Like many of your fellow eBay companions, you may have never heard of the term “drop shipping” before. And it really is no wonder, because up until a few years ago, the drop shipping technique was only slightly known. But with the current boom of auction sites such as eBay, drop shipping is at the height of its popularity.

What is drop shipping?

Drop shipping is a type of supply chain management technique in which the retailer does not actually keep the goods he sells in stock. Instead, he sends his customer orders and shipment instructions directly to a wholesaler. The wholesaler, in turn, will then ship the goods directly to the customer. For example, when a seller advertises an item on eBay and the item is bought by a customer, a wholesaler, not the seller himself, will package and ship the item to the customer in return for a percentage of the money made.

If you look at most eBay shops (rather than sellers with single items), this is often the method implemented, although it won’t explicitly be stated as such. Some items are ex-catalogue brands that are being sold at less-than-market-value-prices and this is how many sellers can afford to keep prices so low.

Benefits of drop shipping

Drop shipping can be an extremely useful tool when it comes to starting your own business or improving an existing venture. If you are considering opening an eBay shop, it might be a good idea to think about whether or not you would benefit from drop shipping. There are many companies that operate in this manner, which is why prices are usually very competitive. If you do some research by typing “drop shipping merchants” into a search engine, you will be surprised at how common this service has become.

How can you benefit from such a facility?

• If you want to sell particular items in bulk, then larger merchants are more likely to be able to provide these to you.
• Buying in bulk often translates into large discounts. Large merchants often receive goods for next to nothing and this saving could be passed onto you and your customer.
• A common problem of many individual eBay sellers is the lack of time needed for packaging the goods and arranging delivery. When a merchant does this on your behalf, there is nothing to worry about.
• No storage space is required. Again, as a merchant holds all of the stock, you do not have to fret about finding space for the goods or paying for storage at a warehouse.
• Some merchants don’t charge too much to provide and send goods on your behalf, so if you do the necessary research, you could end up with a pretty good deal

These are great benefits and it could make what initially seemed like a difficult venture quite simple. Provided, of course, that all the listings are honest in their descriptions and in line with merchants’ goods.

Disadvantages of drop shipping

As with any other business technique that you might be considering, there are some disadvantages of drop shipping, although they are quite minimal and can be avoided if some careful planning is implemented at the onset.

• Sometimes items can go out of stock, especially with “in demand” products. In addition it is often very difficult to determine when they will be in stock again. It is vital that you create listings for goods that you know are going to be readily available.

• With merchants sending goods out to your customers, it can be a lifesaver. But at the same time, if purchased items go awry, then chasing down the merchant can prove to be quite stressful. In the case that no more of a particular item is in stock, similar problems could occur.

• There may also be some problems associated with the logistics of shipping. Some goods, especially larger items, can take anywhere from 7 to 14 days (depending on the merchant) to be delivered and most eBay buyers aren’t willing to wait that long. It would be extremely unprofessional if this is not mentioned at the time of sale and will almost certainly lead to refund requests.

• Most merchants will charge a reasonable fee to pack and transmit goods to buyers on your behalf, but there are some who will try to charge you outrageous prices. Therefore, it is extremely important that you search the market carefully for a company which is reputable and reliable.

These are some of the main downsides to drop shipping. As you can see, there are ways of avoiding them, but you still need to ask yourself if drop shipping is suitable and complimentary to your business model. Some sellers simply trawl market stalls to find great deals or resort to selling household clearance items.

Although a myriad of sourcing options exist, don’t dismiss the concept of using a merchant to supply and send goods to your customers. Like I said, it can work if done properly. Serious money can be made from selling items for bargain prices, so if the opportunity is there, then go for it. Start searching for drop shipping companies who can help you head towards financial freedom today!