Want to Make Money and Be Successful on eBay? Say No to Drop Shipping!!!

With a registered user database of about 147 million people (as of March 2005), it will make you wonder what there is in eBay that makes it very popular among buyers and sellers alike. Well, the answer is really easy. On the part of the buyers, eBay provides them with a lot of products that they can never find locally. On the part of the sellers, eBay provides them with a lot of opportunities to make money, whether the seller is an established businessman or a newbie.

There are really a lot of ways to make money on eBay. Manufacturers of a certain product can sell their produce on eBay. And so can retailers sell products on their inventory on the online auction site. And today, even people who don't have products to sell are also making business on eBay. How? Through drop shipping.

So what is drop shipping and why is this selling method very popular among the new eBay sellers?

Drop Shipping

Drop shipping, or drop shipment, is a process of selling a product that is neither the seller's own nor existing on his stock or product inventory. Instead, the product is owned and kept in stock by a manufacturer or wholesaler, called the drop shipper. Once a customer orders a product from the seller, the seller would forward the customer's order and shipment details to the drop shipper, who then ships the product directly to the customer.

And how do the seller profit from this scheme?

The difference between the retail price, or the price by which he sold the product to the buyer, and the wholesale price, or the actual price of the product, becomes his profit.

Now, drop shipping has slowly been gaining popularity in eBay, and that popularity goes with several reasons. Among the more popular reasons why new sellers would often resort to drop shipping schemes are:

• Reduction in Inventory Cost

Without the need to actually buy the product and keep that product in stock, the seller saves a lot on inventory cost. Further, the seller won't have to shoulder the cost of picking and pulling the product from the wholesaler, packing the product and shipping it to the customer.

• Transparency of the Drop Shipper

In most cases, drop shippers wouldn't mind if their products are not labeled with their own brand name, unlike in retailing where the manufacturers keep the right to name their products. As such, the seller can claim the products as his own. Many customers won't even know that the product never actually passed into the seller's hand.

Now, all these things may sound very advantageous to the seller. This is the reason why many eBay newbie would instantly be attracted to this scheme. A deeper look on drop shipping, however, would reveal its negative side.

The Disadvantages of Drop Shipping

Like every other selling method, drop shipping is not all positive. Drop shipping also has a lot of disadvantages; so many that it may just cancel out all the advantages there is to it.

• Inventory

It may save the seller a lot if he does not maintain the inventory of the products himself, but it may also cost him a lot of negative feedbacks and complaints if he was able to sell a product that is actually out of stock. This is not a rare occurrence when using the drop shipping scheme, as the seller is usually uninformed about what products are still in stock and what products are out of stock.

• Shipping

In any drop shipping scheme, the seller has no control over the shipping of the product from the wholesaler to the customer. But since the customer would not know that the seller's products are from a drop shipper, the seller would have to shoulder all the blames and complaints if ever the drop shipper delays the shipping. This would be another blow to the eBay business of the seller because this would only mean another negative feedback.

• Product Returns

In retail businesses, the retailer would usually return a defective product to the wholesaler and it will be replaced with a new one. Things would be different for drop shipped items as the product doesn't actually pass your hands. In case of defects, the buyer would return the product to you and you would have to shoulder the refund, unless you want a negative feedback.

• Pricing

This is being cited by many as the biggest disadvantage of drop shipping. Drop shippers would usually give a particular product a higher price than its true wholesale price. This prevents the seller from giving the product a competitive starting price on eBay auctions.

Selling products in eBay through drop shipping offers a lot of advantages. A closer look at the scheme, however, reveals that it also has a lot of disadvantages. But what selling method does not have?, you may ask.

Well, all eBay selling methods have advantages and disadvantages. But in the case of drop shipping, the disadvantages appear to outnumber and outclass the advantages.

Drop shipping may offer you an easy way to start your business in eBay. In the long run, however, this scheme may bring you more losses than success. So if you want to make money and be successful on eBay, avoid the drop shipping scheme.