Disclosing the Reality of Dropshipping

For those looking to cash in on the popularity of online marketplaces like eBay, dropshipping is often touted as a viable option. At least, that's what the proprietors of all those dropshipper listings would have you believe. It seems simple enough: you sign up for a wholesaler's dropshipping service and then promote the wholesaler's products on your website or through online auctions. When customers purchase your goods, you just inform the wholesaler, pay the agreed-upon price, and keep the profit.

Could that be true? Is this the key to your monetary security in the future?

In response to a fiercely competitive wholesale industry, the American market was the birthplace of the dropshipping model. It was recognized that wholesalers were having trouble turning a profit, and the idea of "drop shipping" was developed to help alleviate this problem. If the wholesaler wanted to offer entrepreneurs the opportunity to sell their products without having to stock or manage shipment, they would charge a slight premium above the wholesale price to cover the extra work involved.

After a small number of wholesalers got going, the rest of the industry was pressured to follow suit or risk losing ground and eventually going out of business. This is why the dropshipping industry is so lucrative in the United States.

We don't have nearly as much competition in our market here in Australia. Recently, a small but growing number of purported wholesalers have begun providing a dropshipping option for their customers. When you stop to consider it, what wholesaler would want to deal with packing and shipping just one of a particular item? Unless they were struggling like so many American businesses, they obviously wouldn't. The wholesale industry in Australia can function quite well without resorting to such measures.

Some Australian dropshippers aren't even legitimate businesses, as many wholesalers there just don't want to deal with the hassle of dealing with dropshippers. It's possible that some of these businesses are simply bargain stores that sell at a lower wholesale price, while others are wholesale dropshippers that purchase from true wholesalers at a substantial markup. As a matter of fact, they are more akin to shops. At the rates they set, it's nearly impossible for anyone to make a living selling their wares on eBay. Most eBay items are already priced at or below their suggested retail value, so you'd be lucky to make a profit.

Even though you would anticipate lower costs from Asian dropshippers, the scenario remains unchanged. They, like Australian wholesalers, don't need to dropship to make a healthy profit, but some of them have discovered that dropshipping to the West allows them to charge significantly more than average for their products. Because of the far reduced cost of labor in Asia, "wholesalers" can pocket even more of the final sale price.

To that end, I've been doing some pricing comparisons on digital cameras from a popular Asian dropshipper. On eBay, these cameras were going for less than what the dropshipper was asking. The Canon digital camera retailed for $469.00 from the dropshipper but was selling for about $430.00 on eBay. This means the seller loses $49.00 (plus eBay fees) while the Asian dropshipper makes a profit of 100% or more.

The only individuals that benefit from dropshipping are the dropshippers themselves because they don't have to provide as low of pricing to stay in business in Australia, Asia, and the UK as they do in the US. Dropshipping from the United States to Australia is futile because of the high shipping costs.

Why pay a middleman's inflated pricing for a single item when most wholesalers have a $500 minimum order? There is no minimum order quantity with some suppliers; you may even buy only one of something! When you cut out the retailer and go straight to the wholesaler, you save money and get to keep the savings.

In conclusion, there are only three methods to profit from drop shipping:

First, it's not ethical to compile your own list of dropshippers and then offer it to naive beginners.

Build your own website geared toward the US market and interact directly with US-based dropshippers. Another option is to attempt selling on the US eBay site with the help of US dropshippers; but, with so many people in the US doing the same thing, you might not make much, if any, money.

To become a dropshipper, you can start your own business by purchasing goods from Australian wholesalers and then reselling them to customers.