If you are considering using drop shipping as a product source for your eBay auctions then this article might literally frighten you. Hopefully it will, because…
Drop shipping is not right for your eBay business. Now, there may be (very) rare exception to that statement. But chances are, if you are like the thousands of other eBay hopefuls planning on making money using drop shipping, you are about to do nothing but go broke and give up.
What is Drop Shipping? Drop shipping is a method of buying-and-selling that requires very little overhead investment (aka CASH) and very little effort. Sounds perfect for the entrepreneur who is both broke and lazy!
Here is how drop shipping works (on eBay).
You look through the drop shipper’s catalog to find products you would like to sell. Then, you list the products on eBay – either as auctions or buy-it-now sales. If a product sells, you forward the order on to the drop shipper who then ships the product to your customer.
You keep the profit.
The profit is the difference in price between what you pay the drop shipper and what you sell the product for on eBay. So if your drop shipper sells the iPod for $120 and you sell it on eBay for $150 you have made $30 profit. However, to determine your true profit you need to calculate your eBay fees, PayPal fees, etc. So your actual profit would be under $30.
Why is drop shipping bad for my eBay business? Let me start by saying “bad” is an understatement. Drop shipping is not bad, it is fatal. Drop shipping makes no sense in the online marketplace… Just think about it!
Drop shipping 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 Best Buy, places an order it is in huge quantity (to fill all of their stores). I’ll make you an example using digital cameras…
Best Buy wants to order 5000 XYG Digital Cameras which retail for $225 each. Best Buy plans to sell them for a little under retail at $175 each. So, they contact their wholesale distributor who offers them a price of $140 each. Best Buy places the order and everyone is happy. But…
Using drop shipping you cannot expect to get that camera for anywhere near $140. The distributor offered Best Buy the $140 price because of the quantity. At the $140 price the distributor is only profiting $6 per camera. But that is ok. One sale of 5000 units to Best Buy is $30,000 in profit. But you want just one, and a $6 profit sale is not going to do.
You have to look at it from the drop shipper’s perspective. If a drop shipper had a really hot product — why would they sell it to some small businesses for very little profit? Anyone using drop shipping is not going to sell huge quantities (or they would use wholesale)… So what is in it for the drop ship company? They could even sell direct to the public and do much better. They could charge a higher price and probably sell more quantity. Wholesalers could do this too, but remember, they do not sell one item at a time. They have a 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. Drop shipping will cost you much more than wholesale price and since eBay is a low-price marketplace, often the drop shipping price is MORE than the eBay price.
To learn more about why drop shipping cannot work for your business and to learn what will work please visit http://www.DropShippingSucks.com