Retail Blog

There are a lot of companies that claim you can make thousands of dollars a month selling drop-shipped products online. This is a parade that is screaming to be rained on. The reality is that you probably won’t make much money selling drop-ship products on Ebay.

If you haven’t heard, drop-shipping is a retail fulfillment method where the retailer never actually owns or stocks inventory in the product they are selling. The retailer sells the product to the consumer online and a wholesale supplier, known as the drop-shipper, ships the product to the customer.

There is nothing wrong with drop-shipping–in fact, many of the web’s largest retailers sell drop-shipped products every day. What’s wrong is that drop-shipping is being sold as a method to get rich quick. Starting a business that sells products online exclusively through drop-shipping is a recipe for disaster. There are too many factors that you have no control over that can severely dent your business.

1. Low Margins

The drop-shipper you are buying from is probably not the manufacturer of the product you are selling. In fact, the drop-shipper is probably buying their inventory from yet another another middle-man. You are the last in line in the supply-chain and you are not going to get a competitive price from the drop-shipper. In fact, you should not be surprised if you find products on Amazon.com that are selling at a lower price than is offered by the drop-shipper.

2. Competition

Everyone wants to make more money and these drop-ship companies are marketing to everyone. If you can roll out of bed and sell digital cameras online then so can anyone else. If everyone ends up selling the same product the downward price pressure will further dent your profits–especially if they are sourcing from the same catalog of drop-ship products.

3. Reliance on a Single Supplier

Smart retailers always have multiple sources for their products when possible. If you buy into the idea that any company can provide a constant supply of name-brand consumer electronics then you have a lot to learn. There is a reason why people spend so much time finding new sources and protecting their existing sources. Products sell out all the time–especially hot consumer electronics. Just because a drop-shipper has a picture of an XBox 360 on their home page doesn’t mean he is going to have them in stock when you have just sold one to a customer. If your only drop-shipper doesn’t have the product you will lose the order and the customer.

4. Loss of Branding

How will your drop-shipper represent your brand when your customer receives your package? You will be lucky if the drop-shipper will include a packing slip with your logo on it to the customer. Even if your customer does get a branded packing slip he will also find himself on the drop-shipper’s mailing list. Think about it: you probably paid good money through AdWords to get that customer’s order and now your drop-shipper has the customer too.

Unless you can get a contract with a supplier tailor-made to your needs drop-shipping online is a losing game. Effective e-commerce takes effort.

You need a defensible strategy for selling products online. A key to your success will be establishing long-lasting relationships with high quality suppliers. Start creating those relationships now by finding quality wholesale suppliers and manufacturers of specialty products today.

Still not sure what to sell? Here are thirteen wholesale sources for Halloween costumes. Go make some relationships and start selling!