The Down Side Of Using Drop-Shippers On Ebay!

Ok, let me just say right up front that I am not against drop-shipping! If you are dealing with a wholesale drop-shipping distribuor that is rendering you outstanding products and service, then hold onto that company with bonds of steel, for truly good drop-shippers are hard to find! However, if you have never used a drop shipper for your Ebay auction, then you might want to take a step back and let me provide you with some “points to ponder.”

Drop-Shipping sounds like the utopian business model. No up front investment in inventory. You don’t have to carry packages to the Post Office, United Parcel, or Fedex. All you have to do is set up your own business and advertise their products. Once the orders come in, you forward it to the drop-shipper, and they send the product directly to your customer.

But, the devil is always in the details. While using drop-shipping companies might be good for a stand alone e-commerce website, I just don’t think that it is a good method for selling products on Ebay. In this article, I want to provide you with a few reasons why using drop-shipping companies in the auction arena might not be a good idea…

Back ordered products..The reality is that drop-shipping companies run out of product, and will be back ordered. Ebay buyers purchase product in “real time.” They are under the impression that the item you auction, is the item they bought, not a product that is subject to shortages. One or two customers might be understanding about the situation, but most will not. If you happen to run out of product on a regular basis, then your negative feedback rating will go through the roof, and your reputation will suffer.

One way to combat shortages is to buy a pallet of product in advance, and have the drop-shipper store it in their warehouse so that you are assured of an ample supply. This method sort of goes against the idea of Drop-Shipping (buying the product in advance) but if you are selling on Ebay, you would be best served by employing that method.

Fees..Some drop-shipping companies will charge you a sign up fee of about twenty five to fifty dollars just for the privilege of selling their product. You are also charged a shipping and handling, or “processing fee” for sending the product to your customer.

The “price for processing” can range anywhere from seven to twenty dollars per item, depending on the type of merchandise you are selling. These expenses, plus Ebay fees, can take a big chunk out of your bottom line. Finding a product that can bring you a profit, as well as offset these types of expenses, in some cases, can be an exercise in futility.

Circumventing your customers..While I do not believe that this is a pervasive practice among drop-shipping companies, anecdotal evidence has suggested that some unscrupulous enterprises can cut you out of the sales loop. Not only could they easily substitute your return address for their company logo, but there is nothing to prevent them from selling directly to your list of customers.

Market saturation..For those of you who are Ebay veterans, you all know about the Giovanni Leather jackets that are still being sold throughout the Ebay marketplace. The company that most Ebayer's were getting this product from was BNFusa.com, i.e., Maxam Wholesale. Everyone was selling the jackets and other products from that one drop-shipping source.

Companies like BNF, and Speciality Merchandise Corporation (SMC) are too well known to the general public to make them profitable. After a while, too much of the same supply creates little demand, creating market saturation, distilling price and profit for the seller. As of this writing, people are auctioning off Giovanni jackets, but they no longer posses the profit potential that they once enjoyed.

It is hard to find drop-shippers that will cater to the smaller seller. Most will find it more profitable to sell in volume than by the piece. The larger forfillment houses and wholesalers are used by retail catalog operations. To get involved with the larger operations, you would have to have a huge customer base with tremendous sales volume.

If you still want to pursue drop-shipping as a source of supply for your Ebay auction, then I would suggest that you read other opinions, and become as educated as you can about the drop-shipping company you do business with.

A good and inexpensive start to finding drop-shipping companies is a publication called the Drop Shipping News: http://www.drop-shipping-news.com. Remember, that when it comes to Ebay auction selling, “own what you sell.” Never leave customer service, or your feedback rating in the hands of other people!!