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Drop Ship on eBay? Risk Versus Reward

Let me start with an interesting eBay auction story!

I was experimenting with various ads and categories in eBay. There are many tools on the market that can help you locate what are called "Hot eBay Sales Items". A few years ago, eBay would put a small flame next to any item that received 10 or more bids. That would be considered a "hot" or "in demand" item.

If an item is in demand, it is simply good business logic to search for sources on the item so you can also sell them on eBay. While using a hot item search tool I noticed that high-end appliances (brands like Viking, Subzero and Thermador) had a very substantial number of bids.

I went to the Viking website, looked at their accessories for gas ranges, and proceeded to list one of the items on the website for $39 to test consumer response. This was $15 more than the price of $24 shown on the Viking website. I did call the Viking 800 number for customer service to make sure the item was in stock before I listed the item for sale, and also to verify that I could pay with a credit card and have the item shipped to a different address. Viking said, "yes" to both questions.

I was surprised to find the item sold after three days for the $39 price plus $6 shipping. I received payment from the eBay buyer, called Viking and placed the order to be shipped direct to the buyer with only a packing list.

This is a great example of how I set up a drop ship account. When you set up a drop ship account with a distributor or wholesale company, they will give you a discount on the retail price. I made money on this test transaction and sold it for more than retail.

I will now explain the process of drop shipping. Drop shipping a product means you are taking an order either from your own website, or an auction site such as eBay, Yahoo, Amazon, etc., receiving payment from the customer and then contacting the direct source of the product to have it shipped to the customer. You supply the name and address of your customer, thus eliminating your need to box and label the item. The drop-shipping source uses a "blind ship" label, which contains your business name and address, or just a plain packing slip with the package.

In a perfect world, the beauty of this is that you have no overhead expense. Overhead expenses include such items as rent for storing the product, interest on the money spent to buy the product, and labor involved in boxing and shipping the product. You also have no risk of overstocking product or slow moving product. The product is purchased from your direct source only after you have received an order from your customer.

www.hsshopping.com suggestion:

Some of the potential problems with drop shipping are:

1. The drop shipper source runs out of the product you are listing for sale

2. Defective merchandise returns may have fees associated to you.

3. Customer support is out of your hands, which, if handled incorrectly, can negatively affect your feedback.

As with any business venture, there are risks and rewards that you have to balance to find out if the method works for you.

Drop shipping is also a good way to test new products, if you don't want to invest $500 or more on a minimum order to obtain resale pricing. You can list your item on your ecommerce or auction site and experiment with various titles and categories to see where the product will sell and what it will sell for. Any successful sales organization will tell you the key is to Test! Test! Test! Fine-tune your listings and products to find the best mix for you.

Use eBay to test your drop ship items. Remember, the information you gather on these products is very valuable to you. You may sell some items at or below cost for your testing purposes, but I have purchased volume loads of product prior to testing and then been saddled with them - even having to sell some for 50% of my cost. You will make mistakes - everyone does! Using eBay and other auctions sites to test new markets or new products via drop shipping eliminates any large risk before committing to a product line.