It goes without saying that e-commerce has become essential for both brands and retailers in the fashion, pharmaceutical, DIY and other sectors. However, there are different operating models for selling online, the direct site (B2C), the marketplaces, the dropship and the affiliate.
The relationship between retailers and brands has changed. Retailers aren't placing wholesale orders like they used to, but are integrating several business models including dropshipping, marketplace, and e-concession.
It is the e-concession formula that responds to the growth needs of brands. These agreements allow brands to attack new markets more quickly and to have greater control than wholesale, primarily in terms of price management and discount policies.
In e-concessions - he specified Giacomo Antonelli, e-commerce advisor of 143 Consulting - the brand generally leaves the garments 'on consignment' and the shopkeeper (online-only giants such as Net-a-porter or Matchesfashion) retains a commission (from 20% to 30%) on the total value of sales".
They have a lot of options for interacting with brands, including dropship and curated markets. Just look at the fact that in 2021 Macy's, Nordstrom and Foot Locker they have all announced plans to invest in dropshipping operations to reduce their reliance on wholesale inventory.
Farfetch is a marketplace that also offers brands the ability to outsource B2C logistics, in other words Farfetch can handle stock and pick pack and ship operations in exchange for a commission on 8% sales.
Monetization: Farfetch monetizes the platform on the supply side by charging brands a total of 25% on the sale of each asset, with an additional 8% if retailers wish to outsource order fulfillment to Farfetch. Over 70% of the company's revenue comes from sales commissions.
The Market: Farfetch has been able to attract a strong customer segment of young men and women who consistently spend an average order size of USD 550-650.
Dropshipping is a fulfillment model that allows you to buy directly from suppliers and manufacturers who will ship the products directly to your customers.Shopify
Dropshipping is an order management model that allows you to purchase products to ship to your customers directly from the supplier. This allows you who sell online to focus on marketing and customer service rather than working on logistics and shipping.
With dropshipping, you who are the retailer "retailer" or "etailer" receive the retail price of the product you sell from the end customer, while you pay the wholesale price to your "drop shipper" supplier who ships the goods.
Differences between markeplace and dropshipping
But while the terms are often used interchangeably, there are important distinctions between dropship and marketplace. In simplified terms, the biggest differences between drop ship and marketplace are the seller of record o seller (who invoices) and who sets the price: in a drop ship model, the merchant is both the seller of record and the price decider, while in the model marketplace the vendor is the seller of record And set the price.
In the marketplace model, i third party vendors sell directly to end customers via a merchant's existing eCommerce site. When a sale is made, while the merchant facilitates the exchange, the supplier and the buyer directly enter into an agreement.
It is useful to note that the payment can take place from the customer to the merchant both directly, for example on e-bay, or indirectly, for example Amazon.
How does retail arbitrage compare to other business models on Amazon?
- Private label is when you create your own product label / brand, generally by modifying an existing product in the market. For example, you can create a higher quality garlic press than one already selling on Amazon, reproduce it from a manufacturer, and add your logo to it. It's the most common method of selling on Amazon and can be incredibly profitable, but most sellers need some capital to get started.
- Wholesale is when you buy products in bulk directly from a brand or from distributors with extra stock in order to sell on Amazon, and this also requires start-up money. This does not involve ordering products from retail stores. Wholesale is a more sustainable business model as you can replace orders every month and you are an authorized reseller, meaning you don't have to worry so much about inauthentic claims.
- Dropshipping is when you buy products directly from a manufacturer who fulfills the order and ships directly to the customer.
What is dropshipping
What is drop shipping and how does it work?
Drop shipping is an eCommerce fulfillment method in which a business does not stock the products it sells at its warehouse. Instead, when the merchant sells the product, it makes a “just in time” purchase from its supplier, and the supplier ships the product directly to the customer.
With drop ship, the merchant never actually takes physical ownership of the goods, and it doesn't have to purchase a product until it has already been sold to a customer. However, it is still the seller of record, which means it still controls the retail price and margin, promotions, and customer service. Drop ship offers more control over the portfolio while reducing working capital.
Drop ship is most commonly seen with product categories where the merchant wants to reduce the cost of managing inventory, especially for bulky items like furniture, that don't fit the business' existing fulfillment capabilities. It is also applied to those products for which procurement teams can negotiate deeper discounts by committing to a drop ship relationship versus marketplace.