The Ultimate Guide to Dropshipping

Evaluating Sales Channels

With a product picked, suppliers secured and your business legally established, it's time to start selling! Next, you need to decide how to get your products in front of prospective customers. Several sales options are available, but you'll most likely choose one or a combination of selling on your own online store, eBay,  or Amazon.

Dropshipping on eBay

As the world's largest auction site for physical goods online, eBay is a site most people know well. The following are some reasons you might want to consider – or avoid – dropshipping on eBay:

The Pros of Selling on eBay

Easy to Get Started – With eBay you can immediately dive in and start listing your wholesale products. Create an account, add a listing and you're in business.

Access to a Large Audience – When you list on eBay, you have access to the many online buyers who frequent the auction giant. Millions of people will see your listings, and the fairly robust and active market will help ensure you get a decent price for your products.  

Less Marketing – Because you're able to piggyback off eBay's enormous platform, you don't need to worry about marketing, SEO or paying for traffic. This saves you time, as marketing is one of the biggest challenges associated with launching a dropshipping business.  

The Cons of Selling on eBay

Listing Fees – The biggest downside to eBay are the fees you'll have to pay. The most notable is the success fee, which can be up to 10% – or higher – of the sale prices of your items. In the dropshipping market, where margins are already fairly thin, this will cut into a large portion of your profits.  

Constant Monitoring and Re-Listing – eBay is an auction-style marketplace, so you'll need to be constantly monitoring and re-listing the products you want to sell. Some tools help automate this process, but it's still not as straightforward as listing a static product for sale on your own ecommerce website.

Can't Customize Your Sales Platform – Your product listings need to follow eBay templates, making it more difficult to create a professional, value-adding page for your items.

No Long-Term Connection With Customers – You might have a few repeat eBay customers, but most will probably never buy from you again. Any goodwill you bank up through excellent service will likely be lost. 

The marketplace structure is created to serve itself. eBay doesn’t want to focus on the merchants (you), they only want to focus on the products. You will be significantly restricted in how you communicate with customers, how you brand yourself, the design of your store, and so on.

You're Not Building an Asset – When you create a store that generates traffic and has repeat customers, you're building a real business with value that you can sell to someone else. When you sell on eBay, you're not building a lasting brand or web property with any tangible value that can be sold in the future.

Dropshipping on Amazon

Although Amazon stocks and sells a number of items, many of the products listed are actually sold by third-party merchants via Amazon's website. Like eBay, Amazon acts to help facilitate the sale and to resolve any problems that arise.

The Pros of Selling on Amazon

The advantages of selling on Amazon are similar to the ones discussed for eBay: it's easy to get started, you have immediate access to a large audience and you don't need to worry about marketing or SEO. 

Amazon also offers its own fulfillment warehouses (Fulfillment by Amazon), which allow you to complement your drop shipped items with products of your own without having to deal with packing, shipping or warehousing.  

The Cons of Selling on Amazon

Listing Fees – As with eBay, you pay for access to this large network of buyers through fairly substantial commission fees. Amazon's commission fees vary by product type but are usually in the 10% to 15% range. 

Again, if you're working with relatively small dropshipping margins, this will take a hefty chunk out of your profits.  

Exposure of Sales Data – One risk you take using Amazon's platform is that Amazon can see all of your sales data, from the items that sell best to how much you're selling overall. Amazon has been accused of using this data to identify great selling opportunities and strengthen its own involvement in the niche, ultimately pushing out other merchants selling through its marketplace.  

No Long-Term Connection With Customers – Same deal as eBay, it’s unlikely that you’ll be able to grow a long-term relationship with your customers. Amazon exists to help themselves, so it’s in there best interest to focus on the products and not the sellers. Be prepared to be severely restricted on how you can brand your business, display your products and communicate with your customers. 

No Customization – Again like eBay you’re going to be really limited in terms of customization. Everything you do in terms of branding, UI, marketing, and everything else is under Amazon’s control. 

Dropshipping With Your
Own Online Store

The alternative to selling through third-party sites like Amazon and eBay is establishing your own online store to sell products. This is the method that attracts most people interested in building a successful dropshipping business. 

The Pros of Selling on Your Own Store 

More Control – With your own online store you get to create a shopping environment that's conductive to selling your products and – most importantly – adding value to your customers. You can customize the look and layout, and create custom product pages optimized to best inform your customers about the products.

Easy Design – Building your own ecommerce store is easy, especially with platforms like Shopify. Simply choose a store design out of hundreds of options, make any customizations you want, add your products, hook up a payment gateway and you’re up and running. Depending on the type of online store you’re looking to create, you can be up and running in one day. 

Mobile Ready – Selling on eBay and Amazon via mobile can be a pain. If you choose to build your online store with well respected hosted ecommerce platform your site will likely be responsive, which means it will look great on an iPad or mobile phone. This is increasingly important these days, as nearly 30% of online purchases are made via a mobile device. 

Some online store platforms, like Shopify, let you manage your entire business from your mobile device. This is particularly attractive to dropshipping business owners who often like to run their business on-the-go, or even on the beach somewhere.

No Third-Party Fees – You won't have to pay 10% to 15% of every sale to eBay or Amazon, which will significantly improve your profit margins. All-in-all you’re going to make more money by setting your dropshipping business up with an online store.

Building a Real Business – You're able to build a long-term business with a distinctive feel, known expertise and repeat customers. Most importantly, you'll be building a business with equity. It's much easier to sell a business built around an independently owned website.

The Cons of Selling on Your Own Store

Less Free Traffic – With your own site, you'll be responsible for generating traffic through marketing, SEO and paid advertising. There's more cost involved – either money or time invested – and you'll need to be willing to invest in a long-term campaign to promote your new store.

Increased Complexity – On Amazon and eBay, you don't have to think too much; simply fill out the standard template and publish your product listing. With your own site, you're ultimately responsible for configuring the design, layout and structure of your store. And if you're hosting your own store (versus using a hosted service like Shopify), you'll be responsible for any technical configuration related to the software and servers.

Which Sales Strategy
Should You Choose?

So which platform should you choose? There's a lot to consider, and different platforms will be better suited for different people and situations. 

If you're looking to dip your toes into the dropshipping waters and explore it as a hobby, selling on eBay and Amazon can be a viable way to move forward if you can find products with enough margin to cover your fees and still make a profit. There are many people making money selling on eBay and Amazon so you shouldn't dismiss it.  

But if you're serious about building a long-term business, we recommend starting your own ecommerce store. As discussed above, it offers the most flexibility, customization, ability to connect with customers, the chance to build real brand equity, and so much more. You'll need to invest in marketing and promotion, especially in the early days, but we think it offers the best long-term potential and is truly the only option for those serious about selling online.

Also, there's nothing wrong with selling a few items on eBay and Amazon while you're in the early stages of building your store. In fact, a number of mature, established brands sell merchandise this way, particularly through Amazon. 

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