Learn to sell on Amazon with Skip McGrath Follow Skip on Facebook
Follow Skip on Twitter
Learn How to Sell Used Books on Amazon

Why Dropshipping Is a Poor Business Model

The eBay & Amazon Seller's News ~ May 22, 2018 ~ Volume 19, Issue No. 10

Tips, Tools, News and Wholesale Resources for eBay and Amazon Sellers
by: Skip McGrath

In This Issue:

Musings from and about eBay, Amazon and The World Wide Web

  1. Why Dropshipping Is a Poor Business Model
  2. Tips to Sell Used Books on eBay & Amazon
  3. Understanding Your Inventory Management System for Amazon
  4. Dealing with the Summer Slowdown on eBay & Amazon
  5. New Wholesale Sources for eBay and Amazon Sellers

"... life doesn't give you seat-belts!" ~ Batman


Summer Slowdown Book Sale

I rarely put all my books on sale, but the summer slowdown is not just on eBay and Amazon, it affects my book sales too. So, from now, through the end of June, I am having a 40% off sale on all my books and training courses. Please click here to see all my books. To get your 40% discount, just use the Coupon SKIPSAV40 at checkout. Be sure and hit the button that says Apply after you enter the coupon so it will take effect.

I apologize to those of you who just purchased a book over the past week or so, but unfortunately, I can not backdate my sale price. This was a fairly sudden decision brought on by slowing sales due to summer selling and was not planned.

Important Please read before you order. Whenever I have a sale, I get folks who order multiple books. Both the Complete Amazon Marketing System and the eBay Marketing System include all of the information in The Wholesale Buying System -so please do not purchase one of the Marketing Systems, and the Wholesale Buying System.

One more thing, both the eBay and Amazon Marketing Systems contain a large amount of duplicate information -so again, I do not recommend purchasing both of them. My suggestion would be to buy the Amazon System, and my published book - Three Weeks to eBay Profits - Third Edition.

Sellers get ready. eBay is doing it again.

eBay is rolling out a new search engine over the next few weeks. Every time eBay does this it confuses buyers, and sellers see their sales tank until they understand what eBay is doing and make adjustments.

I wish I had some wisdom and advice for you but I don't, except - pay attention. These roll-outs always have glitches, so I suggest you wait a week or so to take any actions and give the new algorithm time to settle in.

Are you having FBA Hazmat issues? Amazon has released a list of potential dangerous goods. You can see the complete list here (seller central login required). Note: Amazon calls it a complete list -but it's not. There are several items missing - so you may want to read the policies themselves for more complete information.

The list does not contain every potential dangerous good in each category. The examples represent dangerous goods that might be among your listings. There is also a place on the page where you can enter an ASIN to see if Amazon considers it hazardous.

When products may be regulated as dangerous goods, sellers must provide Amazon with specific product information and documentation (for example, a material safety data sheet - MSDS).

Of interest to me is the food category which is not on the list. It's missing items in the grocery category such as cooking oils and sprays which has caused me problems before.

One real surprise on the list is eBooks. Two things about that: 1) Except for Kindle books, Amazon does not allow the sale of eBooks and 2) what is dangerous about a PDF file and since they are not shipped to FBA - why are they on the list? Strange?

When you see an item as Reserved in your FBA inventory report - what does that mean? It can be one of three things:

  • being processed for an order
  • in-transit to another fulfillment center
  • Received, but not yet checked in and stocked

Sellers can download a Reserved Inventory Report in your Seller Central Reports section, under Reports>Fulfillment.

Amazon announced that all Grocery & Gourmet food products selling below $15, have had their referral fees dropped from 15% to 8% until October 14th.

Amazon also reported that third-party sellers (that's you and me), now account for over 50% of total Amazon sales. Amazon sales this year will easily exceed $240 Billion, so that is a nice chunk of the market!

Remember, you can still remove your FBA inventory for free -although this could end any day without notice from Amazon.

If you remove inventory for free during this promotion you will not be able to send more units to FBA of the ASINs you remove until either:

  • August 1, 2018, when these restrictions will be lifted - or,
  • When your inventory level for the removed ASINs falls below Amazon's sales projection for the next eight weeks. That is based on your average sales rate for the removed ASINs during the prior 90-days

Lets get started with this month's in-depth articles:


1. Why Dropshipping Is a Poor Business Model

Dropshipping is one of those business models that sounds perfect until you dive into the gory details. A few years ago (before 2006), I used to make a lot of money dropshipping on both eBay and Amazon. It was so easy and took almost no investment, that it was like printing money. But those days are long gone.

