Subscription: the automatic recurring purchase of a product or service on a regular basis until the subscriber chooses to cancel. 
  7. Crowd funding: this is like collecting money from consumers before the arrival of products. This will enable the seller raise capital necessary to bring the wanted products into market. 
  8. Digital products: This refers to all items that are in digital format including e-books, softwares, graphics and virtual books.

How to start an E-commerce business

Generating product ideas:

Product research is of utmost importance here. This will just be like a ‘bulb’ that shines the road if you’re doing business to succeed. In this, you are to consider the best products to sell.

The process of selection can be very difficult and that is why it is so important to brainstorm and write whatever comes to your brain down.

Then you can try to browse other shops to see what they can offer and the products they promote. One can also ask for advice from friends and families as well.

All these processes are followed to project and bring on board the products that people around can not do without.


Evaluating products ideas

After conceiving your idea, the next is to examine which to be filtered or removed. Find your niche that best suit you. Look out to supply niche products that are undeserved by larger players. Focus on finding an interesting category of niche that will make your store unique. You also have to think about a marketing strategy before launching your store. You may change it but you must have a plan to begin with.

Different marketing channels are good for different products. Once you pick the product, you have to figure out which marketing channel is best for it. Put products in your store that will be attractive to your buyer for the entire year. Avoid seasonal products like Christmas decorations, easter baskets.  It may reduce your sales cycle. Avoid copying other people’s brands and try to build your own. 

Finally, check whether the product you are about to sell is already popular in the market. If so try to cross it out of your plan. 


Launching the e-commerce store:

Launching of an e-commerce store should begin with creating the store. To make sure the launch of the store is complete, make do with the following checklist;

(a). picking your store name: In doing this, whatever name you are going for must be random and simple. This is necessary because you will need to find an available internet address (domain) and it’s easier to find an available address when there are several words.

(b). Register for a free account: Before it used to be that one had to get a server, upload an e-commerce system to it, get the service of somebody to change it according to your needs and also pay for maintenance. This is not so anymore as we now have so many softwares that have simplified the process. With this, you can just create your store in just a few clicks and all the servers and maintenance are taken care of. This is less time consuming, effective, fast and less expensive. E.g Shopify.com is one of those softwares. 

(c). Choose your store theme: check Shopify theme store and select a theme. Although there are many of them but try choose the one that requires to make it look like the way you want. 

(d). Add your logo: this is the first thing to be seen by your visitors. So there’s need to have one that is attractive and appealing. 

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(e). Have your standard pages ready: This is the section where you things like; About us, terms and conditions, privacy and returns policy, shipping and delivery information and contact us. 

(f). Add a payment gateway 

(g). Adjust shipping settings 

(h). Set up your billing information 

(I). Add custom domain: this is kind of optional but it’s worthy to note that having a custom internet address provides social accountability when you start advertising your site which can increase your sales. 

(4). Find suppliers and add products to your store: this is just like drop shipping. Check out for reliable suppliers eg Alibaba, aliexpress to do business with them. 

(5). Launch your first ad campaign: the only and best platform to promote your product to millions around the globe is facebook.

 

 5 Advantages of e-commerce Business 

  1. Cheap and affordable: the birth of e-commerce platform technologies has become very easy and affordable to set up and maintain and e-commerce stores with a low overhead. Merchants no longer have to spend a fat and robust budget on advertisement .
  2. Wide market: E-commerce gives the room to communicate or get in touch with numerous customers within the country and the world at large. Be it far or near, your customers can purchase anytime they will. 
  3. Customer insights through tracking and analytics: Whether you are sending visitors to your website via SEO, PPC ads, there’s a way to track your traffic and customer’s entire user journey to get insights into keywords, user experience, marketing message, pricing strategy etc. 

(4). Increased sales with instant gratification: Businesses that are into the sale of online goods enjoys the privileges of quicker delivery to their customer’s satisfaction which helps to increase sales. 

(5). Fast response to consumer’s demand: e-commerce also allows merchants especially those into drop shipping to respond to market, demands and trends in a very fast and accurate manner.

