The Down Side Of Using Dropshippers On Ebay

Robert C. Potter 

Ok, let me just say right up front that I am not against drop-shipping! I love the concept. If you are dealing with a particular wholesale drop-shipping distributor that is serving your Ebay ambitions well, then hold onto that company with bonds of steel, for truly good drop-shippers are hard to find! However, if you have never used a drop shipper for your Ebay auction, then you might want to take a step back and let me provide you with some “points to ponder.”

Drop-Shipping sounds like the utopian business model. No up front investment in inventory. You don't have to carry packages to the Post Office, United Parcel, or Fedex. All you have to do is set up your own business, auction, or retail website and advertise the products that the company provides. Once the orders come in, you forward it to the drop-shipper and they send the product directly to your customer.

But, the devil is always in the details. While using drop-shipping companies might be good for a stand alone e-commerce website, there are more than a few reasons why using a drop-shipper as your only product source for the Ebay auction arena might not be a good idea.

Back ordered products. The reality is that drop-shipping companies run out of product and will be back ordered. Ebay bidders purchase product in “real time.” They are under the impression that the item you auction, is the item they bought, not a product that is subject to shortages.

One or two customers might be understanding about the situation, but most will not. If you happen to run out of product on a regular basis, then your negative feedback rating will go through the roof, and your reputation will suffer.

One way to combat shortages is to buy a pallet of product in advance, and have the drop-shipper store it in their warehouse so that you are assured of an ample supply. This method sort of goes against the idea of Drop-Shipping (buying the product in advance) but if you are selling on Ebay, you would be best served by employing that method.

Also, if it is possible, find a drop-shipper in your area, or within a comfortable traveling distance. If you run into any supply or shipping problems, then you could be on hand to go and visit the facility and remedy any logistic concerns.

Fees. Some dropshippers will charge you a sign up, or entry fee of about twenty five to fifty dollars just for the privilege of selling their product. You are also charged a shipping & handling, or “processing fee” for sending the product to your customer.

The “price for processing” can range anywhere from seven to twenty dollars per item, depending on the type of merchandise you are selling. These expenses, plus Ebay fees, can take a big chunk out of your bottom line. Finding a product that can bring you a profit, as well as offset these types of expenses, in some cases, can be an exercise in futility.

Circumventing your customers. While I do not believe that this is a pervasive practice among drop-shipping companies, anecdotal evidence has suggested that some unscrupulous enterprises can cut you out of the sales loop. Not only could they easily substitute your return address for their company logo, but there is nothing to prevent them from selling directly to your list of customers.

Market saturation. One of the largest wholesale drop-shippers in the county is the B&F System, BNFusa.com. A lot of Ebayer's jumped on board, and started selling their products, one in particular, called Giovanni Navarre leather jackets. At first, it was a profitable item. After a while, everyone started selling the same product. Too much of the same supply, creates market saturation, ultimately destroying profit potential for the seller.

The Giovanni Navarre leather jackets are still being sold on Ebay today, but I doubt that they still provide a very profitable return for the seller. Even though B&F carries over 500 products in 14 different categories, they are intimately familiar to the Ebay auction seller. You could probably make a great profit from just about any B&F product if you were to sell them off line, or out of the auction arena.

However, when a company becomes too well known to the general public it becomes almost impossible to make money from products that have flooded the marketplace. In addition to finding a drop-shipper who is close to home, it might be a good idea to find a DS company that is not well known to the Ebay market, or who's products have not seen scattered all over cyberspace.

These days, however, It is hard to find drop-shippers that will cater to the smaller seller. Most will find it more profitable to sell in volume than by the piece. The larger forfillment houses and wholesalers are used by retail catalog operations. To get involved with the larger operations, you would have to have a huge customer base with tremendous sales volume.

If you still want to pursue drop-shipping as a source of supply for your Ebay auction, then I would suggest that you read other opinions, and become as educated as you can about the drop-shipping company you do business with.

A good and inexpensive start to finding drop-shipping companies is the Drop Shipping News. Remember, that when it comes to Ebay auction selling, “own what you sell.” Never leave customer service, or your feedback rating in the hands of other people!