If you are considering using dropshipping to
supply your eBay auctions with products then this article might change
your mind and send you in the right direction...
Dropshipping is terrible for eBay businesses!
What is dropshipping? Dropshipping is a method of buying-and-selling
that requires very little money upfront and very little effort. In
theory.
Here is how dropshipping works on eBay.
You look through a dropshipper's catalog to find products you want to
sell on eBay. Then, you post the products as auctions or buy it now
listings on eBay. If the product sells, you collect the payment from
the buyer and forward the order on to the dropshipper, using your eBay
customer's payment to fund the transaction. The dropshipper then send
the product directly to your eBay customer.
The money you have left is your profit.
The profit is the difference in price between what you pay the
dropshipper and what you sell the product for on eBay. So if your
dropshipper sells the Nintendo Wii for $230 and you sell it on eBay for
$250 have $20 in profit. However, to determine your actual profit you
need to include and deduct your eBay fees, PayPal fees, etc. So your
final profit is under $20 using the example given.
Why is dropshipping bad for my eBay business? Let me start by saying
"bad" is an understatement. Dropshipping is not bad, it is deadly.
Dropshipping makes no sense in the eBay marketplace... Just think about
it!
Dropshipping is based on the concept that you can get just one of an
item and pay near wholesale price. But if you just think about it, that
doesn't make any sense. If we look at how the wholesale industry works
it will be obvious.
The wholesale industry works on quantity. Wholesale is all about bulk.
When a huge company, such as Wal*Mart, places an order it is in huge
quantity (to fill all of their stores). I'll make you an example using
dvd players...
Wal*Mart wants to order 5000 ZIP-ZAM DVD PLAYERS which retail for $105
each. Wal*Mart plans to sell them for a little under retail at $98
each. So, they contact their wholesale distributor who offers them a
price of $86 each. Wal*Mart places the order and everyone is happy.
But...
Using dropshipping you cannot expect to get that DVD player for
anywhere near $86. The distributor offered Wal*Mart the $86 price
because of the quantity they were agreeing to purchase. At the $86
price the distributor is only profiting $5 per DVD player. But that is
ok. One sale of 5000 units to Wal*Mart is $25,000 in profit. But you
want just one, and a $5 profit sale is not going to do.
You have to look at it from the dropshipper's perspective. If a
dropshipper had a really hot product -- why would they sell it to some
small businesses for very little profit? Anyone using dropshipping is
not going to sell huge quantities (or they would use wholesale)... So
what is in it for the dropship company? The dropshipper could even sell
direct to the public and do much better. They could charge a higher
price and probably sell more units. Wholesalers could do this too, but
remember, they do not sell one item at a time. They have a completely
different business model.
So, when you think about it even a little bit - WHY would any company
sell you just one of an item for very little profit? WHAT would be the
advantage?
The answer is simple. They do not. The exception to this would be
companies that sell large items that most stores do not keep in stock
but will special order or very unique specialty items. But in the real
world; in the EBAY world, dropshipping will cost you much more than
wholesale price. Since eBay is a low-price marketplace, this means that
often the dropshipping price is MORE than the eBay price.
eBay is a very competitive marketplace and the profit margins with
dropshipping are just too thin to allow anyone to actually make a good
living with this method of product sourcing.
But even if you could find a good product with a high profit margin,
you cannot use dropshipping's main advantage. You can no longer sell
the item on eBay and then use that money to buy the item from the
dropshipper.
You see, dropshipping is about getting paid first and then using that
money to buy the product and have it shipped directly to your eBay
buyer. So, you list an item on eBay then someone buys it. Then you use
the money they paid you (though PayPal) to buy the item, which the drop
shipper then ships directly to the buyer.
YOU LIST THE ITEM
YOU SELL THE ITEM
BUYER PAYS YOU FOR THE ITEM
YOU USE BUYER'S PAYMENT TO BUY THE ITEM FROM THE DROP SHIPPER
THE DROP SHIPPER SENDS THE ITEM DIRECTLY TO YOUR EBAY CUSTOMER
eBay's recent policy changes will make it nearly impossible to start
with dropshipping. One of the major benefits of dropshipping has been
obliterated by eBay. You can no longer use the buyer's money to pay for
the product you are selling on eBay.
eBay has an new policy in place where they will start HOLDING FUNDS FOR
21 DAYS or UNTIL POSITIVE FEEDBACK IS LEFT! This applies to small
sellers, new sellers, and sellers with less than stellar feedback.
Here are the details direct from eBay's website...
FROM EBAY'S POLICY CHANGE ANNOUNCEMENT:
Occasional holds on payment
27. Which sellers will have their payments held?
In a small percentage of cases where it has been determined the risk of
dissatisfied buyers is higher, PayPal may delay release of the payment
funds to the seller until the buyer has left a positive feedback or 21
days have passed without a dispute, claim, chargeback or reversal filed
on that transaction.
To determine if a transaction may have a higher risk of dissatisfied
buyers, eBay reports to PayPal a number of factors, including but not
limited to:
Seller's % Positive Feedback in the last 30 days
Seller's Detailed Seller Ratings in the last 30 days
Final price for the item
Shipping & handling fee
Seller's eBay tenure as an eBay member
Seller's total number of Feedback
29. When will PayPal release the eBay item hold?
PayPal will release the hold when the earliest of the following occurs:
the buyer leaves positive feedback,
3 days after confirmed item delivery* or
21 days without a dispute, claim, chargeback, or reversal filed on that
transaction.
* This applies to US domestic transactions that are shipped by USPS or
FedEx and either (i) use PayPal shipping labels to ship items or (ii)
upload tracking information to PayPal via the transaction details page.
So, now assuming you are a newer eBay seller (and if you're established
why on earth would you be considering dropshipping) you can not use the
money they pay you to complete the transaction as it will be held.
You must use your own money to complete the drop ship order as the
funds will not be released for 21 days. Seeing as this "pay only after
you sell" feature was one of the best things about the dropshipping
method of product sourcing there is really no reason whatsoever to use
dropshipping any more.
While this might have you upset. I think it is a blessing in disguise.
This will undoubtedly put a dent in the business of the handful of
dropship sourcing companies that have made a fortune preying on eBay
business hopefuls.
Dropshipping doesn't work on eBay. It didn't before and it definitely
will not now!
If you are interested in buying products in a method similar to
dropshipping (but that actually can help you profit) please visit my
anti-dropshipping website at http://www.DropShippingSucks.com
Good luck and no matter what you try remember... If it sounds too good
to be true, it is!
Article Source:
http://www.articlesbase.com/ecommerce-articles/
dropshipping-will-not-make-you-money-on-ebay-330506.html
About the Author
Christopher Bernard is an eBay Power Seller and
Expert Wholesale & Drop Ship Product Sourcing Specialist with
Over 9 Years Experience.
Christopher Currently Operates the Anti-Drop Shipping Website at DropShippingSucks.Com.
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