Unlike buying items wholesale to list and sell on eBay, drop shipping on eBay requires zero investment in stock. Whilst this seems like an attractive proposition is it a good long term business model for eBay ? Or is it only suitable for short-term experiments ?
On eBay sellers normally buy items wholesale from a supplier, apply a profit margin, list them on eBay, take care of the shipping and then sit back and watch the money roll in ! The problem with this approach is that it requires a certain investment in stock which may or may not sell at the price that you need in order to get the profit that you want. If you’re just starting out selling on eBay you need to be particularly careful that the product that you’re going to sell is actually in demand otherwise you could end up out of business before you even start !
Although there are various eBay research tools to estimate demand for an item in my opinion it’s better to actually try and sell the item to assess the demand. Some items may be sensitive to price, particularly if there are lots of competing sellers selling the same item, but the sell through rate can be very sensitive to the design of the listing. By design I don’t mean the HTML template used (although that can help to an extent) but more the quality of the pictures, the description, whether you use examples of your feedback in your listing etc.
But how can you do this without buying stock which may not sell ? The solution is to look for a supplier who is willing to drop ship the item for you.
For those that don’t know, a drop shipper is a supplier who will take care of the packing and dispatch side of the sale for you in return for a share of the profit. So, in a normal eBay sale the seller buys stock from a supplier which they then list on eBay. When it sell they pack it and dispatch it to the buyer. But in the case of a drop shipping arrangement the seller will list the item without actually having purchased any stock. Instead the drop ship supplier will provide them with stock photographs and some descriptive text (which it is best to adapt). Once an order has been received and paid for, the customer details are passed to the drop shipper who then sends the customer their item.
On the face of it this appears to be an ideal setup – you don’t hold any stock and they have the hassle of posting the item but it comes at a price – literally! The downside to drop shipping is that the supplier charges a higher price than if they were to supply the item wholesale. This difference covers the cost of holding stock, picking, packing and shipping the item as well as dealing with any returns and could eat into your profit margin if you’re selling items that are very competitive.
To be honest, in some markets (cell phones and accessories for example), it may even be impossible to compete with the established sellers if you try and drop ship. However, if you’re prepared to sell the item at below cost as an experiment to see if you can attract sales then you can use that knowledge to determine your maximum buy-in price when you source the products that you want to stock and sell. Just don’t do it for too long or you’ll start off your eBay selling career already in debt !
So where can drop shipping work effectively ? Drop shipping really works best in relatively non-competitive, niche markets. This is because, to be successful at drop shipping, you need to one of very few other people selling the same item on eBay. In fact, ideally, you want to be the only one !
If you’re interested in drop shipping then a quick search on Google will turn up plenty of companies offering drop shipping services but my advice would be avoid these. By the very nature of their business, most of these will be selling the same item to dozens or maybe even hundreds of people just like you. All you’ll end up doing is competing with them in a race to the lowest profit margin.
If you want to use drop shipping and want to be successful at it you’ll need to find companies that sell products that are in-demand on eBay, have a good quality product and competitive prices but which don’t already sell on eBay or even online and, ideally, don’t supply to anyone else !
If that sounds like a tall order, fear not !
To find businesses like these take a walk around your local town to see what the smaller businesses sell. But what are you looking for ? Well you’re NOT looking for businesses that simply retail other people products – most regular high street shops in other words.
What you ARE looking for are businesses that make products themselves. These could be arts and crafts businesses, small publishers, clothing producers etc.
Once you’ve found them check to see if they are selling on eBay already. If not, do they have a website ? If they do, does it sell their products or simply promote them ? If they don’t sell online you may be able to persuade them to let you supply you with their products on a drop ship basis. But only if there’s demand for the items. In the blog next post I’ll look at ways of assessing potential demand for the items that you’ve found.
In the meantime, if you’ve you’ve succeeded or failed with drop shipping on eBay why not share your experiences with others by leaving a comment ?
