UA What types of online retailers exist? How can they be classified? What sets marketplaces apart from classic online stores? What is fulfillment, and how does it differ from dropshipping? In today’s market, knowing how to sell products online has become a core competency for suppliers. And the market now includes all kinds of online retailers, each working with suppliers under very different models.
Let’s take a closer look at these models, since understanding them matters for figuring out which online retailers are worth partnering with, and which ones suppliers should hold off on for now.
So today, for food product sellers, there are essentially five types of online retailers:
- 🎁 Suppliers’ own branded online stores;
- 🎁 Classic online stores;
- 🎁 Marketplaces running the dropship model;
- 🎁 Classic marketplaces running the fulfillment model;
- 🎁 Marketplaces running the “shop in shop” model.
So how do these types of online retailers actually differ from one another? Let’s look at each one in more detail from the perspective of the business processes involved.
In their own branded online stores 🎁, the manufacturer handles every process directly: delivery management and logistics, assortment management, content management, storage, picking and packing, and running the store itself.
In classic online stores 🎁, on the other hand, all of the processes listed above are handled by the store itself.
Dropship marketplaces 🎁 — AliExpress being the obvious example — hand over important functions like content management and assortment management, as well as storage, picking, and packing, to the manufacturers themselves. Believing that manufacturers know best how to sell their own products, marketplaces of this type don’t spend time or resources on functions they consider outside their core business, and instead focus on organizing and controlling delivery, along with managing and promoting their own brands.
Manufacturers are generally happy with this arrangement, since there’s no need to sign any supply agreements — they just pay a commission on items sold through the marketplace — which makes them readily willing to work with marketplaces of this kind.
Some online retailers, Ozon being one example, operate as a classic marketplace using the “fulfillment” 🎁 model. Under this model, the manufacturer only controls the assortment, while the retailer keeps every other core function to itself. As a result, suppliers are required to work under formal supply agreements and closely monitor warehouse stock levels, so as not to get hit with higher storage fees if a product isn’t selling.
Not being able to manage content is also a limiting factor for many suppliers, and that’s exactly what the “shop in shop” 🎁 model is meant to solve — it gives suppliers control over both assortment and content, offering more flexibility. Suppliers working with a retailer under this model don’t need to deal with functions that aren’t their core competency, such as delivery organization and management or storage and packing — the retailer handles all of that for them. Incidentally, AliExpress also works with some of its suppliers under exactly this scheme.
So suppliers need to choose the right form of cooperation based on their own capabilities and, of course, their own business strategy.
