May 3rd 2006
Drop-Shipping And EBay Don’t Mix?!
China Business News
6 Comments
An interesting article from Robert Potter discusses the pros and cons of buying from wholesalers, buying surplus, and drop-shipping, for EBay/auction resale…
PROS AND CONS OF DROP-SHIPPING: There is one obvious advantage to drop-shipping. It is basically a “product less” venture. No need to tie up your money in inventory. Drop-Shipping can fit into any business model, or advertising method you happen to use. However, if you are an Ebay Auction seller you might want to rethink that position. Finding a drop-shipping company that can deliver on a consistent basis can be tough. Drop-Shipping companies have been known to run out of merchandise. If they happen to run out of the product you are auctioning, asking buyers to wait on their product because it is “backordered,” does not inspire confidence. Your negative feedback rating can pile up real quick. The other problem is expense. Some drop-shippers require a sign-up, or “entry fee” before you even start marketing their products. You might also have to pay for support materials, such as pictures and advertisement brochures for the product you choose to sell. In addition, when you sell a product from a drop-shipping distributor there are processing fees that have to be paid, in order to get the product out the door and in the hands of your customer. That price can range anywhere from 5.00 to 10.00 dollars and up depending on the item. After Ebay and drop-shipping fees, you can wind up loosing money, or at best, breaking even. Bottom-line, drop-shipping and auction selling don’t mix. The best bet for any auction venture is to “own what you sell.”
Is this view too negative? Share your opinions in the Chinavasion blog comments!!
RSS Feed - Subscribe
Your comments regarding drop-shipping and eBay is correct. One would be extremely lucky if they just broke even after paying all of the fees. There seems to be a misconception from these drop-shippers and that is that you buy at wholesale (usually their wholesale is higher than what it’s going for on eBay) and sell retail. This just does not happen now a days. As a generaL rule, a true wholesaler will rquire you to provide a tax I.D. number, if he does not then he is more than likely a middle-man.
Chinavasion offers some items as a fare price however, by the time you add on the cost of shipping the item is usually selling for less on eBay. Also, if for some reason you have to return the item because it does not work correctly or is broken you have to pay the shipping all over again. All of a sudden, your cost for that one item has just skyrocketed.
After a year of studying the advantages and disadvantages of using Drop-Shippers, your comments regarding drop-shipping and auction sites such as e-bay is right on.
Chinavasion recently sent an ad e-mail which featured an X-Box360. The discounted price in the ad was just under $390. After adding even a 5% mark-up, the e-bay seller needs to get $410. Even without the shipping and handling, and import duties, the cost is $12 more than the same item could have been purchased at a local retailer here for $399.
One solution to this problem would be if a china based company such as Chinavasion formed a co-op of international Internet retailers where collective volume would allow Chinavasion to command even larger volume discounts at the manufacturing level.
Thanks for the informative comments Peter.
Point of information: Chinavasion doesn’t sell X-Box360s or any other Microsoft products.
On the topic of prices in general, I always think that it’s interesting that even though we are in a “global village” and “information age” the prices of consumer electronics in high street stores are so variable in different countries and even within countries. You can’t underestimate the influence of the huge buying power of the big chain stores driving down prices for consumers. Why are the prices so low locally? Only because those shops are buying in huge quantities… from China. In countries where the Wal-Marts etc don’t have such a big reach, the savings from direct wholesale sources are simply much more apparent.
I have been looking into drop-shipping myself as I first thought this would be a good & fast solution for shipping, but I find the personal touch of receiving a product, checking its contents &/or checking for damage and correct product before shipping onto customers, greatly insures positive customer feedback. You will find some ‘auction’ sites also require the consigner at time of auction to physically have the goods in there possesion. I know I would…..
Author is right on target. I tried drop shipping last year 2005 and it was chaotic. One example, I usually reinspect, retest my items if refurbished/used etc. to make sure they are working well before packaging and shipping out. For a refurbished DVD purchased by a buyer and shipped by the drop-shipper, after a few days, the buyer contacted me and informed it did not work. The return policy to get it back to the drop shipper is time-consuming, so I just told buyer to keep item and refunded buyer full amount paid including S&H cost as it was only fair if it honestly didn’t work as buyer said. Had this item been in my possession, I would have retested it in some way..at least the main features to ensure it was working but it was at the drop shipper. In this instance I lost more than double what the buyer paid as I paid drop shipper + had to return the buyer full amount paid. Ebay sellers should be very cautious of drop shipping as the profit margin is very low and if an item arrives at a buyer and does not work and has to be returned, the return shipping cost has to be paid for by the buyer or seller…which it is only fair that the seller pays since the item did not work…as contrary to the seller taking on this of non-working item you can bet negative fb will accummulate. I will never use a drop shipper again as it is not worth the time and returns are marginal.
I checked out dropshipping over the last two years most of them have a supscription fee in case you dont buy any thing off them they still profit off you also you pay ebay fees on their profit as well all of their products sell cheaper on ebay than they sell to you