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I’ve been drop shipping on eBay for a few months now and it is going really well.
The products I’m selling are unique and in some cases I’m the only one selling them. It is a great way to test the market or run an eBay business that means you don’t have to hold stock that may not sell.
The only down side I’ve found so far is the time it takes for your items to arrive to the buyer, and also that buyers just don’t fully read listings and the messages you send them.
My items are dispatched from the warehouse within 24 hours of me placing the order, but they are taking up to a week to leave Hong Kong or China by registered mail.
You can allow for this delay in your estimated delivery times but I also find that buyers today are just not reading through listings fully and being aware of the delivery times of items before the commit to their purchase. I clearly state estimated delivery times at least twice in my listings. I also clearly state these delivery times in each message I send out during the buying process, this is three messages.
But overall it is a great way to get items to sell. You can make some great profits if your items sell, and if they don’t you aren’t stuck with stock that won’t sell.
“You can allow for this delay in your estimated delivery times but I also find that buyers today are just not reading through listings fully and being aware of the delivery times of items before the commit to their purchase. I clearly state estimated delivery times at least twice in my listings.”
This is one of my biggest beefs with ebay. I do just as you do. (Although I am not drop shipping, but I am shipping from Canada. Due to customs inspections into the US, parcels can take 10-14 days to arrive.) So, someone buys an item, and I ship the next day. Within 24 hours of ordering. I notify the buyer by email that I shipped along with the time and date. The parcel arrives 10 days later and I end up with far less than a 5 “star” rating for Shipping Time and sometimes even with comments in the feedback about “slow shipping”.
In “our” case, we (sellers) get penalized for something we have NO control over and those penalties can affect our ebay standings, and even our ability to participate in special offers from ebay.
There is one on right now where you can list up to 100 items per month – regardless of the starting price – and pay NO listing fees. (Ebay Canada and US.) However, if your “star” rating is below 4.5 average for the past 12 months, you are NOT illegible for the freebie.
I also have less than 5 stars for my shipping & handling charges. This one really stumps me! Almost everything I’ve sold in the past year has been “FREE SHIPPING”. If I can’t get 5 stars with free shipping, I don’t know WHAT gets it from some buyers. (Pay them to take the item?)
Sorry if this seems off topic but, going to drop shipping would definitely be slow and most of the companies I’ve seen offering it are in China. I can probably offer free shipping with some of the D.S. companies but the potential 21+ days delivery to Canada or the US would be sure to kill my Shipping Time star rating more than it is right now. It seems that a lot of buyers just don’t read the listing OR, they don’t know how the star rating system works. (Or they don’t care. THAT is really sad.)
Rick
SUGGESTION:
Based on the comments above (one of them mine) – I might start up a new ebay account JUST for drop shipped goods. That way if the star rating isn’t all that great, it doesn’t affect my main account. And if I can think of something this quickly, I’m sure there are hundreds if not thousands of sellers on ebay that have done the same thing already.
Found and received some top class items from a Chinese seller on ebay; relisted some items from same seller; only to find he’s now got no items for sale (at time of listing he had about 70 of the one item); had to send out apologies and free gifts; other items from one and two weeks ago may not arrive.
So a big mess up, then, but I’m not put off – I think there’s a lot of scope, and many more reliable sellers out there.
The post above speaks of sourcing products locally, and I think that’s an excellent suggestion which I’ll try and keep in mind. Rick mentions having more than one ebay account – did not know you could have – is it legal. so to speak?
@ Mark – You can have more than one eBay account as long as you have different email addresses attached to each one. So yes it is perfectly fine!
@Rick – I do exactly as you you have suggested. I have one eBay account that is my personal one and another just for drop shipping. That way I keep items I ship and have some control over away from the drop ship stuff that I can’t control.
I also find it funny that I get low DSR scores for shipping and handling charges when I offer free shipping. Recently I changed my listings to have a small postage cost which covers the registered postage. I figure that if I’m going to get a low DSR for shipping and handling charges I may as well get an extra couple of dollars for it.
