Why eBay Dropshipping Is A Bad Idea (& Choosing Better Fulfillment Methods)

With 179 million active buyers, it’s no wonder many sellers turn to eBay as their marketplace of choice: eBay boasts 1.2 billion live listings. But where do all those products come from? And how do they get to the end customer?

One popular eBay product fulfillment technique is called dropshipping. Low barriers to entry and minimal overhead make dropshipping an attractive option to new ecommerce sellers, but there are more cons than pros to this production and fulfillment method. Read on to learn why dropshipping on eBay is a bad idea, as well as better ways to fulfill orders.

What is eBay dropshipping?

eBay dropshipping is a hands-off approach to manufacturing and shipping products sold on your eBay store. Inventory is produced, stored, and shipped by the manufacturer. When a shopper places an order on your eBay store, the details are passed along to the manufacturer. If the manufacturer has inventory on-hand, they’ll ship it directly to your customer; If not, your customer will have to wait for them to produce and ship the product.

Is dropshipping legal?

Yes, dropshipping is legal unless you’re advertising a different item from the one that ships. That said, many manufacturer agreements put the legal liability of broken or dangerous products on the seller. Make sure you work with a trusted manufacturer — and read the fine print.

Is dropshipping allowed on eBay?

Yes, eBay allows dropshipping, but dropshippers on eBay must follow these rules:

1. Items can’t be shipped directly from a retailer or marketplace

When you sell an item on eBay, you can’t buy it from a retailer or marketplace and have it shipped directly to your customer. For example, this scenario isn’t allowed on eBay:

  1. You list Item X on your eBay store
  2. A customer buys Item X from your eBay store
  3. You order Item X from Amazon or Walmart and have it shipped directly to your customer

If eBay catches you doing the above, they may lower or remove your listings from search results — or even from the site completely. Your account may even be suspended.

2. Sales must meet shipping and delivery standards

If you choose dropshipping, you’re still responsible for following eBay’s policies and procedures. This includes getting the item to the buyer within 30 days after the listing ends.

You’re also responsible for the buyer’s overall satisfaction, from the moment they place their purchase through when they use the product. If shipping is delayed past 30 days, your account can be penalized. Even though these factors may be out of your control, eBay puts full responsibility on the seller.

3. False advertising results in listings or accounts being removed

The seller’s responsibility extends to product quality, too: If the product is a counterfeit or doesn’t work, or the customer receives something different from what was listed, the seller faces the consequences from eBay. This can result in listings being removed from search results or deleted, and even account suspension.

5 reasons you shouldn’t dropship on eBay

Still contemplating eBay dropshipping? Here are 5 reasons you should reconsider.

1. No control over the supply chain

As mentioned above, you’re fully responsible for customer satisfaction with eBay dropshipping. That includes product quality and fulfillment speed. Unlike dropshipping, most ecommerce fulfillment methods offer you some supervision over your supply chain, allowing you to address these problems yourself.

Dropshipping on eBay can also negatively affect your ability to provide good customer service. With eBay dropshipping, you’re essentially at the mercy of your dropship supplier — but your customers won’t take that as an excuse. You’ll have to communicate with your supplier and your customers and hope that the former replies quickly and works to improve upon the problem. If not, communication and sales may come to a screeching halt — and so will your revenue stream.

2. Little to no customization

In a similar vein, eBay dropshipping gives you essentially no customization options when it comes to your products and your fulfillment process. Your logo won’t be on the box or product, and your customers likely won’t associate positive aspects of the product with you — but you’re still responsible if there’s something wrong with it.

If your eBay store is brand new, dropshipping doesn’t give you the opportunity to build your brand identity and you may even sell identical products as other listings. If you want your store and brand to stand out, having more control over your inventory and fulfillment is key.

3. Low profit margins

One of the benefits of eBay dropshipping is low overhead — but one of the downsides is low financial returns. Dropshipping is notorious for low profit margins: You have to sell a lot of products to break even, and even more to make money.

Another consideration to keep in mind is that eBay charges a small listing fee after the first 50 listings and can take up to 10% of your final sale price. These fees add up quickly, especially if your sales volumes aren’t through the roof.

4. More experienced competitors

Piggybacking off the last point, low barriers to entry mean a lot of competition in the eBay dropshipping space. Many dropship suppliers work with several different eBay sellers, so there will always be others selling the same thing you sell. The bigger the competitor is, the lower the prices they can offer for the same product.

