Virtually everyone in the modern world has at some point made a purchase online. eCommerce started off as a convenient solution for shoppers with geographical limitations or similar issues. Today, it is the dominating force in the field of trade – dictating how a large portion of businesses operate. It was reported that about 1.8 billion of the world’s population were omni-channel shoppers. According to Statista, eCommerce accounted for 19% of all retail sales worldwide by the end of the year 2021, a figure that is only expected to grow in the following years.
Seeing this rapid rate of growth and the vast amount of opportunities available in this field, it isn’t surprising that entrepreneurs want to carve themselves a slice of this lucrative pie. Manufacturers and suppliers are getting savvier, while resourceful marketers are finding ways to simplify the process.
The boom of eCommerce birthed a business model called ‘dropshipping’. The term has been misconstrued and even overused across various channels – so let’s shed some light on what exactly this field entails:
Dropshipping is a method of retail fulfillment in which the seller or store does not hold physical inventory of their own. They instead depend on third-party manufacturers and suppliers to source their products. The shop or seller purchases items from a supplier’s warehouse and has it shipped directly to the customer. The seller does not have any physical contact with the inventory on sale. Some suppliers nowadays even handle shipping, making the process even simpler.
Traditional retailers and shops have their own physical inventory. Maintaining stock in warehouses has its advantages, but the costs of storage and maintenance rack up pretty quickly. There’s also the added issue of having to pay for manpower to handle goods. Dropshippers take this inconvenient part of the sales process out of the picture.
When a customer visits their favorite online store and buys a product they like, they pay the seller upfront. The seller then uses this money (or fronts their own money) and buys the desired product from a trusted supplier. The seller then uses third-party shipping companies to transport the product to the customer. They never see or touch the product they’re selling. Some suppliers and shippers offer custom packaging, logo printing, and express shipping, ensuring great customer experience.
Dropshipping can be started by budding founders without significant starting capital. Sellers don’t have to invest thousands of dollars on upfront inventory, warehouse rents, and manpower salaries. They don’t have to purchase anything from the supplier unless a sale has already been made on their website – which means close to zero losses. Testing new products and their value to a segmented user base is relatively intuitive as well. Winning products can be identified quickly by value to targeted potential customers, aiding the store to scale up easily and more efficiently. The dropshipping model also allows sellers to be flexible in terms of their location since they are reliant on suppliers, meaning they can conduct their business from practically anywhere in the world.
Since the seller is not worried about creating, manufacturing, or sourcing the products, they can focus their attention exclusively on sales, marketing, and growth. Dropshipping marketplaces like Spocket make the sales and checkout process highly automated, which further reduces the burden on the seller.
Dropshipping does have its pitfalls, however. Even if sellers obtain samples from suppliers beforehand, there’s no guarantee of quality. The product the customer receives might be defective or completely different from what’s displayed online. Furthermore, since most popular and affordable suppliers are based in China, long shipping times can be a hassle. There’s also the somewhat common issues of rampant fraud, online scams, and missing deliveries. Finally, due to the fact that packaging and transportation are handled by other entities, the seller has very little control of the shipping efficiency, as well as a very limited scope in terms of branding and customization of merchandise.
In order to try and avoid some of these unfortunate and unprofessional incidents, it is imperative to develop relationships with trustable suppliers. It’s also recommended to source products locally from suppliers in designated areas. This adds a dash of personal touch to the transaction processes, while also ensuring trust is maintained.
eBay is a household name at this point. The popular website is an online auction platform that connects sellers and prospective buyers. On par with eCommerce giants like Amazon, eBay’s customer base has been expanding steadily over the years. The platform had about 138 million monthly users in 2022.
Online sellers are attracted by eBay’s centralized platform. The large existing user base means the chances of converting a prospect and making a sale are significantly higher than using personal websites.
The business model of eBay is quite simple. Sellers list their products on the platform after registration. The product can be anything – cars, electronics, fashion accessories, autographed rarities, etc. Sellers attach a starting bid to the item – a reasonable expected price. Then the bidding process starts, with potential buyers bidding the amount they think the product is worth. The process lasts for a specific period of time predetermined by the seller. At the end of the bidding process, the highest bidder gets to purchase the product.
The ‘buy it now’ option introduced by eBay also allows buyers to buy the product directly (for a predetermined fixed price) without entering the bidding process.
Several sellers on eBay do not actually handle or store the items they list. They have means of procuring them for customers, but they don’t actually have the products in their possession. The branding factors like the image, description, and title are usually the same as what their supplier uses.
