My Secret Fear About Selling Products on a Drop Ship Basis

I spent nearly three months trying to sell products on eBay using a strategy called drop shipping. For those of you not familiar with the concept, here's how it works. You find a wholesaler who is willing to work with you on a drop shipping basis. (Note: there are several fine directories available of just such wholesalers.) You put some of this company's products on eBay, sell them, and then pay the wholesaler who packs and ships the products for you.

Sounds pretty cool, huh? You never have to take possession of any products so you don't need warehouse space.. There's no packing and shipping. You just market the products and count your profits.

As the punch line in one old joke would have it, "not so fast there, Abernathy."

First, the market niche

First, you have to find a profitable market niche and this just ain't easy. You might say that eBay has been too successful as it is now darn near impossible to find a market niche that isn't already very, very competitive. If you don't believe me, go to eBay and type in some uoffbeat search term such as "emperor penguins." I did this when writing this article and found two pages of stuff related to these birds, including penguin crossing signs (who would have guessed?), penguin art, and glass penguin figurines.

Second, you have to find a niche where you can expect a good mark-up. This is because your profit is the difference between what you will have to pay the wholesaler and what you can sell the item for on eBay.

And there's the catch. Since you know what you will have to pay the wholesaler, say $25 for a nice lambs wool sweater, you have to either start the auction at $25 to keep from losing money, or do a “buy it now” for maybe $40 to get a $15 profit. But wait a minute. You have to pay your wholesaler to pack and ship the product – say $5 -- so your profit drops to $15. Plus, you check eBay and find the same sweaters are selling for $25. So, what are the chances you'll be able to sell yours for $40 or even $35?

Now comes my secret fear

I tried to sell a lot of products from a lot of different wholesalers. What I found is that no matter what products I put up for auction or buy it now, the same item was always available for less. In fact, hmm, some were available at the exact same price I had to pay my wholesalers.

So my secret fear is that there are wholesalers who are selling products on eBay for the same amount they wanted me to pay for identical items – making it almost impossible for me to make a profit.

Can I prove this? Of course not, because the sellers on eBay always had these really generic names such as "bargainprinters" and "memory4less." But who's to say what companies are really behind them?

Am I being paranoid? It's possible. But if you want to try drop shipping, I would suggest two things. First, stay away from computer stuff and consumer electronics. It is a jungle out there. Second, try to find a small market niche where there isn't enough volume to attract the big guys and where you can earn a fair mark up.

It's not easy but it is doable.