On the surface, you find a dropshipper with thousands of products. Instead of buying the products outright, you list them on eBay and/or Amazon (or your website), wait for them to sell. When the buyer pays, you order the product and pay for it. The dropshipper then ships it directly to your customer. Only if it were that easy?

The first thing you need to understand is there are several types of dropshippers. These include:

  • Virtual Dropshippers - These are companies who claim to have all the top brand name products in their warehouse. The problem is, their warehouses are virtual - they don't really exist. When you place an order for a product, these companies buy it from a middleman discounter. You are not really getting a typical wholesale price. Type the word dropshipper into the Google search bar and these are the companies that usually come up on the first page.

    They mark up the price they pay and add a few dollars as a dropshipping service fee. After a few days go by, they ship the product to your customer. (In addition to the dropshipping service fee, some of these companies also add money to the shipping cost).

    Besides those costs, many of these dropshippers charge an annual membership fee, or they charge for a website loaded with thousands of their products. (When Google sees one of those websites -they promptly bury it so no one will ever find it).

    There are tons of problems dealing with these companies, and should you ever decide to get into dropshipping, I recommend you avoid them at all costs.

    Don't even waste your time with these types of dropshippers. Any time any wholesaler asks you to pay a membership fee, run the other way as fast as you can -because its almost always a scam.

  • Dropshipping Manufacturers and Distributors - This is a slightly better option -but there can still be problems. With these folks, you are at least dealing with a company who actually has inventory. There can be other problems with these guys that I will get into below. Having said that -if you do decide to get into dropshipping, these are the type of companies you should look for.

  • Overseas Dropshippers - This is a fairly new practice, but there are now many companies dropshipping direct from overseas countries -especially China. These companies are highly unreliable and the practice is fraught with problems (for example - just try returning a defective item. Another problem is the company sending the incorrect product which actually happens quite often). My advice - these companies have such a poor reputation that I urge you to never, never, never deal with them.

  • Dropshipping liquidators - These are liquidation companies that agree to drop ship their products. They are hard to find, and when you do they can be very unreliable because they also sell their products in bulk. For example - Let's say they have 200 each of a certain electric coffee maker. You list the product on eBay or Amazon and one of them sells. The problem is - just a few hours before you get an order, someone came along and bought all 200 at a bulk liquidation price. Now you are stuck and the dropshipping liquidator could care less.

Let's examine some of the problems that affect all dropshippers:

Inventory - A major problem occurs when an eBay or Amazon seller sells something they can't deliver and have to cancel the order. Do that even once, and it hurts your account metrics which affects your search position. Do it a few times, and your account will be suspended.

I don't know of any dropshipper that guarantees their stock on hand. You might look at their inventory and see several units on hand, but when you place the order, you are informed they are out-of-stock. This happens because most dropshippers are not very good at updating their inventory. In fact, I had one of the largest dropshippers on the web tell me they only update their inventory on Mondays and Fridays.

Shipping speed - Both eBay and Amazon have policies whereby you must do two things:

1. ship by the promised date and prove it with tracking.

2. At least 90% of your shipments must be shipped within one business day and the tracking sent to eBay and/or Amazon within that time. I have dealt with about a dozen dropshippers over the past few years and only one of them met that standard (They are now the only dropshipper I still work with).

eBay has just introduced a Guaranteed Delivery Policy which further complicates this issue.

Also note: A large number of dropshippers actually source from Asia and it can take up to two weeks (or even longer) for your sales to be delivered.

Return issues - Amazon has long had a liberal return policy and ebay has just introduced theirs. It doesn't matter which type of dropshipper you deal with -all of them are difficult to deal with when it comes to returns, and even worse if you have a claim against their shipper for loss or breakage

Fake Merchandise - If you read the fine print, many of these so called dropshippers have a statement that says they do not guarantee the authenticity of merchandise listed on their site. Since a lot of these dropshipping companies source from Asia, this can be a real problem.

eBay & Amazon Drop Ship policies - It is not very well known (and seldom enforced), but Amazon actually has a policy that does not allow sellers to drop ship. Moreover, both eBay and Amazon have policies in place to discourage the practice. I have spoken with sources inside eBay and Amazon who tell me the practice of sellers dropshipping products will be banned outright in the coming year or so.

