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By Joe Richey

How Dropshipping works with eBay By Joe Richey SwapSellTrade.Com

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 handled. 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 some 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, where 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 sales catalogs.

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 retailer’s behalf. Therefore, dropshipping involves 3 persons in the selling process: the dropshipper, the 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 virtual goods, services and second-hand products, and collectibles from 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 the 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 everyday.

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 seller’s stock, but available to be delivered in any quantity to the final end user after arranging for the delivery with the dropshipper to the final user.

Dropshippers are wholesalers, whether individuals or companies, selling large quantities of goods and merchandise to commercial, industrial, institutional, or other professional business users, or individuals acting as agents or brokers in buying or selling 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 rare and valuable items that can hardly be found as unique items. If 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 goods must not be illegal nor violate the internal prohibited and restricted policy. Listing fraudulent items or those misleading the buyer is absolutely forbidden. From physical and digital goods to services and intangibles, eBay is the super trampoline 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 directly to a postal office closer to the location where the end recipients live, instead of deliver the selling orders directly to the dropshipper, with the purpose to save time and postal costs.

Whichever the modality, eBay has been involved in controversy, ranging from such dropshipping activities to privacy policy 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 are related to end users discovering that they have purchased an item from a wholesaler and not from a retailer, filling a claim because of the difference of prices, or due to a very few other deceptive practices.

Dropshippers offer wholesaler prices indeed, but retailers do not. The difference between a wholesaler price and the eBay’s listing price is the retailer’s 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 they 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 required within the dealer application. Otherwise, established dropshippers with wholesaler activities require either a Social 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 use 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 to 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 stock”.

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 receives 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 to warn other users about their bad experience, and even submit a claim for fraud. The importance of the rating system at eBay is based on the fact that buyers can examine a seller’s feedback history.

In fact, new users are always encouraged to verify the seller’s history as a buyers’ protection practice. eBay’s feedback system 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 the dropshipper.

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 anything, 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 when 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 SwapSellTrade.com

About the Author: Joe Richey Online Wholesale Master Agent Since 2001 See our dedicated site for dropshipping tools

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