It’s harsh but true: If customers can buy the exact same product from another seller for cheaper, why would they choose to buy from you? Dropshipping makes it incredibly difficult to differentiate your store.

5. Longer transit times and distances

Because dropship suppliers are often located overseas, shipping items can take significantly longer and potentially be much more expensive than fulfilling orders domestically. Remember that eBay requires that buyers receive their orders within 30 days of the sale. Can your dropship supplier guarantee consistent delivery within that time frame?

If your supplier doesn’t have an item on hand, the customer will have to wait even longer for it to be produced. If you don’t have real-time insight into your inventory levels, that situation can be hard to predict.

Two better ways to fulfill your orders on eBay

Now for some good news: There are better ways to fulfill orders placed on your eBay store. First, make sure you’re working with a manufacturer you trust — our partners at Sourcify are a great resource for this. Once you have production and supply sorted, you have two options: self-fulfillment or outsourced fulfillment.

Self-fulfillment

Also called in-house fulfillment, this option involves handling the entire order fulfillment process without help from a third-party provider.  If your products are handmade to order or require high levels of customization, fulfilling orders in-house can ensure you maintain control over the entire process. This can also be a great (and cost-effective) option for new sellers with lower order volumes.

Outsourced fulfillment

The other option is to outsource some or all of the fulfillment process to a third-party logistics (3PL) provider. This can include inventory management; picking, packing, and shipping orders; and managing returns.

Many eBay sellers partner with a 3PL to outsource tasks that are too unproductive, costly, or complex to manage in-house. This can be especially helpful for sellers who want to automate time-consuming tasks to focus more time on growing their ecommerce business.

5 benefits of using a 3PL for eBay fulfillment

In addition to saving time, partnering with a 3PL for eBay fulfillment can benefit your business in many ways. Here are five perks of outsourcing eBay fulfillment to a 3PL.

1. Faster shipping

Today’s customers expect fast shipping wherever they shop online. With eBay Guaranteed Delivery competing with Amazon Prime, it’s never been more important to offer fast shipping to shoppers.

A 3PL has the technology and infrastructure to automate fulfillment for your business, meaning less work for you and faster shipping for your customers.

2. Cost savings

Fulfilling orders in-house makes sense when you’re shipping low volumes, but as your business grows, doing it all yourself becomes more and more expensive. Warehousing, equipment, labor, technology, and time all add up quickly.

Working with a 3PL eliminates the need to invest in all of that — not only does a fulfillment provider already have those components at scale, they’re also experts at making the most of them. 3PLs also negotiate bulk shipping discounts with major shipping carriers, then pass those discounts onto their customers.

3. Inventory management and forecasting

Inventory management goes beyond storing products. The right 3PL allows you to sync inventory with your eBay store, view real-time inventory counts at each fulfillment center location, and proactively reorder inventory to prevent stockouts. This offers much more visibility than working with a dropship supplier, meaning fewer stockouts and happier customers.

4. Customization options

Dropshipping limits how much you can customize your shipments to showcase your brand. You’re stuck with plain packaging — or worse, with boxes with your manufacturer’s logo and not your own.

Branded packaging can make a big impression; Oftentimes, receiving a package is the first in-person experience a customer has with your brand. If you want your brand to shine through your shipping, make sure you partner with a 3PL that allows you to use custom packaging, such as branded boxes and inserts.

5. Geographic footprint

If you’re only shipping from one region, you’re limiting your business’s potential — especially if that region is your supplier’s location overseas. Working with a 3PL can help you expand your reach by giving you access to a network of fulfillment centers. This can help you place your inventory closer to more of your end customers, which can, in turn, lower the time in transit and shipping costs for many of your orders.

Conclusion

If you’re interested in working with a 3PL for eBay order fulfillment, consider partnering with ShipBob. ShipBob’s software integrates with your eBay store to fulfill orders as soon as they’re placed.

With fulfillment centers in the largest US cities, ShipBob merchants can offer 2-day shipping using ground shipping rather than expensive expedited air. This helps keep shipping costs and transit times low and can increase your average order value and sales for your eBay store.

Ready for better eBay order fulfillment? Click the link below to explore ShipBob’s dashboard, learn more about fulfilling orders through ShipBob, and access pricing.

Learn more about ShipBob