I know there are sellers still dropshipping profitably, but when it comes to using the dropshipping business model on eBay and/or Amazon, I think those days are over and it is no longer a good business strategy.

If you have your own website (not one of those set up by a dropshipping company), then you can still make dropshipping work, but it is definitely a non-starter for selling on popular online selling venues. There are some folks dropshipping successfully with Shopify websites.


2. Tips to Sell Used Books on eBay & Amazon

Over the past few years, my book: Sell Used Books on eBay, Amazon.com and the Internet for Profit, has been one of my top selling books. Of all my books, people must like it because, although it comes with a 90-day, money back guarantee, it has the lowest return rate of any book I sell

Note: My book on selling used books is about learning the online book business. It is not a how-to sell on eBay or Amazon book. If you want to learn how to sell on eBay or Amazon, I suggest you look at The Complete eBay Marketing System or The Complete Amazon Marketing System. (Please don't buy both books because there is some duplication in them). Remember my sale: If you buy any of these books between now and June 30 th, use coupon code SKIPSAV40 at checkout to get a 40% discount.

Selling books on eBay, Amazon, and the Internet is one of the easiest online businesses to start. The most difficult problem online sellers have today is finding merchandise they can sell at a profit. Selling used books solves this problem because there is a ready market for used books-and there is ample supply at great prices, as you will learn.

The used book business does not require a large investment to get started and the risk of failure is very low as long as you follow sound business practices and techniques. Selling books on eBay, Amazon and other Internet sites is actually quite easy. You can start with as little as $50 worth of inventory. If you learn how to buy correctly, earning gross profits of 60% to 90% is not that difficult.

Tip #1 - Focus on non-fiction books. The problem with fiction (novels), is that popular titles are printed in the millions, whereas most non-fiction books have a first-printing of 40 to 60,000. When there are millions of copies of a book printed, the supply of used copies on eBay and Amazon is so large, that there is just no profit margin to be had unless you happen you find a rare first-edition.

Tip #2 - Learn how to write book descriptions that sell. A really good book on that topic is: How to Write Descriptions that Sell Used Books on Amazon: Easy Ways to Make More Money Selling Used Books on Amazon with Simple Copywriting Templates .

Tip#3 - The best books to buy are the ones that will sell. When you are starting out you will want to stick with non-fiction. Fiction and/or literature, is a somewhat specialized area. If you are knowledgeable in this area, then by all means go for it. But be careful. Collectible literature can be risky-sort of like walking through an off-leash dog park in your bare feet blindfolded. (Ask any bookstore owner and they will tell you that non-fiction books make up the majority of their sales.)

When it comes to non-fiction, the narrower and stranger the niche, the better they seem to sell. Some of the best-selling genres include books on military, history of specific events, (stock-market crash, civil war and so on) transportation (cars, motorcycles, boats, planes and trains), Pre-1960 books on engineering, science and medicine, geography and books about geographic events such as The California Gold Rush and almost any How-to book - the stranger the better. For example a book on glove making recently sold on eBay for over $100, whereas books on improving your golf game routinely sell for under $5.00.

Tip#4 - Condition is everything! - As with any collectible, condition is very important. With the exception of very rare books, condition is the most important factor that determines what a book will sell for. I only buy books in very-good or like-new condition. These will always sell faster -and for more money. The other thing to watch out for is the cover on paperbacks, or the dust jacket on hardcovers. In general, books with dust jackets are worth far more than those without. The condition of the dust jacket is also important. A dust jacket, or cover, with even a small tear will detract from a book's value.

Tip#5 - Avoid low-priced books - I look for books that will sell for $10 to $20 or more. You can easily find books for 25¢ to 50¢ that will sell for $3 or $4. Now that is a great markup. If you buy a book for a quarter and sell it for $4 you have made a 1600% markup-Wow! But, you have only made a couple dollars after selling fees. When you pay $,1 and sell a book for $10, you make about $7.50 after selling fees. For the same effort you can make a lot more money on a more expensive book.

