Often the term dropshipping and multivendor marketplace model (also known as B2B2C Marketplace) are used interchangeably, however, both of them have distinct differences. Understanding these differences will help you decide on the model that suits your circumstances. In fact, businesses can choose both and adopt a hybrid approach.

Multivendor Marketplace

Marketplaces can be easily understood as Amazon, eBay, Shopee, and Lazada where third-party sellers have a direct relationship with the customers. In the multivendor marketplace scenario, sellers and vendors sell directly to customers via your e-commerce site. You can quickly onboard them in a dedicated Seller Centre, and they can upload products, set prices, manage their own inventory, and process order fulfillment.

As a platform operator, you can manage the sellers, approve product listings, and handle refunds. Enterprise-level multivendor marketplace enablers like CLEARomni also support distributed order management for a variety of fulfillment workflows. With pre-set order splitting and complex fulfillment workflows, your store enables Click & Collect (BOPIS), Ship from Store, endless aisles, and dropshipping fulfillment methods.

A multivendor marketplace enabler with an embedded product information management system is able to support multi-lingual product information, information completeness scores, and version control.

Advantages of Multivendor Marketplace

• Expanded Reach

  Brands and retailers with a multivendor marketplace platform are able to reach a wider audience. Different groups of sellers/vendors with different products attract their own specific customer groups to one single e-commerce platform. The business can explore international markets when onboarding worldwide vendors along the journey.

• Greater Flexibility & Agility

  Brands and retailers can quickly scale up their presence by onboarding more sellers/vendors in the market based on demand.

• Reduced Risk

  Business does not need to invest much in product inventory and storage. All these would be handled by the sellers themselves. This can greatly reduce potential risks with holding products on hand and prior warehouse rental or building costs.

• Efficient Business Focus

  While most operations can be handled by the vendors, brands and retailers can focus on creating traffic flow and controlling sellers. Meanwhile, businesses can have more time for product development and marketing.

Dropshipping

Dropshipping is a fulfillment model often used by start-up businesses as it doesn't require capital to own the product. Merchants just need to place the order with the sellers after receiving a customer order. Drop-shippers don't need to keep any physical products in their store. The physical ownership of the goods is always with the seller itself.

Merchants can create products and set delivery conditions in the store so that when a customer creates a new order, it will automatically redirect to the seller or supplier. Using a dropshipping model offers more control over the portfolio compared to the multivendor marketplace model. The merchant has full control over product price, margin, promotions, and customer services. Usually, customers have no direct relationships and don't know the suppliers of the products they purchased.

Advantages of Dropshipping

• Brand Identity

  Drop-shippers can have a strong brand identity without the presence of the actual supplier. The products and promotions are fully managed by the merchant. You can decide on brand message, design, and positioning while optimizing your website. You can also choose only the assortments that suit your brand identity to be listed on your site.

• Revenue Control

  The merchant can set the final price of the products on the online store. This means the merchant can decide on the profit margin of each product. They can also have flexible promotion events applied to all products in the store. Revenue can be affected based on the team's negotiation power with suppliers through dropshipping relationships.

Key Differences Between Multivendor Marketplace and Dropshipping

Technical Considerations: Shipping Costs

Using Shopify: By default, Shopify will assume a single origin only for each shipment. As a multivendor marketplace or B2B2C marketplace, the shipping costs are calculated on the basis that the order is being picked, packed, and shipped from a single location regardless of your warehouse or a vendor location. You need to consider the shipping costs after adding all products from several vendors, which potentially costs more than the order profit. Charging all of these costs to your customers might cause abandoned carts due to high shipping costs.

This is where advanced marketplace enablers like CLEARomni make a difference, offering sophisticated distributed order management that can calculate and display accurate shipping costs based on actual fulfillment locations.

Choose the Right Model for Your Business

Both multivendor marketplace and dropshipping models offer unique advantages depending on your business goals. The multivendor marketplace model is ideal if you want to create a platform connecting multiple sellers with customers while earning commission on transactions. The dropshipping model is better suited if you want to maintain complete control over your brand identity and pricing while minimizing inventory investment.

The good news? You don't necessarily have to choose just one. Many successful e-commerce businesses adopt a hybrid approach, offering both marketplace seller products and dropshipped items to maximize product selection and revenue opportunities.