Myth # 128: Wholesalers are a good source of items to sell on eBay.
The myth of using wholesale sources for items sold on eBay is so pervasive that it’s almost impossible to stamp out. The eBay-oriented newsgroups receive plaintive questions from newbies three or four times a week asking “Where can I find a list of reliable wholesalers willing to sell small quantities?” The consensus answer is usually, “There is no such thing!” The reason is simple: eBay’s normal prices are generally much, much lower than those offered by wholesalers in the quantities an eBay seller can afford to buy. It’s virtually impossible to purchase anything from one of these sources and expect to sell at a profit for higher prices. That $20.00 (retail) item you bought for $6.00 from a wholesaler is probably already available on eBay for $5.00 or less.
However, there is a big market in lists of wholesalers. The last time I typed “wholesale list” into the eBay search box I turned up more than 3000 different auctions for lists of sellers willing to deal with individuals at wholesale prices. Think about it: if these “wholesalers” are willing to sell to anyone, why would eBayers want to buy from you at higher prices? Yet, hundreds of these worthless wholesale lists are sold on eBay every day.
The wholesalers themselves are seldom worth anything, either. All the wholesaler does is add another middleperson to take some of the profit before the item gets into your hands. As one newsgroup regular likes to put it, “there are too many fingers in the pie.”
If you buy small quantities, the prices will be too high. When offering their very best price, true wholesale outlets demand larger purchase commitments than the average eBay seller is willing to make. Perhaps you think you can sell 100 of a particular item a month. To get your wholesaler’s best price, you have to buy 5000 of them. Do you really want to stock up on four years’ worth of one product to get the best price? If you’d like to sell a dozen different items, do you want to accumulate thousands of each one?
Even if you nail down a great price on an item, is it low enough to beat the competition? What happens if a competitor manages to get an even better deal and seriously undercuts your price? To make money on items purchased at wholesale, you need to buy them at a much lower price, generally a minimum of that 1:10 ratio I mentioned in Myth # 125, and, ideally, a better price than that. I use several different techniques to achieve those favorable ratios:
Discontinued items and close-outs. I’m not talking about retail close-outs here but wholesale close-outs, with prices that amount to pennies on the dollar. One of my best-selling items is an electronics accessory that originally sold for about $20.00. It was replaced by an improved model, and the wholesaler I deal with purchased the remaining 2000 or so and was selling them to dealers for $3.00 each. I bought a few dozen as a test, sold them effortlessly for $7.95. With those sales under my belt, I figured out a new use for the accessory and approached my wholesale rep. By that time, only 1200 were left, and I asked what kind of price I could get if I bought all of them. It turned out I could buy up the lot for 60 cents each, and I snapped them up. By bundling the accessory with other items I’ve been able to sell the packages for as much as $18.95, and nobody else on eBay can offer the identical item, because I bought the last remaining stocks.
Direct importing variations. I’ve tried importing items from Taiwan myself, but found I could do almost as well working directly with my trusty wholesale outfit and having them import the product on my behalf. My second-biggest seller is a gadget that sells for $10.95 alone, and in combination with other items for $24.95 and more. I was buying them for about $3.00 and selling 100-200 a month when I brainstormed with my wholesaler and came up with a solution that worked for both of us.
I faxed my wholesale outfit an open purchase order for 3000 of the gadgets, with a promise to buy all of them over a specified period of time. They in turn ordered 3000 of the item from an Asian source without the usual packaging (which I was removing anyway) and delivery within 90 days. The product was manufactured, packed in heat-sealed bags, and shipped by boat. My wholesaler assigned a special product number and keeps the gadget in their warehouse just for me. Each month, I call in an order for a couple hundred and am billed about $1.00 each for them. No one else on eBay sells this exact item, so I am virtually without competition. I’m buying “wholesale” but at prices that are far below the usual prices, so I can make a decent profit.
Myth # 129: Dropshippers make it possible to sell on eBay with no inventory at all.
Profitable dropshipping is almost as mythical as profitable wholesale buying. Unfortunately, the genuine opportunities to make money on eBay have fostered the idea that eBay can be a “Get Rich Quick” plan. This idea is most readily embraced by those who want are really just looking for a lazy person’s way to make money.
On paper, dropshipping looks ideal. You don’t have to make an investment in inventory, or deal with pesky details like packaging and shipping. All you need to do is post auctions on eBay, collect the money, send some of it to the dropshipper, and relax while the shipper sends the item to your customer. No fuss, no bother.
Unfortunately, the only party guaranteed to be free of fuss and bother is the dropshipper. Think about it. The shipper doesn’t have to post auctions, deal with after-auction e-mail messages, collect money, follow-up with deadbeats, wrestle with feedback issues, or handle customer service if the product shipped doesn’t arrive or turns out to be a dud. All the dropshipper has to do is collect money from you and, if the shipper chooses to, send the item to the customer. All the problems fall in your lap, and they can include any or all of the following:
High prices. Dropshipper prices are certainly no lower than wholesalers’ and frequently higher. They undoubtedly make money selling at those prices, but can you? Again, it’s too many fingers in the pie and a pie that’s just not large enough for all of them.
Out of stock. What happens when your supplier runs out of an item after you’ve sold it and collected the money. You’ll end up with an angry eBay customer, probably some bad feedback, and the need to issue a refund. Your dropshipper’s problem has become your problem.
Late shipping. You can’t really promise or count on prompt shipping when somebody else is doing it on your behalf. Unless your dropshipper is really on the ball, expect to receive complaints from your buyers on a regular basis.
Non-delivery. Items get lost in the mail, delivered to the wrong location, or stolen once they get there. That’s the good news. The bad news is that your dropshipper may not even send the item, may ship it to the wrong location, or may take your money and go out of business before the item is sent. Scam dropshippers may never intend to ship your merchandise in the first place.
Defective merchandise. Even if the item arrives safely, it may be damaged, not as advertised, or have some other defect that neither you nor the buyer might be aware of. How can you guarantee your goods are as described if you’ve never seen them yourself?
There are honest and reliable dropshippers. Some have prices that are low enough that it’s possible to sell their wares online. You’ll find many eBayers who use them successfully. However, the odds are greatly against you, so you should approach the dropshipping business model with a great deal of skepticism.