Drop shipping is a simple concept, and many people run very successful businesses doing nothing but drop shipping, however it is still not widely understood.
So What is Drop Shipping?
Put simply, drop shipping refers to the act of finding products, that can be sold at a higher price, and acting as the middle man. You have no stock, all you do is act as the intermediary with the aim of making a profit.
Here is an example:
- A Shop stock a box for £5
- However, you know the box retails well at £10 on other selling sites
- You list the box on these sites for £10 and £2.99 to cover your postal costs
- When a buyer purchases the item, you return to A Shop, and make your purchase with them telling them to ship directly to your customer.
- Total income £12.99
- Total spend £7.99
- Profit £5
Now, that is a very simplistic example, and you will have to consider fees from the selling sites, etc, in your profit equation, but that is the basic principle.
Another way is to find companies that only do drop shipping on behalf of their customers.
You can login to their websites, download product information and advertise these products on your website, eBay, Amazon or anywhere you would like to, naturally with a mark-up.
Once one of the products sells you just notify the dropshipper of the buyer, the product and pay the dropshipper – they do the rest.
You may even find dropshippers that can link directly to your website or have an inventory management application that makes sure you never sell something that is not in stock.
Here is a list of dropshippers you can look at:
Is That Even Legal?
Yes. Drop shipping is completely legal. In sales the common term is Arbitrage. You are simply buying low and selling high, which is of course what all sellers aim to do. It is no different than purchasing items from wholesalers and making a mark up. You have paid the price your seller is asking, and then sold it on at a higher price.
Why Would You Do That?
Well, for some people having physical space to keep stock is an issue. It enables you to run potentially infinite sales without ever touching the product. There is nothing in the way of overheads, therefore, no storage lockups, no shops, just your time, your computer and your electricity. It gives people the opportunity to become successful sellers without needing to purchase expensive stock to get going.
What is the catch?
There is no catch as such, but you need to be familiar with all aspects to protect yourself and become a reputable seller.
Firstly, drop shipping is considered to be a form of low profit margin sales. Obviously buyers could discover the product for £5 themselves using search engines. You cannot make ridiculous markups either, because it is unlikely that such a massive price discrepancy would occur. If a product worth £100 could really be bought for £5, that news would get out pretty fast. You are tapping into the market of people who want an easy sale and are prepared to pay the first price they see, for speed and simplicity.
You are responsible for your buyer. Ensure the item meets the quality you are advertising it at. If your buyer feels it is substandard, you are in the firing line – not your source.
Looking at the first link in the chain – your source – you must ensure you are not infringing copyright notices with your postings. You need to be sure you can source and list a product without risking getting a warning or ban.
Do eBay Allow Drop Shipping?
They do. With the proviso above taken into account. eBay have very strict rules on copyright, so you need to make sure you are running with good standing. You also need to keep any eye on your source as selling products you later discover are out of stock, meaning you cannot fulfil your buyers order won’t go down well with eBay either.