When you sell a book and make $3.75 each, you would have to list, sell, pack, and ship 533 books just to make $2,000. But if you pay $3 for a book that sells for $21, you make about $16 a book after fees. Now you only have to sell, pack and ship 130 books to make the same amount of money.

Whenever I write about selling used books, I am often asked about the large number of penny books selling online. Although you will see some non-fiction books selling for 1¢ each, most of the penny books tend to be fiction.

Here is an article by Chris Green of Scan Power that explains the ins and outs of the penny book market. The article is a bit dated, but the explanation is still accurate years later.


3. Understanding Your Inventory Management System for Amazon

This is a guest article by Annie Fleming. Annie is a Public Relations Specialist for Channel Supply Experts. Channel Supply Experts provide a variety of services to help Amazon sellers reduce and control inventory risks, manage your brands, get category approvals, account management and help with advertising. Annie regularly produces content for a variety of blogs that cover topics from inventory to account management.

Managing inventory on Amazon

If you're a seller on Amazon, you're undoubtedly familiar with the perils of mismanaged inventory, and it's potential for negatively affecting your business. But how do you circumvent this problem? This question is salient amongst professional and novice sellers alike. In this article, we will discuss ways of maintaining your inventory so that you can maximize profits and avoid losing revenue.

Is an inventory management system the answer?

What is the best way to manage your inventory on Amazon's platform? Well, you need an inventory management system; maintaining adequate inventory can seem like a juggling act. If you have too much, you will end up with a surplus, in which case, you're losing money. If you don't have enough, you lose potential sales, which, in turn, means you're not making money. A quality inventory management system can help you avoid both of these scenarios.

Manual or automated?

When choosing an inventory management system for your Amazon business, there is a lot to consider. For example, how many sales do you generate per quarter, should you go with a manual or automated system?

If you don't do a lot of selling on Amazon, a manual inventory management system via spreadsheets may suffice; however, this option may prove to be time-consuming and difficult to keep up to date. If you're a high volume seller, you will want to go with an automated system.

An automated inventory management system is an all-encompassing system that not only automates the fulfillment process but also updates inventory quantity when sales are made. Also, this type of system works across multiple sales channels. How does the system work, exactly? Simply put you enter your inventory information once, based on historical sales data, and then the system will automate all of your sales, alerting you when inventory drops below a certain threshold.

The cost of mismanaged inventory

Before we delve into specific inventory management systems available to sellers, let's identify some of the common pitfalls that many Amazon sellers encounter as a result of poorly managing their inventory:

  • Negative customer experience
  • Missed sales opportunities
  • Suspension of your Amazon seller's account

The aphorism "an ounce of prevention is worth a pound of cure" is one that invariably applies to managing inventory on Amazon. It is much easier to be proactive and avoid common pitfalls than trying to climb out of a ditch that you, in effect, dug yourself.

Popular inventory management systems

Unsurprisingly, there is a multitude of inventory management systems on the market, making it difficult to choose the right one for your business needs. Assuming you're not interested in updating a spreadsheet or keeping a detailed ledger, there are several automated systems that can help you streamline the task of staying on top of your inventory. Some of the more popular options include:

  • Inventory Lab
  • Ecomdash
  • Appath
  • Manage by Stats
  • Sellics
  • Stitch Labs
  • Forecastly

Please note that many of these systems are country and, in some cases, continent specific; therefore, you're encouraged to do your due diligence when choosing a system, taking into consideration geographical location and your business needs.

These systems all come in at different price points and offer unique benefits to Amazon sellers. For example, "Appath" is a cloud-based system that is ideal for those who do drop shipping, but it's only available in the U.S. and the U.K. Obviously, this article is not intended to steer you in one direction or the other; it is, moreover, an attempt to inform sellers of the automated systems currently available that can make running their business a much easier proposition.


4. Dealing with the Summer Slowdown on eBay & Amazon

The Summer slowdown has officially started and will not end until Back-to-School sales start in mid-August. It might be inflation, or just the overall economy, but every year we see some level of summer slowdown. When the weather is nice, people spend a lot less time in front of their computers. This is also the time of year when folks go on vacation.

But slowdown or not, we still have to eat and pay our bills. So, how best to handle this?