I think that a lot of what happens on e bay is for buyer and not the seller. The buyer controls us and they get cheap deals. That sucks.
I’ve been dropshipping on eBay since 2006 and have only acquired inventory this year. I found 3 very reliable and highly customer-service oriented suppliers after much research and 2 that didn’t work out. I only sell products from true wholesalers who do not compete with me online on their own sites.
I am now trying to stock 1-2 at least of each of the drop shipped items so that I do not every have to worry about an “out of stock” problem after someone has paid. I have only had that occur once back in December, 2007 and never want to have to deal with it again. To avoid that, I’ve had to spend a lot of time watching inventory and being in touch with the suppliers. I pull my listings down when the items are out of stock and relist them when they are back in. By stocking 1-2 of each, I can ship when the supplier is out and then take down the listing.
They are all in the USA, though 2 of them deal with imported products. I have established very good relationships with them, having personally met the folks at two of the three.
I have much competition in one of the niches; however, I do not sell at $5 over cost. I provide superior customer service and sell at MSRP with free shipping in the Continental USA. It has not been a get rich quick process but I am now back and forth between Bronze and Silver PS on eBay and have just this year branched out to sell on other venues.
My business took off when eBay introduced the 35 cent fixed price listing format in 2008 as most of my items sell in the $50-$100 range.
I have found the best places to obtain suppliers are trade shows and WorldWide Brands. I’ve approached some local hand crafters just recently and am hoping to get something going with one of them. I’m waiting on samples and prices.
One other thing I have done is to bundle products. You can use stock photos and a good photo editor to make composite photos for “sets.” Most of the competitors will be selling just from the shipper’s photos for the products exactly as they offer them.
I would not have been able to create an online business had it not been for drop shipping as most of the years prior to this, I had to be in and out of hospitals with my daughter who has a chronic illness. Her ultimate management of that illness has also been a contributing factor in my ability to work with inventory of my own.
I reached eBay Silver PS last holiday season while dropshipping 95% of the items I sold and maintaining 100% positive feedback with DSRs that fluctuate between 9.4 and 5.0. eBay’s decision to apply automatic 5.0 DSR to free shipping should make them even better.
I have also maintained a top seller rating since it began.
I am not trying to brag here, but to say that if I can do it, anyone can, and I could not have done it without suppliers who had a drop ship program.
Interesting comments there, jan, especially the mention of keeping at least one or two of each item within easy reach.
I look forward to the day I find a reliable drop shipper for silver jewellery items – some sellers on ebay are not entirely accurate in their descriptions, and searching the net has been fruitless.
Mexican jewellery appeals to me but it’s difficult to find a supplier with a facility for small orders. I will, though, persevere, and your words are encouraging, jan, so hope one day to make drop shipping a regular money earner for me.
I found this post quite good.
To my opinion, Drop shipping is a great way getting to know a particular niche or market, so you can test the waters and then buy supply.
But I also want to strength the idea that drop shipping can be a good business – if in a small not overly competitive niche, and if you are exclusive to that drop shipper.
exclusivity is key if you lack the whole margin which wholesale prices can give you
I just started the full ebay selling services and selling my own stuff for years. I think if we do it right, this turn key service will help people make money on stuff they don’t use or want. I think people are afraid or uncomfortable with the process of starting up and maintaining a eBay Business.
@Rick
You probably have realized it by now, but FREE SHIPPING on eBay automatically gets you a 5 star rating on S&H. In addition 1 day shipping does the same for SHIP TIME if you print your labels through eBay.
eBay is still a huge marketplace and a good place to start selling whether you drop ship or sell your own things or consign for others. I use 3 different eBay accounts for (1) my store where everything is new and fixed price and business purchases, (2) auction style listings and (3) personal shopping. It has worked well for me, and I’m just getting into Amazon.