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Internet and Businesses Online > Auctions > EBay Dropshipping Explained
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Article rating : 0.00, 0 votes. Author : George Chernikov
Unless you have been living under a rock for the past few years, you know what eBay is. You have probably also of people making millions via this online auction website, people becoming full-time eBay sellers and using eBay as the sole source of their monthly income. How do they do it? There are many strategies for eBay success that, while interesting and definitely profitable, are entirely outside the scope of this article, save for one –- dropshipping.
Dropshippers are businesses that sell goods are wholesale prices and deliver them directly to the address you specify. For you as an eBay seller, this means two things –- that you can offer your product to eBay buyers at below retail prices, and that there is no need for storage space, as the product will be shipped directly to the end customer.
Let us illustrate the point by using the example of a dropshipping business selling clocks. Let’s say the retail price of the clock is $200, and you manage to find a dropshipper that sells it for $150. For you as the eBay seller, this means that you can sell the product for $175 –- enough to make a profit, but still below the retail price. But it gets better – you do not actually need to own the clock when you setup the eBay auction! In fact, another advantage of dropshippers is that you can sell products that you do not actually have, so long as the dropshipper still has them in stock. This means that you are free to experiment and test-drive the market, since even if your product does not sell, all you will lose is the eBay listing fee.
Now suppose that everything goes well and the clock in question sells. You receive your payment and then –- and only then! –- do you proceed to place an order with the dropshipper, asking the item to be delivered directly to the end buyer’s doorstep. After shipping costs, you are probably looking at about $20 pure profit –- it might not be a big deal, but remember that, throughout this entire operation, the biggest amount of money you risked at any point was the listing fee!
To summarise, dropshippers offer eBay sellers a number of definite advantages – they let you sell the product at below retail prices, eliminate the need to buy the product beforehand (and thus risk losing money if it does not sell), reduce the need to have storage space of your own and, finally, grant you access to overseas markets. Under normal circumstances, you will be hard-pressed to make a profit selling heavy items that need to be delivered overseas (the shipping costs are likely to be prohibitive) –- by using dropshippers, however, you can buy the product from a store located in the same area as the end buyer.
What’s the catch? After all, if dropshipping is a sure way to make millions in a month, why do I even bother writing this article instead of spending all my free time becoming an eBay millionaire? Yes, unfortunately, there is a downside to using dropshippers, and it lies in the fact that you have very little control over what the dropshipper delivers and when. After all, remember that, in the final analysis, the objective of the dropshipper is to take your money; they do not care whether the right product arrives at the right time so long as you pay them. Furthermore, since you never actually get to see the product you are selling, you effectively have to trust the dropshipper when they claim that it is in good condition and will be delivered on time.
So suppose the dropshipper that you deal with proved to be fraudulent –- your buyer is furious with you and with the worthless product they got, and you are furious with the dropshipper for ruining your reputation. Sure, you can write them an angry e-mail and promise never to deal with them again, but the fundamental problem is that it is your reputation that will suffer more. Your end buyer does not and should not care about whether the product came directly from you, from a dropshipper or from Santa Claus –- they paid the price you charged and they have every reason to expect a quality product. So while the dropshipper will lose your business (and probably find someone else to trick), you are the one that will be stuck with a negative trader feedback – and believe me, on eBay, you don’t want to have any of that if you can help it.
However, all is not bleak in the world of dropshipping. The good news is that there are reliable dropshippers out there. The bad news is, however, that most of them are already taken, meaning that a huge number of eBay sellers are already buying their products to sell on eBay. As explained above, due to the nature of the business, reliable dropshippers are quite rare, so the ones that are trustworthy already have an army of eBay sellers working with them. Here basic economics comes into play – the more people are selling the same product, the lower the profit margins are. For you, this means that you do not want to compete with thousands other eBay sellers, as you will have to lower your price to make your product look more attractive.
So how do you make money with dropshippers, then? Broadly speaking, there are two main ways of doing it –- you can either find a reliable dropshipper that few people have heard of (meaning that you won’t be competing against too many eBay sellers), or you can find a niche market to operate in (where competition will be minimal). In both cases, success with dropshipping involves plenty of research, both in terms of finding the right business and finding the right market.
About the Author
George Chernikov is a firm believer in the future of e-commerce and is convinced that the Internet represents a level playing field where new enterpreneurs can unleash their creativity to achieve massive commercial success. He maintains a number of websites, one which deals exclusively with dropshipping and can be found at http://yourdropshippers.com/.
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