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Dropshipping is the lowest-risk eBay business model known. Dropshipping is a low-cost option that can be started. However, it can be risky for people who don’t want to gamble on a new venture. Below are the steps to making money dropshipping on eBay, despite all the difficulties.
Prologue: What is Dropshipping?
- Find a supplier (a company which manufactures or distributes products), and then close a dropshipping arrangement with them.
- You can list your products for sale on a website like eBay.
- You buy a product from someone and then tell them to ship it to you.
- While you handle customer service, the supplier will take care of all inventory and shipping.
There is no need to spend money on products you don’t have yet sold. Also, you don’t need to worry about inventory storage or packing boxes. But on the other hand, dropshippers have a much harder time finding suppliers and profitable products than sellers using other eBay business models.
Let’s now discuss how to overcome those obstacles and make money.
Dropshipping businesses can be destroyed by lack of professionalism before they even make a sale. Many suppliers will disregard you if you don’t have a registered company and a sales tax ID. This can prevent you from obtaining the lucrative products that you need to earn a living.
Registering a business is the first major hurdle you have to jump. Expect to put in a lot of effort and pay several hundred dollars for fees.
Once that’s done, you will need a sales tax permit for your state (unless you are lucky enough to live in a state with no sales tax, such as New Hampshire) and possibly your city. All the paperwork should be available at your local town hall.
Later, additional tax permits might be required. See “Online Sales Tax for Ecommerce Businesses” for more info.
- Costs for registering a company and obtaining a sales tax ID (or reseller’s license) vary from one state to the next. In general, you can expect to spend $500 in your state (business and tax registration), and $50 for each state where your suppliers are located or where high-volume sales are conducted (sales tax registration only).
- You may be able to save time and money by using local suppliers or a small number of large suppliers that offer a wide range of products.
Locate a Source for Suppliers
Scammers are common among the many suppliers you will find online. Consider going to trade shows, where you can actually meet people and determine their businesses are legitimate, or use a trusted supplier directory like SaleHoo.
Alternatively, you can select Spocket, available on WooCommerce and Shopify. This is a huge marketplace that sells products from the US and EU. It has hundreds of verified suppliers, with pre-negotiated discount codes. There’s plenty of margin to make a profit.
Always make sure any supplier you consider has been verified by a third party like the Better Business Bureau or has plenty of positive, trustworthy reviews from other users. If the reviews don’t seem trustworthy to you, read them yourself.
Once you have figured out how to find reliable, safe suppliers, you can begin looking at brochures and websites, and then contact suppliers to inquire about dropshipping policies. This will allow you to determine which products are profitable.
- Dropshipping is not an option offered by many suppliers. This will save you hours of wasted research.
Pick a Niche
Choose a product category you wish to sell. a niche. Look for niches that are popular but not overcrowded with competitors. For ways to do that, see “How to Figure out What to Sell on eBay.”
You should be able to find similar products (like a variety lawn furniture), and you will have no trouble finding one supplier who sells all or most of them. This will allow you to spend less time searching and more time selling. You will also be able to negotiate better prices if you do business with multiple suppliers.
- Your brain is more important than your heart. Dropshipping can be very competitive. You shouldn’t count on making a profit off of the passions you have.
- You should look for items that have large profit margins. Remember to include the shipping cost, item price, and dropshipping fees.
- Sell crap. Items that are likely to get returned or result in eBay chargebacks may end up costing you more money than they make.
- If you are interested in something that looks promising, but your profit margin is low or nonexistent, contact suppliers directly. You may be offered a lower price than what they have posted publicly.
Select Your Supplier
It’s now time to make the sale. Before you sign anything, consider the following:
- The location of the supplier. You may need to register for new sales taxes permits depending on the location of your supplier.
- Which country they ship to. They may not be a good fit if you only sell to U.S. clients and the supplier ships only domestically in China.
- There are fees and paperwork. Many suppliers will require you to pay a registration fee or membership fee. You will likely be charged a small fee to ship each item.
Do a Test Order
When ordering from a supplier, make sure they live up to the contract. You should ensure that the item is shipped promptly, that it arrives in good condition, and that you inspect it to make sure it meets your expectations. Their job is critical to your eBay reputation.
You can list their items with confidence if everything is in order. You might want to test them again every now and again to ensure they aren’t slowing down.
You are a supplier with proven products and profits. You now need to convince people to buy from you.
- Build a great team.Feedback score at eBay. In addition to providing Outstanding customer serviceTo get the first positive reviews, you might need to sell your product at a loss or at cost.
- Integrating eBay with a helpdesk provides an enormous boost to your customer service.
- Follow the best practices of eBay SEO to help buyers find your listings.
- How to create an eBay description and take photos for eBay. Although your supplier may provide you with a lot of product information and photos, your listing text should be unique. Having more photos is a good idea.
Pay attention to your competition. Even if your product is the first to be sold, it’s likely that someone will follow you and begin competing against you.
As we mention in our eBay SEO guidelines, the lowest price isn’t always the best price. Do not feel pressured to beat your competitors. This could easily lead to a price war, leaving you with no profit margin. If they are a traditional retailer they will continue making money even if you lose. Dropshippers have the lowest profit margins, and often have to share the same product with others.
Instead, focus on providing the best customer service and a competitive price. You will be the best match search provider if your service is superior to your competitors and your price is reasonable. Integrating eBay with a helpdesk can give you the competitive edge you need here.
Keep your eyes open. Never know when your best product will be outsold by a new competitor. You’ll never stop looking for new products to market and you’ll always stay one step ahead.