- You place an ad selling what you don't have, but what you know how to get.
- Customer “buys” item by sending you the money for the item.
- You take a portion of that money and buy the item from your supplier at a lower (usually wholesale) cost, having your supplier ship directly to your customer.
- Everyone is happy.
When it works well, drop shipping is an entrepreneur's dream, a chance to play the perfect middle man with no overhead—you have no inventory, no shipping hassles, and no storefront to deal with. You just accept money in quantity and send slightly smaller quantities of the money you accept to a third party, keeping the difference as profit.
Mistakes to Avoid When Drop Shipping Through eBayOf course, in real life things are rarely so simple, and direct marketers that are experienced at drop shipping know that there are generally a steady stream of “hiccups” to be dealt with in most drop shipping businesses that do any volume. While such hiccups may not have any statistical effect on your business in a traditional drop shipping scenario, on eBay they can mean the difference between success and failure, so it's important that you treat your eBay drop shipping business like an eBay business first and a drop shipping business a distant second.
- Keep close tabs on fulfillment times. The best way to do this is to actively send emails asking your customers to leave you feedback or to fill out some kind of satisfaction survey after allowing reasonable time for fulfillment. You'll hear back quickly if the orders are taking longer than you think they should to arrive. This is important because eBay and online buyers generally expect better service than other kinds of direct marketing purchasers, and if shipments are being delayed for any reason before being sent, you'll see negative feedback and PayPal charge reversals that can seriously damage your prospects for success.
- Monitor stocking issues by whatever means is available. It is much more critically important that you monitor stocking issues when selling on eBay than it is when selling via other direct marketing channels. Coordinate with your supplier(s) using whatever means is/are available to you, but do not leave fulfillment times and availability exclusively to your supplier. eBay sales are contracts and there is no allowance for “backorder” or “order cancellation due to unavailability” situations. Once someone buys an item, you are expected to deliver it promptly, or you may be slapped with a seller nonperformance violation—a process that buyers can start a mere ten days after the close of an auction if they haven't yet received their order. Just a few of these (generally in numbers that you can count on one hand, though it depends on sales volume) and eBay will close you down as a seller for good.
- Be ready to mediate in returns. On eBay, your sales and your ability to make them both depend on your feedback score—a score that is given to you as the initial contact, not as your supplier. If your customer has a return or exchange issue and isn't satisfied with the process, it will come down on your head as a seller in a very public way—and will negatively affect future sales. For this reason, you may find it absolutely necessary as an eBay seller to mediate in return and exchange issues after fulfillment in ways that are not necessary when selling using other avenues.
- Beware of product quality and buyer expectations. Once again, eBay and online buyers tend to have higher expectations for trading transactions than do customers in more traditional direct marketing environments. They expect a photo and a clear list of features in your auction listings, and they expect to receive an item identical to the one that they “bought” through your auction listing. It is therefore important that you either select a wholesaler and a product catalog that won't switch inventory or suppliers on you without letting you know—or on the other hand that you make very clear in your listings that the item may vary significantly from the listing when your customers receive it—something which won't play well on eBay and will likely harm sales.
- Remember, auctions are auctions. It may seem like an obvious point, but too often it has come back to bite new eBay sellers, so it bears mentioning. If you list using the auction format, you are expected to fulfill the order no matter what the closing price is—even if it is below your cost. If you can't fulfill this requirement, sell only using fixed-price (i.e. Buy It Now) listings, or you're asking either to hit serious financial quicksand and lose your shirt or to be closed down for non-fulfillment—something that has taken down some of eBay's best and brightest virtually overnight.
As you can begin to see, running a successful business on eBay involves two major concerns—first, the maintenance of your good feedback and fulfillment in the context of eBay policies to ensure that you can continue to sell, and second, the fact that you have to fulfill rapidly and at the cost at which your auctions close, no matter what—along with all the costs, overhead, and/or unexpected losses that can go along with such a proposition.
Master these two tensions between eBay culture and drop ship business models and you'll be on your way, as are so many others, toward a successful drop shipping business on eBay.