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The Downside of Dropshipping

Updated on January 9, 2015

Drop shipping, to define it to the novice, is a means of selling things on one forum and entering your buyer's shipping info on another forum, thereby making a profit from the sale without actually having to ship anything. You can do it from anywhere in the world if you have a reliable internet connection.

Drop shipping has its clear merits. You don't have to carry inventory which frees up space for all of the amazing things you'll buy from your profits. You also don't have to package anything or go to the Post Office. It's basically the online retail sellers' lazy paradise.

Now, before you get super excited and start listing goods, there are some cruddy things to consider. The overarching theme is that you are at the mercy of someone else's employees. You can't fire or counsel them for not doing their job. You have zero control over your virtual workforce.

So what does this mean? If they ship late, your shipment rate suffers. On a forum like Amazon, that is pretty bad. Particularly if you sell multiple items from the same drop ship source. If you go in the red, your account may be reviewed and closed.

Groupon is a source I would never recommend. They have some great suppliers but the ones that suck are going to hurt you. If your customers are dissatisfied, you have to go through the hassle of letting Groupon know and then either processing a return or a potential partial refund. Even worse, you may receive bad feedback. Any experienced seller can tell you multiple bad feedbacks hurt your account and your sales.

So how does one minimize risk if they still decide to use drop shipping? Pretty simple. And by writing this, I am in no way telling you that your risk is low. Please read further.

eBay is pretty good about siding with the seller if customers claim they didn't get the item if the tracking number shows it was delivered. Amazon is the opposite. They basically require signature confirmation as proof and sometimes even then you lose. It's a scammer's paradise (if this happens to you file a report with the Postal Inspector and Amazon. Theft is a crime and sometimes these scammers are prosecuted).

Your lowest risk when drop shipping may (and I mean may) be doing it by buying from Amazon to sell on eBay. Personally, after bad experiences, I prefer to just get nice inventory from Goodwill Outlet but to each his own. Good luck!

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