5 Disadvantages Of e-commerce Business

  1. Digital fraud: this is one very serious problem faced by the digital businesses through credit card fraud, charge backs that leads to the loss of revenue, penalties and bad reputation can arise. 
  2. Network issues: this is one business that can not survive where there is lack of internet access. Both merchant and customers need internet to operate. The absent of it can cause lot of damages. 
  3. Price and product comparism: With online shopping, consumers can compare many products and find the lowest price. This tend to force many merchants to compete on prices and reduce their profit margin. 
  4. Lack of IT security: killers of businesses call hackers are great threats to e-commerce businesses. They steal customer’s information from their data base. This may bring some kind of legal issues and distrust of customers on the company. Sometimes the companies also suffer from the hacks as well. 
  5. Lack of physicality: Some consumers prefer to buy from stores where they get to see and touch the quality of the desired product. This is because most products seen online are not what are usually delivered. Most people feel cheated and deceived at the end. 

Note: E-commerce is really deep and sure has lots of potentials in it. From all that has been said. The obvious truth remains that the relationship between e-commerce and drop shipping is like that of a mother and child. 

Drop Shipping Business Model (All You Need To Know)


Drop shipping is a model of e-commerce. It transactions does not require the seller storing or shipping their inventory. It is the supplier or the manufacturer that does that. This simply means that one can actually selling products online and the supplier or manufacturer will ship them. At the end, the seller gets paid. 

The success of drop shipping lies in the excellent marketing and branding. The product design doesn’t really carry weight. The profit in it is the commission gotten for the sales of an item.

Drop shipping is a retail fulfilment method. But the the difference between it and the standard retail model is that the seller does not stock or own inventory. Rather the merchant purchases such inventory from the third party (manufacturer /suppliers) to satisfy demand.

5 advantages of drop shipping

  1. Little start up: it is very much possible to go into this business without having that worry of putting in thousand of dollars. Little amount of money is enough. With drop shipping, you do not need to purchase any goods unless sales have been made and paid for by the customer. 
  2. Easy to start: Running e-commerce business is easy because you don’t deal with physical products while operating drop shipping. You worry not about paying for warehouse or it management, packing or shipping your orders, fire outbreak, tracking inventory for accounting reasons. 
  3. Easy to test: Drop shipping is a useful fulfilment method for launching a new store and for business owners on the look out to test the willingness and demand of their customers towards additional products categories. Eg. Accessories or new product line.
  4. Wide selection of products to sell: it is possible to display many products on your online store at zero cost for your potential buyers to see and make their purchases. 
  5. Flexible location: No need to look for one particular spot to start up your business. Drop shipping business can be run from anywhere internet connection is available. The only barrier lies in your inability to communicate with your customers.

    4 disadvantages of drop shipping business 

  1. Unreasonable suppliers: Drop shipping can not perform without their suppliers. They are just like partners. Both shipping, timeliness, products quality rest on the shoulders of the suppliers. This is to say that without diligent performance of the suppliers, business may end up falling. To this end, one needs to be careful because they are lots of fake suppliers who take advantage on inexperienced vendors. Don’t just partner any supplier you find on Google.
  2. Mistake in the supply of demand: The truth is that as a merchant, you have no control over the supply chain. Even at that, when fulfilment errors occurs like over selling or outdated stock levels, it’s often the merchant who bears the loss, even when the supplier is at fault.

You can overcome this by using product tracking software to manage and control your marketplace channels. 

  1. Shipping complexities: Working with multiple suppliers amount to the fact that the products on your online store will be sourced through a a number of different drop shippers. This may complicate your shipping costs. Example; a customer may place an order for three items and they are from separate suppliers. The three shipping charges will be bore by you and it is not wise to pass the burden on to the customer. 
  2. Getting overwhelmed: Drop shipping is not as easy as it seems. Although the stress of shipping and storage is off but there’s a huge task in branding, advertising, social media, content strategies, customer engagement, choosing the product price etc.

Conclusion:

e-commerce is one of the lucrative online business model that can actually generate you a lot of money with consistent efforts. Many have made hundreds of thousands of dollar by leveraging drop shipping business model as well. If you find this post very important please don’t forget to share!

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BIlal Abdullahi

Bilal Abdullahi is one of the fast rising professional bloggers in the West African Region. He is a Nigerian, the founder of Campus Entrepreneurs Hub (cehub.com.ng) an inbound online platform that helps individuals to maximize their full potentials to become successful entrepreneurs and bloggers. He is an SEO expert, and also holds certificates in 3 different courses (Affiliate Marketing, Digital Marketing and Graphics Design), also a content creator and Facebook Ads expert. Currently working with six trained and dedicated team members who share the same vision and likewise passion.

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