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eBay PowerSeller Nick Sevino (a pseudonym) answers questions about buying and selling on eBay.
Hello Nick,
I have been reading numerous materials on eBay Selling, and I am real serious about getting into the Selling Business on eBay. Because of my work situation, I can only start part-time to begin, but my company is moving in 6 months and I would like to be able to get full-time then, if I work and learn enough by then.
Can you make money using Drop Shippers to start with? If I am able to do this, then I will be eventually be able to go full-time and then do my own shipping.
Thanks for your time, and I would really appreciate your professional opinion on this.
Sincerely,
Howard
Dear Howard,
You've asked a tough question. I've heard of PowerSellers that have been tremendously successful using drop-shippers. I never felt comfortable doing it. When you sell product that is not in your own warehouse (also known as Garage to many PowerSellers), you lose control.
There have been cases of drop-shippers that go out of business or run scam operations and don't ship the merchandise. The way drop-shipping works is to sell merchandise for a company and have them ship the items for you (drop-ship). This can be very desirable if you encounter the right opportunity, but those are very hard to find.
eBay dynamics are supply-and-demand based. If you are not one of the exclusive representatives of the company, the marketplace can become disorderly. Too many people will have the exact same item and demand won't be large enough to support it. You'll find yourself in price wars, and a high percentage of your listings will go unsold.
The result is low margins, and the two parties profiting the most are eBay, which gets paid regardless of whether you make the sale, and the drop-shipping company, which gets increased sale on your advertising budget.
On the other hand, the right company will give you competitive prices and the financial and logistical support necessary for your success. The benefit is the savings in inventory investment: they stock for you, what a dream. Nick's been looking for that situation for years and just hasn't found it.
You also bring up a very interesting topic, how to work full time and balance a full-time job with eBay sales. From first hand experience, I know it can be done, but it involves sacrifice and hustle! For one year, I was balancing a full time sales position and moonlighting on eBay. When sales were at a certain point, I did leave the employ of the company. Of course, during that first year, I took my share of 2-hour lunches.
The number one tip to making moonlighting a success is good customer communication. This is vital! If you can't get back to a customer immediately, inform him when you will respond. I used an email auto-responder with a message informing my customers that all emails would be returned between 6:00 and 9:00 at night.
Nick Tip: I use an excellent email program called The Bat with a great auto-responder feature http://www.ritlabs.com.
One of the biggest challenges to eBay moonlighting is figuring out how to get the packages out while you are working 9:00 to 5:00, when most post offices are closed. With a little hustle and creativity, you can surmount this obstacle.
You don't have to ship every single day. Many PowerSellers ship only two or three times a week. A practical scenario is to ship on Tuesdays, Thursdays and Saturday. You only ship on two workdays, and the longest interval of time for an order to go out is 2 working days. Different post offices have different hours, so check around. In my Auction descriptions, I stated that orders were shipped within two day of receiving order.
Another option: UPS, FedEx and Airborne all will pick up at your house. USPS (Post Office) will also pick up at your house for a $15 fee (expensive, but could be handy in a pinch).
I used to use my lunch hour to deliver the packages to the post office. If you use a postage program like Endicia (http://www.endicia.com), you can drop off your packages at the counter without waiting in line. Saturdays can be your day for international shipments. (Just be clear about this in your Terms of Sales.)
Tricky Nick Tip: I've brought packages to the post office one day later than the postage-label date, and they've gone through. The customer only sees the date printed on the label, and he blames any delays on the Post Office. I don't recommend this practice, and all post offices are different, so use caution.
Finally, you can contract with a fulfillment company to handle the shipping logistics. In this scenario, you purchase the inventory and have it delivered to them. They package and ship according to your instructions, and you pay them a storage fee and a fee per package.
This can be expensive, and you may lose efficiency when things are out of your hands. A financial analysis of profit verse expenses will determine if the impact to the bottom line makes sense.
Marketing the products of a company that will drop-ship for you can be a great, but only if the situation if right.
SideBar: The Hazards of Drop-Shipping
One eBay seller was arrested when he allegedly failed to deliver goods to customers http://www.auctionbytes.com/pages/abn/y02/m06/i21/s01. He said he had paid his drop-ship company in advance, and then they went bankrupt.
Sure enough, the owner of the drop-ship company was later arrested http://www.auctionbytes.com/pages/abn/y03/m05/i19/s03 and indicted for fraud http://jcmorris.com/103cr44/7.pdf
Finally, you can also run into trouble with wholesalers who undercut you on eBay http://www.auctionbytes.com/forum/phpBB/viewtopic.php?t=4813.
Always do your research and use caution when evaluating suppliers!
To comment on this letter, post a message in the forums at http://www.auctionbytes.com/forum/phpBB/viewtopic.php?t=5089
If you have a question you'd like Nick to consider for a future issue of "Dear Nick," send it to nick@auctionbytes.com.
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