Pros and Cons of Dropshipping on eBay

Pros and Cons of Dropshipping on Ebay for Retailers and Those Who Work From Home

Are you a work from home eBay seller who doesn’t want to handle any stock? Are you a retailer selling on eBay with no storage facilities? Well, you’re not alone! The number of work from home sellers and professional retailers on eBay who do not hold their own stock is increasing, they prefer to use dropshipping on eBay as part of their supply chain.

• For anyone new to Internet business, the dropshipping model, where the business owner is responsible for sales while stock and shipping is completely outsourced to the supplier, is a very attractive business model because of its relatively low start-up cost.

Dropshipping on Ebay

Did you know, some eBay sellers never actually handle any of their stock? Their entire eBay operation is based around dropshipping on eBay. They list products available from dropshippers at wholesale prices, accept payment from the eBay buyer, then, and only then, place the order with the dropshipper. The dropshipper fulfils the order and ships the goods directly to the customer with the necessary documentation. They never handle or even see the goods themselves.

Although not strictly classed as dropshipping, some eBay sellers use companies such as Amazon and Play.com to “dropship” for them. The method is simple, find an item on sale below market value, usually an end of line item then offer the item for sale on eBay in the “Buy it Now” category. When sold, place the order and keep the profits. If you can make a margin as the middle man, it’s a great way of fulfilling a customers requirements without holding any stock, especially for those who work from home.

How to Find Dropshippers

A quick search of the Internet using your favourite search engine will reveal many hundreds of companies who specialise in dropshipping, some specialise in dropshipping solely for eBay, in particular those who work from home and small retail sellers.

Many of these dropshippers are reputable and some may even be eBay certified, but do your homework before committing to a particular dropshipping company. For every reputable dropshipping company there are ten scammers, be careful.

• See: Recommended Dropshipping Wholesale Suppliers.

Shipping Records

Test your dropshippers service, and start small. Place a couple of orders to be shipped to yourself or family to test their service before launching products on eBay. You can always resell the items you’ve bought, so you waste nothing.

• If you want to be an eBay power seller, you need buyers to rate your service as excellent. When using a dropshipper you lose control of shipping. If your chosen dropshipper has a poor shipping record this will affect your eBay feedback and your status as a power seller.

Payments and Fees

Many dropshippers allow new and “small sellers” to pay on an order by order basis. If you’re a power seller, some will send a monthly invoice to be paid within 30 days (excellent for cash flow).

• Note: if you’re a power seller, you really should be buying wholesale.

Before entering into any contract, check for any up front or annual fees you need to pay, (real dropshippers don’t charge annual fees for using their services) and payment terms. It’s normal to pay for each order you place with the dropshipper by credit card. Make sure you have funds available.

• If you are a new seller subject to PayPal 21 day holds or if a PayPal rolling reserve is placed on your account you’ll still need to pay your dropshipper for orders placed, so make sure you have the funds available.

Dropshipping on Ebay Advantages

The obvious advantages of dropshipping on eBay are:

• Low cost, and even more important, low risk.
• Huge amount of global traffic for your product.
• You can generate income quickly.
• You don’t have any up-front investment in stock. This makes it very easy to experiment and find out what does and does not sell.
• The business has a very low start-up costs.
• You don’t need warehousing to store your products.
• When using a dropship supplier you have no worries about shipping as the supplier handles all of it.
• Better shipping rate. Most dropshippers will have delivery charges lower than you can buy on the high street. They can negotiate with carriers based on a larger number of shipments for discount levels that you, as an individual seller, will be unable to obtain.
• Dropship suppliers often provide product descriptions. With no descriptions to write you can get your item listed quickly (this is also a disadvantage). The best advice is to write your own product descriptions.
• By outsourcing you can get by with fewer staff (maybe none) and work from home.

Dropshipping on Ebay Disadvantages

As well as the advantages of dropshipping on eBay, there are some pretty big downsides to dropshipping on eBay, these are:

• You’ll, spend more time researching the right product(s) to sell.
• You’ll be competing with many work from home retailers like yourself.
• Lots of traffic, but lots of competition on eBay, too.
• You’ll be offering the same products with the same service as many others.
• Your delivery service is wholly reliant on the dropshipper.
• You’ll be reliant on stock images and manufacturers descriptions (identical to your competitor’s listings, so difficult to differentiate). The best advice is to write your own product descriptions.
• When dropshipping on ebay, maintaining decent margins is tough to achieve. Don’t be tempted to constantly undercut your competitors. If necessary just drop the product.
• With the drop shipping business model you are responsible to the customer since he or she has bought direct from you, but you don’t have control over delivery. To be fair, neither does your drop ship supplier who will probably outsourced this to another company.
• You are responsible to your customer. If your dropship supplier packs badly and things get broken it is your job to pacify the customer and take things up with your supplier later.
• Better shipping rates? Although your dropshipper almost certainly gets better shipping rates than you can, they may not pass these savings on to you and may even charge you more. Be watchful for this scam.
• Listing Fees. Fairly hefty fees, dropshipping on eBay is far from free. The ever increasing fees have led many sellers to nickname the venue “FeeBay.” So, do you sums carefully and don’t forget to take into account both eBay and PayPal fees.

Improve Your Ebay Photographs

When ever possible try to obtain samples of the products you are selling so you can personally photograph and describe the product. Try not to be reliant on the same stock photos provided by the manufacturer as everyone else. Stand out from the crowd.

• If you’re not very good at photography, try this ebook and photography course: Trick Photography & Special Effects. I think it’s the best book on photography I’ve read.

Dropshipping on Ebay Conclusion

Dropshipping on eBay is something only experienced eBay sellers should consider.

The advantages of zero stock purchase, zero storage costs and even zero shipping costs are attractive, but the lack of personal control and the ease with which competitors can enter the market make dropshipping a very difficult business model to get right.

• The management of a dropshipping operation and the risks to your eBay feedback if something goes wrong shouldn’t be underestimated.

The biggest downside to dropshipping on eBay is that you’re not building an asset. When you create an online store that generates traffic and has repeat customers, you’re building a real business with value that you can sell to someone else. When you sell on eBay, you’re not building a lasting brand or web property with any tangible value that can be sold in the future.

My final thoughts? If you have the funds, start small, buy wholesale and build your own online store.

• See: Recommended Dropshipping Wholesale Suppliers, for my recommended dropshipping wholesale suppliers, wholesale liquidators and dropship directories.