One thing that helps is to think ahead and find seasonable products to sell. These could include sunglasses, snorkel gear or summer-themed clothing accessories and jewelry. Another area I have found that does well all year round are gourmet foods. Although even these can be seasonable. Food items that do well in colder months just stop selling this time of year. For example, I sell a lot of Paella rice and spices in the summer whereas my Turkey Brine has not sold one package since January.

Another category I find that does well all year round are goods in the kitchen category -knives, utensils, gadgets and so on. However, one category that does slow down this time of year are baking-related products (pie pans, muffin tin, etc.).

And, for some reason, Children's toys always sell well in the summer months - especially right after school lets out.

Short of finding summer-related products to sell, there are other things you can do such as reducing prices on slow selling items and putting that money to work in goods that are selling.

Examine your inventory carefully to identify and remove items that are costing you more in storage fees than you are making in profits. If you sell in Amazon FBA, this is a good time to take advantage of Amazon's free removal promotion now running.

Watch your cash flow. When business is slow it's a good time to slow down your buying, pay off debt and conserve your cash for the upcoming Fall selling season. When business is slow, it is a good time to do product research and plan your buying for the Fall selling season.

I also use this time of year to review my listings. As careful as I try to be, I still find typos in listings. When you have a few hundred SKUs listed, it is inevitable you will make the occasional mistake. This time of year I try to to review at least 25 to 50 listings every week. Here is how I do this:

I open the listing in Amazon so I see what the buyers see. I read through each listing carefully, looking not only for mistakes -but also, is there a benefit I missed stating? Could something be worded better? This exercise works. I did this last week, and saw increased sales from a listing I updated and completely rewrote. It was a product I was just about to lower the price on to move inventory faster. Now I don't have to.

One of the most important tasks I do is review and update keywords in my listings. I always see results when I do this.

Lastly, use this time to review your costs and expenses with an eye to reducing them. For example, I visited my cell phone provider last week and found a better deal, that will save me almost $60 month.


5. New Wholesale Sources for eBay and Amazon Sellers

Remember - not all of these websites include wholesale information. If you don't see it, just use the Contact Us form to request it.

Mascot USA sells a line of very unique gifts for seasons, holidays and all occasions.

Americo Home sells a line of American Made decorative floor mats for the home. Lines include cushion and welcome mats.

The GirlyGoGarter® is a lacey garter made of two-way stretch microfiber with pockets that keep your money, I.D., lip gloss, mobile phone, keys, passport and all of your essentials safe, secure and right at your fingertips.

Lacey garter with a pocket

Happy Habitat produces environmentally friendly Throws and Blankets, baby blankets and Pillow Covers based on ethnic geometric patterns from around the world

The Piper Lou Collection sells a unique line of Women's Apparel and Gifts

Canard Labs handcrafts soaps, soy candles and organic lotions in the Coos Bay, OR, USA,

Outwest Products sells a variety of decor, furniture, travel items, gifts, purses, crafts, lavender and lavender sachets and baskets.

Carmel Ceramica sells a wide line of ceramic products based on the styles found on the Central California coast region

Doodle Pants sells a really unique line of Toddler clothing

Candle Smiths sells several lines of beautiful candles handcrafted in Lancaster, PA (heart of Amish country)

KidsCDs sells wholesale, Kids Music CDs, DVDs, videos, CD-ROM games, toys and more. They also carry music and movies for adults (no XXX)

White Swan Music carries music titles for the creative, spiritual listener. Categories music for Yoga, Global Fusion, Mantras and Chants, Meditation and Relaxation.

American Tee Shirt Ltd. wholesales Tee Shirts, hats, caps, sweatshirts, fleece, hoodys, pins, buttons, shirts and jackets, including women's, men's, rock and roll, music, , tour shirts, tour books, collectibles, collectibles and music group posters

Hollon Safe is a safe manufacture with a dropship program for depository safes, gun safes, home safes, and commercial safes.

Bear Woods Supply sells wholesale wood and craft supplies. They specialize in unfinished wood turnings, dowels, plans, scroll saw blades, clock movements and inserts.

See you in early June,

Skip McGrath
The eBay & Amazon Seller's News

P.S. If you missed the last issue, click here to read it.

Skip McGrath on Facebook Skip McGrath on TwitterFollow

© 1999- Harry McGrath, Inc., DBA Skip McGrath, