Did You Hear About the Guy Who Tried to Use Drop Shipping on eBay?

Just for the record, here are some of the changes that will negatively affect eBay sellers. Especially those with low profit margins (like those who use drop shipping)…

#1 – From $1 Reserve to $2 Reserve

Yes, the cost to list a reserve auction has just DOUBLED. And, as a seller using drop shipping you are going to want to list your items with a reserve price. Why? Because if you don’t you have a strong chance of the items selling for LESS than the price you can get them from your drop shipper. Alternatively you can raise you minimum bid but this could lower the interest in your auction as starting bidding low is a good way to build momentum for your listings.

#2 – Final Value Fees Increase

The amount of “commissions” eBay will take from your sales has risen dramatically. If you are dealing in high profit margin goods you will probably be happy about the increases as some of the bottom dwellers on eBay will soon be put out-of-business. However, if you were someone considering using drop shipping as a method for selling products on eBay this means it will now be even more impossible to profit.

I know, “even more impossible”… But let’s look at the new fees.

OLD FEE FOR PRODUCTS UP TO $25: 5.25% of the closing value.

NEW FEE FOR PRODUCTS UP TO $25: 8.75% of the closing value.

That is a whopping 3.50% more in fees. Let’s make an example with drop shipping.

Say you were lucky enough to find a product from your drop shipper that was selling for $8 profit on eBay. The drop shipper has it for $17 and you can sell it on eBay for $25. I know, you will never find a product with that good of a markup (almost 50%) from a drop shipper but let’s pretend.

So, you pay $15 for the product and sell it for $25. Now, let’s subtract your eBay listing fees which, assuming a basic listing, will be around $2.45 – with $2 of it being the reserve fee. So you’re at $5.55 profit.

Now, let’s subtract that 8.75% which would be another $2.19 bringing your total take on the product to $3.40. Now if we subtract your PayPal fees which are around 2% + $0.30 we would come to $2.60 profit.

Of course, your drop shipper will have a drop shipping service fee which usually ranges from $1.50 – $3.00. Let’s assume the best case scenario which is $1.50 and we’re down to a whopping profit of $1.10! Again, all of this assuming that the drop shipper has a product with a $8 profit margin.

#3 – PayPal 21 Day Hold on Funds

Maybe the worst part is the fact that the only good thing about drop shipping has been completely nullified by eBay’s new policy to hold PayPal payments for 21 days. Sure, not all payments will be held, but if you are using a drop shipping service and are new to eBay you can count on it happening to you. So, once PayPal holds your funds you cannot use your buyer’s money to pay the drop shipper shipping label on paypal . You are going to have to use your own funds. And, since you’re relying on a third party to fulfill your order you can only pray that something won’t hold the order up causing you to get a lower feedback score (in eBay’s new scoring system) which will cause you future payments to get held as well.

On the good side… You will see a decrease in some basic listing fees. But these lower fees only offset the higher ones if you are not successfully selling or if you like to list many pictures with your products. Of course with drop shipping you’re usually using a stock photo anyhow and so you will not save fees here.

So please, DO NOT use drop shipping to source your eBay products.

Good luck and much success to you!

If you’re interested in a product souring method that works like drop shipping with little-to-no cash risk, no quantity requirements (you don’t have to buy more than one of a product), and HIGH profit margins (ok, this is NOT like drop shipping) then visit my anti-dropshipping website at http://www.dropshippingsucks.com. There you can learn more about the pitfalls of drop shipping on eBay and also learn alternative ways to buy products to sell on eBay without shelling out tons of cash for wholesale products.



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