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There are a few Frequently asked questions about drop shipping that need to be answered first, so that you can start your business right away.
If you are new to drop shipping, I suggest you first read our article: What is Drop Shipping ?
Not true!!! And I’ll prove it to you:
Drop-shipping is legal according to any law-book. For every item in the market there’s a wide range of prices and most of the retailers are buying it from other suppliers. Nobody can tell you how much profit you can demand and nobody forces the customer to buy specifically by you. It’s their free choice to do research on other sites or not. You are buying the item honestly from your supplier, paying your fees and taxes and it’s the customer’s choice to buy it from you and not from your supplier.
Also, just because you don’t keep the products in your own warehouse, but rather have your supplier ship it directly to the customer, doesn’t make it illegal. On the contrary, you are providing a great service to the customers by finding excellent products for them and shipping the products in the best way.
Most importantly, eBay Policy allows drop-shipping and they do not require the seller to reveal where he sourced the product as long as it’s purchased in a legal manner.
Q: Why would someone buy from me on eBay when they can find the same product cheaper on the source site (like Amazon or Walmart)?
A: There are a few good reasons why people will buy from you on eBay and not from your suppliers.
- On eBay, you can pay with PayPal. Amazon on the other hand doesn’t accept PayPal. For many people PayPal is a much better option than credit cards because they are afraid someone will steal their credit card number and cheat them. PayPal is more secure and guarantees every payment against fraud or scammers.
- Some people find the eBay website easier to navigate than other sites or that is what they got used to for auctions and they continue to use it for fixed price sales too.
- The eBay Feedback System gives people a clear picture about the seller much more than on Amazon because buyers are more likely to leave detailed feedback on eBay than on Amazon (or other major retailers).
- On eBay, the buyer deals directly with the seller who takes personal responsibility for the sale from listing till delivery and beyond. On Amazon, the buyer deals only with an anonymous customer service representative who forgets about the buyer the moment the phone call or chat ends.
You can read more about this on How To Sell On eBay When It’s Cheaper on Amazon?
And this brings us to the main question:
Q: Can I REALLY make money with drop shipping?
A: Yes, definitively. We work with hundreds of users, who earn from a few hundred to a few thousand US dollars a month. This is not through magic, but through an effective system. The more you use the system, the more money you will earn. It’s as simple as that.
I’ll explain. There are 3 parts to making money with drop shipping from Amazon (or Walmart) to eBay:
- Finding what to sell.
- Making attractive listings.
- The “Numbers Game”.
Finding what to sell and making attractive listings – These I’ll leave for a series of posts I’m writing.
We’ll focus now on the “Numbers Game”. When you drop-ship from Amazon, the profits for each sale are very modest. Just a few dollars each time. So you need to put up a lot of products for sale on eBay. Each sale gives you a few dollars profit. The “numbers game” means that the more products you list on eBay, the more you will sell (it’s not really a “game”, this is serious business).
If you only have 25 products online, you might sell one a week. If you have 2500 products you will probably sell hundreds of products a month. It adds up. The more you list, the more you sell. The more you sell, the more money goes into your pocket. It’s that simple.
Q: What do I need to start a drop shipping business? Do I need a lot of money to start one?
A: This is one of the great things about the drop shipping business. To start your business you will only need a computer with a connection to the Internet. That’s all.
The product fulfillment will be done by your supplier (for example: Amazon), so you don’t need to keep stocks of the products in your house or warehouse. This means that the start-up costs are next to nothing.
Q: Do I need any special software for drop shipping ?
No, you don’t. You can manage a small drop shipping business even without any special software. Nevertheless, when your business grows and you want to save a lot of time and effort, it is really recommended that you use a drop shipping software. Take a look at our article on Drop Shipping Software and why its important for growing your business.
Q: When I make a sale on eBay how fast do I get my money in PayPal?
A: The answer is divided into two parts.
- When is the money in your PayPal account.
- When is the money is available for you to use or withdraw.
First of all when you set up your Payment Policy click the option of “Require immediate payment when buyer uses Buy It Now“. This means that the buyer can only complete the sale if they pay you immediately. Is you see a sale in your eBay account, the money is already in your PayPal account.
Concerning when the money is available for your use, that depends on how long you have been selling, if your record is good and you don’t have problems with buyers. If you are new with only a few sales, PayPal will “freeze” your money for up to 21 days until the buyer has definitely received the item and has a chance to respond with either a positive feedback or a complaint. BTW even if the buyer doesn’t give you positive feedback but also doesn’t complain, you’ll get the money.
Once you’ve proved yourself, made a few sales and are able to solve any issues with the buyers, PayPal will release your money as soon as it arrives in your account.
Q: How do you price an item from Amazon when you list it on eBay?
A: Great question. You need to take in account four different factors (besides for your supplier’s price), when pricing your items on eBay.
- eBay Fees – eBay takes off around 10% of the money you got for selling the item, which means the fee is calculated from the end price.
- PayPal Fees – PayPal also takes off a fee. Depending on where your account is located (US or abroad) and what merchant rate PayPal gives you (the more you sell, the less PayPal charges), you’ll be paying between 2.9%-3.9% + $0.30 per transaction. Again, it’s from the end price.
- State Taxes – whether or not you are located in USA, you’ll be paying state taxes on the purchase. The amount will vary between states and the type of item you are buying. This tax is from the purchase price on Amazon (not the end price).
- Your Profit – This is the most important factor and it is a part of your short and long-term business strategies.
For example, at the beginning of your business when you have few sales if any, you might set a very small profit in order to encourage people to buy and build up your reputation and feedback. Some people at this stage take only $0.50 – $1.50. After you have a few dozen sales under your belt with feedbacks to show, then maybe you’ll raise the profit margin to $1.50-$2.50. At a later stage when you are selling much more expensive items, you might set your margin according to the price of the item or according to how many units of an item you’ve already sold. Bottom line, your profit margin depends a lot on your success and reputation as a seller.
All these calculations can be quite a hassle to do manually and therefor it is vital to use an automation software where you set all the factors in advance and every product will be priced accordingly. For more information on automation software see my post on Drop-shipping Software Automation.
We want to improve our service to you by answering all your Frequently Asked Questions About Drop Shipping, so please feel free to write your questions in the comments below. We’ll answer them in the coming posts.
To find like-minded eCommerce entrepreneurs , Join our Facebook Dropshipping group here .
Wishing you much success!
Adriano & The DShopit Team