Once a buyer buys a product from a seller’s listing, the eBay dropshippers then fulfill the order through their supplier. The product is then transported to the buyer via an independent shipping company. The seller essentially plays the part of a middleman in the process. This method of item/ product fulfillment transferring the dropshipping business model of zero inventory holding onto eBay’s successful platform. With improving seller-supplier relationships, it has never been easier to get started with dropshipping via eBay.
The good news is, anyone with a valid eBay account can start the process of eBay dropshipping. But how worthwhile is this for independent businesses or freelancers?
Considering the size of eBay’s customer base, it’s presumably the easiest platform for dropshipping beginners to start out and assess their potential revenue. Let’s take a look at a step-by-step breakdown on how to dropship on Ebay.
While dropshipping is a completely legal business model, eBay has recently started clamping down on sellers in order to curb fraudulence. So, be sure to take a look at eBay’s policies regarding dropshipping.
Dropshipping on eBay is permitted but heavily restricted. eBay has a clause that says “fulfill orders directly from a wholesale supplier.” This means sellers are technically allowed to dropship on eBay’s platform provided they adhere to their regulations, which state amongst other conditions that sellers are allowed to promote and sell products in pre-purchased bulk quantities from a wholesale supplier.
Traditional dropshipping on eBay was done by promoting and reselling items purchased from third-party retail websites like Amazon and Aliexpress. The seller would purchase in-demand products at cheap prices from these marketplaces and resell them on eBay for a higher price. This model of operation is now banned on eBay and sellers doing this are liable to be banned from the platform. eBay’s legal policy clearly states “purchasing the item from another retailer or marketplace that ships directly to customers is not allowed…”.
The only legitimate way of dropshipping on eBay presently is to purchase bulk amounts of products from a wholesaler beforehand. The products can be stored and fulfilled on behalf of the seller by the wholesaler, which is not an ideal solution for every wholesaler due to the fact that the products are pre-ordered by customers and can end up sitting in warehouses for an indefinite time period (until the sellers manage to create sales.) The products can be shipped to fulfillment companies too. These companies will take care of storage, fulfillment, and shipping on behalf of the seller.
This business model still conforms to the definitions of a dropshipping business, but the difference is that the seller has to purchase bulk inventory upfront with no guarantee of sales.
If a seller can trace a reliable, trusted supplier who can fulfill and ship orders to customers within 30 days, getting started on eBay is quite easy. Yet it’s crucial to remember to obey the platform’s policies.
Dropshippers on eBay face several challenges. It’s quite an uphill battle to maintain and develop this type of business.
As mentioned previously, sellers are required to purchase bulk inventory from wholesales on eBay before they make a single sale. If the product does not gain popularity, falls out of fashion, or is defective, the seller is stuck with a huge order of products.
Sellers are also required to shell out a listing fee to eBay. eBay also takes a cut of the final sale (up to 10%). The free option comes with a catch where the seller loses a large part of the margin. The best items to dropship on eBay are usually priced above $10 to $20. While the margins on low-cost items are thin, moving large quantities can help offset the purchase cost. The upfront purchase and the eBay listing fees might make dropshipping on eBay financially unviable for most beginners.
Most of eBay’s loyal customers explore the platform in hopes of finding the best available deal. The manufacturer charges a fixed price on products regardless of the situation, but the seller has to be flexible when it comes to price. Undercutting the competition can be useful to drive sales initially, but it might prove to be costly in the long run. Pricing control is a huge challenge for eBay dropshippers in this aspect. Unwilling to budge on price might cost the seller their customers.
Ensuring the availability of the listed products and proper fulfillment might be the hardest challenge eBay dropshippers face. Keeping a constant track of the supplier’s inventory and removing out-of-stock products from listings is crucial. Asking suppliers for daily reports on inventory counts can be the solution to this. Reliable suppliers who fulfill orders promptly and give sellers constant tracking information is a rarity. The most important part of the sales process – the fulfillment – is out of the hands of the supplier. Unfulfilled orders, out-of-stock products, defective items can very quickly garner horrible customer reviews and damage the reputation of the seller permanently. eBay dropshipping suppliers who have rigid shipping timescales are hard to find.
In order to scale an eBay business, it’s important to keep customers happy and satisfied. The best way to achieve this is to offer items priced competitively, and ensure the ordered products reach the customers in one piece, one time.
With the centralized platform providing exposure and visibility to millions of customers, sellers can concentrate on building manufacturer relations and sourcing new products instead of marketing. Therefore, if a seller can conduct the manufacturing and dropshipping process in a timely manner, utilizing eBay is definitely worth looking into.