Is Drop Shipping A Scam? Can You Make Money DropShipping (Video)?

Is Drop Shipping a Scam? Can You Really Make Money Dropshipping eBay, ebid and Amazon?

Hi, my name is Philip King and welcome to this video where I’m answering the questions, is drop shipping a scam and can you really make money dropshipping to ebay, ebid and Amazon.

Introduction

To make money dropshipping you need goods to sell. So, before you can start drop shipping, you need to find wholesale suppliers and distributors. For many, the solution to this problem is drop shipping aggregators who are essentially middlemen between you and the manufacturer or wholesale suppliers and distributor.

An Experiment

First I’d like to propose an experiment for those who really want to make a very good income buying wholesale and selling online, either through your own website or sites such as eBay, ebid and Amazon.

The experiment is this:

• Find a manufacturer or wholesaler, not a drop shipping company, and ask them if they will take your orders on a drop shipping basis.
• For example, you will place an order with them for 100 items, send them 100 addresses and they will print your documentation, which will be included with each item, then pack, insure and ship the items to those 100 addresses.

What do you think the manufacturer or wholesaler will say?

Well, those people who have experience buying wholesale will tell you this, the wholesaler will tell you where and how far you can stick your order. Wholesale suppliers are simply not interested in this kind of deal. They want to sell, in bulk, to you, the retailer. They don’t want the hassle and responsibility of shipping to consumers. That’s the responsibility of the retailer – you.

Would You Pay to Enter a Supermarket?

Just think of it this way, no wholesaler would ask you to pay them a monthly fee for the privilege of buying from them. That’s like your local supermarket saying they want you to pay an entrance fee for using their store, even if you decide not to buy anything. Would you shop there? Of course you wouldn’t, you’d go somewhere else to get your groceries.

• No real wholesaler will charge you a fee for the privilege of buying goods. Though most will require you to have a minimum turnover.
• Real wholesalers will pay you with incentives to buy their goods.

The Retail Cycle

Lets look at a typical retail cycle. A typical retail cycle would be:

The manufacturer sells many hundred or thousands of items to the wholesaler who then sells these items to their retailers, who then sells the items to the consumer.

Just image a kettle manufacturer. They make thousands of kettles per year which they sell to wholesalers. The wholesalers then sell the kettles to retailers in batches of 50. The retailer then sells individual kettles to the consumer.

So the retail timeline is:

• Manufacturer > Wholesaler > Retailer > Consumer

Now lets look at the retail cycle where a drop shipper is involved.

Again the manufacturer sells their goods to the wholesaler, but now the wholesale suppliers sell the goods to the drop shipper who then provides their drop shipping service to the retailer who ultimately sold the item to the consumer.

So the retail timeline is:

• Manufacturer > Wholesaler > Drop Shipper > Retailer > Consumer

Can you see what’s happening? The drop shipper is simply a middle man. They buy from the manufacturer or wholesale suppliers and on your behalf, pack and ship the products you have sold to your customers – for a fee.

At each of these stages your profit is reduced. So the more stages there are between the manufacturer and the consumer the less profit there is for the retailer, that’s you. Everyone wants to make a profit on their part of the transaction. So an item that is sold by the manufacturer for £1 may cost the consumer £10.

Who are Drop Ship Suppliers

So who on earth are these companies who say they are wholesale, drop ship suppliers? Are they simply scam artists?

Well, yes a lot of them really are scam artists, so beware when dealing with them.

• Beware the drop shipper who hikes the wholesale price and charges exorbitant fees. These people really don’t have your best interests at heart, they’re just out to milk you for every penny you have. You’ll be left with virtually no profits from your sales.

On the other hand, there are dropshipping companies out there who are not scam artists, but you have to realise that, if you deal with those companies, you are not really buying at wholesale prices. They are an additional expense.

Why Have a Drop Shipper?

So why have a drop shipper? What are you paying the drop shipper to do?

Basically, the dropshipping company is just another middle man who you are paying for their services. These services consist of, finding products for you to sell, and the handling and distribution of the products on your behalf.

So if you are happy paying the additional administration costs and extra fees associated with dropshipping, fees such as increased wholesale prices and monthly charges for the privilege of using their service, then go ahead and use them.

In Conclusion:

• If you have to pay for the privilege of buying merchandise then you are not dealing with a real wholesale suppliers.
• Your competitor, who buys from the real wholesale suppliers will always be able to undercut your prices.
• Beware the drop shipper who also sells products on eBay, ebid, Amazon, etc. They will always be able to undercut your prices. It is impossible to compete with them if you are using their services.
• Beware the drop shipper who hikes the wholesale prices and charges exorbitant fees.

My recommendation. If you find a good drop shipper and you’re happy to accept all the additional charges associated with the deal then fine, go with it, but remember those retailers dealing direct with the wholesale suppliers or manufacture will always have a better profit margin than you.

If you’re just starting and don’t have the finances to buy wholesale, then buy liquidated stock at local auctions or even eBay. Also, try buying your stock from your local charity shop and car-boot sale markets.

Just remember, bottom line, you have to make a profit. The closer you can get to a products source, that’s the manufacturer, the more profit you will make.