Expert: Marvinator - 8/4/2004

Question
I've heard stories about people selling merchandise from a drop-ship warehouse.  Buying it at wholesale and selling it on ebay for retail and making a good supplemental income.  Is there any truth to this and if so how do I find one of these drop-ship warehouses to do the same.  Thanks in advance for the help, Dan

Answer
To start, it's no story about using a Drop Shipper to supply merchandise to customers.  There are many companies on Ebay that do just that.  Some of them you may know, but not realize that they do drop ship.  Others are product rich warehouse companies that deal only with online sellers.  They are out there and they do sell as you have thought.  

When you find them, go through their entire selection and ask yourself and your friends for an honest answer to: "Is this something you would order ON LINE and if so, how much would you expect to pay IN AN AUCTION?"  Consider the weight and shipping costs (along with the Drop Shippers fees if any) in figuring the final cost to the bidder.  This will help you determine if something is worth getting and putting up on auction.    

As for the idea that you can "buy wholesale and sell retail" you may as well know now that rarely does ANYTHING sell for retail on Ebay.  You may think an item is worth retail, but unless you can convince the bidders of the same, you're not going to get it.  Ebay is a buyer's market.  It's the bidders who determine the final price and the subsequent value of any item.  It's quite common to have two identical items up for auction by two different sellers and one gets many bids and sells for a high amount and the other does not. Case in point: I bought several large cookie jars for $8.95 each, thinking I could get $15.00 each MINIMUM.  These were brand names, in mint condition, still in original boxes.  For some reason, I can't give these away!  The most I've sold one for is $7.75.  Remember, value is determined by the bidder, not by the price you pay OR your percieved value.

But let's get back to Drop Shippers.  With some Drop Shippers, you must pay an additional fee to have the company pack and ship the item.  Others do not, and this is one of the many questions you must ask before utilizing a Drop Shipper.  Next, some Drop Shippers will only deal with established businesses.  This can be overcome with a simple business license.  

The problems associated with Drop Shippers may also help you decide whether to use them or not.  First and foremost keep in mind that Ebay (and the FTC) require that you are able to ship an item within 30 days of receiving payment.  The drop shipper doesn't charge  you until the item ships so they may not really put a lot into keeping items in stock.  So let's say you put an item up on Ebay, and when it sells you get payment and contact the Drop Shipper.  They are out of the item, but since you have not been charged, they can put your backorder in the system with an open ended receipt date, just waiting to fill the order when the items arrive in their warehouse.  This can be 4-6 weeks later!  In the meantime you've got an upset buyer and may have had to refund the auction.  Oh but wait - there's more.  Your order is in the backorder list and when the item comes in, it may be shipped and you are charged!  This means 6 weeks after the end of the auction you're charged for an item you've never been paid for - AND the bidder will GET the item without having paid for it.  (And what do you think the odds are of getting paid after the item has been received in such a manner?)

Now I know I'm painting a pretty dim picture of Drop Shippers.  As you are well aware, some people do use them to good service.  I just like to be thorough in my explanation of my answers so that everyone leaves with open eyes.  There are companies out there that do quite well in keeping items in stock and getting them shipped on time.  working in that time table is your greatest challenge.

As for finding companies that drop ship, (As well as companies that can provide you with something worth selling) you might try a Google Search on the term and see what companies pop up.  When I did that this morning, I found several.  I won't list them here as I do not like to use this forum as a place to advertise any company as it implies that I (or the site) somehow endorse them.

Good luck in your Ebay dealings!
If I can be of further help, please stop by again!