Drop shipping is a process where you outsource your product holdings and shipping process. Basically, as an eBay seller, you are supposed to buy stock, list it online, sell it, and post it. With drop shipping you need not buy stock or post it, you just do the listing and selling part. You then have someone else post it out for you, and they already hold the stock so you don’t need to buy it in advance. Some people like the idea of drop shipping because there are a few benefits to outsourcing (and this article lists them). There are also downsides and risks to drop shipping on eBay too (they are also covered here).
What are the risks and/or downsides?
There are a number of risks and downsides that are covered in this article. To some people these downsides or risks will not be a problem, but to other people they are, which is why many people do not decide to drop ship.
- You are putting your reputation in someone else’s hands. The products they send, the way they send them, what they do with the contact details and how quickly they send the products will all affect your reputation. This is because you are the seller and so are responsible.
- Returns will be charged back to you. If an item is returned for whatever reason, the refunded money will have to come out of your pocket. There is little chance that the drop shipping company will reimburse you.
- The shipping time could result in you getting poor reviews. You need to ship your items quickly or your eBay reviews will look pretty bad.
- The drop shipping company may be fraudulent. There is a chance that you ally yourself with a company that has poor work practices, or a company that is simply looking to rip you off and your companies.
- You have no control over ethical business behavior. You do not know how your drop shipping company conducts its business. That means that you have no idea if what they are doing is unethical, nor do you have enough control to stop them.
- Undelivered items are charged back to you. If an item is undelivered then you are the one who has to refund the customer, even though you have paid the drop shipping company. You also have no proof that it was ever delivered, and no way to guard against people who claim it did not arrive when it did.
- How do you prove that the item was delivered? Even if the drop shipping company gives you shipping information, you were not physically there when they posted it, and so cannot be sure that it ever was.
- eBay never sides with drop shippers in disputes. eBay does not like drop shippers and will always rule against you in a dispute.
- You are breaking the law if you do not tell people you are drop shipping. People think that because they often get away with things on eBay that they are not breaking the law, but they are. When you sell on eBay you are supposed to be selling your own items, and you are not, ergo you are breaking the law.
- Out of stock items will make you look bad. If a person buys something from you and your drop shipping company says it is out of stock, then you are going to look bad and will probably receive negative feedbacks.
- There is less profit to be made with drop shipping. This is one of the biggest reasons why a lot of people do not like drop shipping. The loss from one refund may wipe out the profits from several previously sold items.
- Other drop shippers are selling the exact same items as you at the same price. You have no edge over your competition. They are all selling for the same price, selling the same products, and all have the same dispatch time.
What are the benefits?
There are some benefits to all forms of outsourcing, and drop shipping has its benefits too. Here are a few of them.
- You do not need to hold any stock. Paying money to hold your stock will not be a problem, because with drop shipping, all of the stock is held by the drop shipping company.
- Damages or stock going off cannot happen for you. If you buy a lot of stock, then the unsold items may go off. Even clothing goes off and starts to look old. With drop shipping, this sort of thing will never happen to you.
- It cuts out part of the process which saves you work. It means that you can concentrate on selling and need not worry about buying, inventory matters or shipping. You will have a lot less work to do.
- You can list a bigger inventory without needing a big investment. If you want to list a lot of items, then you normally have to have them in your possession. With drop shipping, there is nothing stopping you from listing your drop ship company’s entire inventory.
- It is an easier way to trade online. It is actually very easy. All you need to do is sell a few items and manage your orders. Apart from selling and administration, there is very little needed to be done.