Debt-Management58438

Drop shipping is a process by which a seller advertises an item on eBay, but doesn't actually pay for the item until it sells. Once a customer buys the item and pays for it, the seller contacts the drop shipper and pays for the item, and the drop shipper ships it directly to the customer. Sellers don't have to store the item or ship it. I personally don't use this method for several reasons:

• I can find merchandise more inexpensively through other means
• The profit margin is very small
• I am not able to physically handle the item and answer questions about it or give measurements
• Some drop shipping companies charge a fee to use their services
• Returns can be confusing

Let's look at an example. You can purchase high quality wool sweaters from a drop shipper for around $30. In my experience, you are lucky to get a sale price of $30 for a brand new wool sweater on eBay. You can also find quality wool sweaters in a thrift store for about $3. The item might be used, but if it is a quality name brand and in very good condition, you can sell it on eBay for $20 - $30. Many people (especially international customers with limited supply in their country) are willing to purchase gently used clothing as long as it is in good condition and a quality or designer name. If you purchase the item from a drop shipper, your profit will only be a couple of dollars at best. If you find the sweater on your own in thrift store, consignment store, estate or garage sale, you have significantly increased your profit margin to and will profit around $17 to $27 on just one item.

Granted, you don't have to find or store the item when you work with a drop shipper, but you aren't making much money either. Sellers who use drop shippers are forced to keep their starting prices high or they will lose money. They have to charge at least the amount the drop shipper is charging them to just break even. By finding the item on your own, you can significantly undercut the competition by pricing your items lower and still make a nice profit. You will get the sale, create a larger clientele, and receive positive feedback thereby establishing your eBay reputation.

Look through eBay completed listings at how many items are not sold because the starting price is inflated. Some of these are the sellers are using drop shippers. These sellers also usually have multiple listings for the same exact items with the same exact photo (provided by the drop shipper). These sellers constantly re list the same item over and over again and end up paying a lot of fees, without having many sales to pay the fees.

Furthermore, many eBay sellers use the same drop shipping companies, so their listings and photos look the same. These sellers are saturating eBay with too much of the same product. There is no competitive edge when using drop shippers. Say for example you want to sell iPods through a drop shipper. Many other sellers are already selling iPods through drop shippers. When a potential buyer searches for "iPod" on eBay, he will receive several hundred listings with the same picture, description, and inflated starting price. What will cause a customer to buy from you over the other 200 sellers offering the exact same product?

The competition is too tough, and the profit margin is too low when drop shippers are involved. You are much better off doing the legwork yourself and finding unique items that stand out and drive bidders to your listings.

Suzanne Wells is an eBay Power Seller, author of "The Stay-at-Home Mom's Gude to Successful eBay Selling," eBay Consultant, and mom of 2 in Atlanta, GA.

Learn more about eBay selling by visiting my website, eBay Selling Coach, and visiting my free eBay discussion forum.