By Joe Richey
How Dropshipping works with eBay By Joe Richey
Dropshipping is a term used in reference to a type of retail
sales, where the retailer does not keep goods for sale in
stock. The retailer is in charge of passing the customer's
order with their shipment details to a wholesaler, dropshipper
or third party provider, who dispatches the goods requested by
the customer directly.
Retailers using this sales model make their profit on the
difference between the wholesale and the retail prices
Because the goods are not in stock, many retailers have
purchased some of those items to be displayed at their
land-based stores, allowing their customers to inspect the
items, which are similar to those that they can purchase by
placing an order.
Many retailers can receive from wholesalers and dropshippers
different catalogs to increase the number of goods on sale
without actually investing in any of those items, although
catalogs are not for free, but always cheaper than buying
merchandise to display for customers. Dropshipping on the
Internet is a virtual matter involving digital images of goods
a retailer is selling.
On the Internet, retailers can upload the description of the
goods for sale along with pictures and other information. This
is made through the retailers' personal or commercial website,
or listing the products at an auction site, such as eBay,
the potential buyers are waiting to bid.
Because dropshipping, is a method of selling and distributing
goods that the retailer does not have in stock, the listings
usually include pictures and information that are available to
Manufacturers of goods and distributors are not one in the
same. Hence, dropshippers are distributors that just receive
the order from the retailer and send the items directly to the
end user on the retailerís behalf. Therefore, dropshipping
involves 3 persons in the selling process: the dropshipper,
retailer and the end user, usually targeted at auction sites.
eBay Inc. (NASDAQ: EBAY) is a successful online auction and
shopping website, founded in September 1995, where people from
all around the world buy and sell goods and services. Ebay is
the leading online marketplace for selling physical and
goods, services and second-hand products, and collectibles
a diverse community of both businesses and individuals.
It is estimated that the eBay community is comprised of around
46.1 million registered users in different countries, speaking
different tongues, eBay is the most popular shopping site on
the web, thus the most frequently associated with dropshipping
activities because of the nature of the Internet.
Online it is not necessary to have a stock of physical goods
for sale, and many items sold are digital goods, easily
processed without needing to be on stock.
Retailers at eBay usually sell small quantities of their
products to other users registered at eBay's website. Whether
physical or digital, sometimes those goods are also available
through a land-based store or listed at personal web pages or
e-commerce sites owned by retailers.
Dropshipping is a common practice that occurs when retailers
receive a single large order for a product, and rather than
route the shipment of those goods through their store, the
retailers arrange for the goods to be shipped directly from
wholesaler (the dropshipper) to the purchaser.
eBay retailers sell millions of collectibles, equipment,
furniture, computers, appliances, vehicles, and many other
miscellaneous items, which are listed, sold and bought
Because there is no limit to the number of listed items at
eBay, a retailer can list a single book and make available 50
units. These units are not in the sellerís stock, but
to be delivered in any quantity to the final end user after
arranging for the delivery with the dropshipper to the final
Dropshippers are wholesalers, whether individuals or
selling large quantities of goods and merchandise to
industrial, institutional, or other professional business
or individuals acting as agents or brokers in buying or
merchandise for others. Thus, it is more likely that goods
listed by a retailer can be purchased from them at any time,
while in stock.
At eBay, dropshipping works as long as retailer can purchase
the goods on sale from the wholesalers. However, there are
and valuable items that can hardly be found as unique items.
an end user wants to buy one of those rare goods, he/she must
be aware if the retailers are listing a large number of them,
because users will be purchasing all items with the risk of
fraud. If they have, more than one of these rare items for
sale, then how rare is the item.
Although, almost anything can be sold at eBay, the listed
must not be illegal nor violate the internal prohibited and
restricted policy. Listing fraudulent items or those
the buyer is absolutely forbidden. From physical and digital
goods to services and intangibles, eBay is the super
for retailer sales.
Dropshippers and retailers work hand in hand to sell at eBay.
Retailers are only know as sellers, who usually bid on an item
marked as new, with the goal in mind to ship the item directly
from the dropshipper to the highest bidder. The seller's
profits come from the difference between the winning bid and
the wholesale price offered by the dropshipper, minus the
selling fees from eBay.
In another modality or dropshipping practice, a retailer can
use private freight carriers to transport large volume of
goods. These items are delivered from the manufacturer
to a postal office closer to the location where the end
recipients live, instead of deliver the selling orders
to the dropshipper, with the purpose to save time and postal
Whichever the modality, eBay has been involved in controversy,
violations, and the well-known seller fraud. However, eBay has
provided information showing that only less than .01% of all
the site's transactions result in a confirmed case of fraud.
