Is eBay drop shipping worth it? Let’s not beat around the bush. You want to know if you can realistically expect to make a profit on eBay using a drop shipping model. EBay wholesale product supply and the use of drop shippers is a topic that is always hot, and for good reason. EBay is the Mecca for just about anyone wanting to try their hand at making money online, and easy access to drop shipped goods would seem to make this business model a no-brainer. But is it really?
To begin with, it is important to consider the following points: (1) eBay terms of service with regard to drop shipping, (2) the profit margin of the products you want to sell, (3) product research, (4) the factors that make the eBay selling environment unique, (5) the drop shipping solution versus other supply solutions, (6) and very important–the costs of eBay.
Before you put up your first auction or for that matter any auction, you must understand the price of doing business. By “price” I mean both the mandatory and optional costs charged by eBay to run your auction. Minimally that means, (1) the fees charged for listing the auction, (2) fees charged once your auction sells (final value fee), (3) image hosting fees if you choose to host your images on the eBay servers, (4) payment processor fees–this usually means PayPal fees, (5) optional fixed price charges, (6) charges for the optional “Buy it Now” listing, (7) fees for running a larger picture size, (8) the optional extra charges for bold type and extra space for your listing. With skill, these extra fees can enhance viewership and profitability of your auctions, but they also potentially increase the bottom line.
If you are selling in a highly competitive market, such as cell phones and iPods, it will be particularly important to factor these expenses into the cost of your item.
What does this have to do with eBay drop ship product sourcing? This is where we begin to answer that question. First, we need to understand a little about drop shipping. Basically, as it is generally understood, a drop shipper is a product distributor from whom you buy products that the dropshipper then ships to your customers under your business name. The drop ship service stocks and warehouses the inventory, so that when your buyer purchase from you, you inform and pay the dropshipper, who handles the rest. Your profit is the difference between what you charge your customer and what you pay the drop shipper. You can see that this is an appealing business model as you do not have to deal directly with stocking items or bother with shipping. Would this arrangement work for selling on eBay?
Drop shipping companies are often confused with true wholesale distributors, but in reality they are very different. Remember, the dropshipper is basically someone from whom you buy your products and who manages shipping and handling under your name. A wholesale company, a true wholesaler, is a business licensed to sell manufacturer products to retailers without charging sales tax. The state of residence collects the sales tax from the retailer who charges the tax to buyers. The point is that retailers purchase goods in quantity from a licensed wholesaler at a significant discount and then mark the price up for sale to the public.
Generally speaking, drop shippers are retail businesses who sell goods at a steep discount–but not as low as wholesale–to you for sale to your customers. Some dropshippers, however, are also true wholesalers who will sell goods to you at a single unit wholesale price (provided you have the necessary sales tax permit). The single unit price is generally higher than bulk pricing. Some wholesale business will also sell to you at a single unit price, but when you are selling on eBay, where competition is high and almost everyone is selling at or below wholesale prices, the price you pay for dropship goods and/or single unit prices can eliminate any chance of profit when you sell your item.
What this means for eBay drop shipping, is that you have to do the product research to find hard to find items that are in high demand. If you plan to sell on eBay, it’s important to make sure that the eBay selling environment isn’t too competitive. If everyone else is selling the same item, you may not be able to make a profit, and you might even lose money if your auction doesn’t sell.
As an eBay seller, this is highly important as you have to factor the cost of drop shipping into the cost of your auction. It also means that you have to be sure of the demand and profitability of your product. If there are relatively few auctions and your product is in high demand, then dropshipping may work very well for you. However, if the competition is high, the profit margin may be too narrow to cover the added cost.Can you succeed with eBay and drop shipping? Yes, you can, but please listen to me when I say you must research your products. It isn’t just enough to like them or personally thing they are cool. What ultimately matters is either how they are perceived by the niche you are targeting, or how effectively you can raise the demand and perceived value through marketing and promotion.
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