In some of them, eBays argues that some of those complaints
related to end users discovering that they have purchased an
item from a wholesaler and not from a retailer, filling a
because of the difference of prices, or due to a very few
Dropshippers offer wholesaler prices indeed, but retailers do
not. The difference between a wholesaler price and the eBay's
listing price is the retailerís profit. This cannot be
considered defrauding the users, however they are just lying a
little bit when they say they have the goods in stock that
actually do not have, and do not send from their own location.
Genuine wholesale prices are never shown to the public by
resellers, but can be found if the end user has seen the item
elsewhere and investigate. The best way to determine if drop
shippers are legitimate wholesale suppliers is by paying
attention to their tax identification number, which is
within the dealer application. Otherwise, established
dropshippers with wholesaler activities require either a
Security number or a Federal Tax ID (EIN).
Furthermore, authentic dropshippers will never require
membership fees to access their services, so they will never
offer full or partial refunds after a certain number of
inventory purchases are made. Manufacturers, wholesalers,
dropshippers, retailers and sellers are often mistakenly
confused because of their selling activity, but all of them
different practices aimed at different clientele.
Depending on the management, dropshipping profits can be
immense for retailers, but as sellers, retailers have to rely
on the professionalism and goodwill of the dropshipper,
particularly when all the deals and businesses with them are
made via the Internet. On this basis, there is always a risk
get a wrong item supplying a faulty product, or when the
dropshipper downright sends an incorrect one.
At eBay, the seller's reputation is affected for the good or
bad dropshipping practices, because to the end buyer it does
not make a difference whether the seller is a retailer or not.
Buyers want to receive the goods that they paid for, and they
want to receive exactly what is listed, and not a similar
product with the excuse of that the original is "out of
Due to a fraud prevention mechanism implemented by eBay, users
have a feedback system where they can submit their experiences
after purchasing any merchandise, reflecting their
un-satisfaction if their expectations were not fulfilled. As
bidirectional feature, both the sellers and the buyers can
submit feedback and rate one other.
The rating system is only available after every transaction is
made. Buyers and sellers get a "positive", "negative" or
"neutral" rating. They can leave a short comment or remark
regarding a particular bid, for instance, when a buyer
from a dropshipper a product, which is not exactly that, was
listed by the retailer.
When buyers have problems with sellers or when they do not
receive the goods listed, buyers can rate sellers negatively,
usually leaving a comment to harm the sellers' reputation or
warn other users about their bad experience, and even submit a
claim for fraud. The importance of the rating system at eBay
based on the fact that buyers can examine a seller's feedback
In fact, new users are always encouraged to verify the
history as a buyers' protection practice. eBay's feedback
protects buyers and sellers, who can also reject a bid when a
feedback rating is not enough for the seller's expectations.
Another problem when a seller is involved in dropshipping
activities is that there is always a risk of getting
dropshippers that already have too many sellers using their
services. This can be discouraging, because the dreams of
exceptional profits disappear when a considerable number of
eBay's users, are selling the same goods and seeking the same
opportunities to capitalize on below-retail prices offered by
If the competition is high, the prices go down, reducing the
planned profit margins, and the lower the profits and the less
affordable the dropshipping activity. However, knowing the
basics about dropshipping, many users feel attracted to
becoming sellers and develop a retailer activity using the
services of one or more dropshippers.
If you are considering this possibility, before doing
choose a product to sell. Deciding on a product is the first
step towards any selling process. Many people fail at this
point because the belief that using the services of a
dropshipper, the items to sell are irrelevant, due to the fact
that all items will be available at the wholesaler's stock
instead of you own.
Although there are many factors to take into consideration
it comes to selecting your first dropshipping product, most
retailers focus their attention on postal savings, selecting
books, CD's or other easy to carry merchandise, while others
consider small items can cut costs, but there are usually more
competitors selling the same items.
Dropshipping can deliver to your customers from a needle to
elaborated pieces of furniture, so think carefully when
choosing a product.
Once you have determined what you want to sell, locate the
distributor who will be in charge of dropshipping the
merchandise for you to the end users. This is easily achieved
by doing a research using Google or any other of the major
search engines. However, there are special eBay Dropshipping
tools created to help you find dropshippers in your area,
nationwide or worldwide.
Thanks Joe Richey Copyrighted Article Belonging to
About The Author: Joe Richey Online Wholesale Master Agent
Since 2001 See our dedicated site for dropshipping tools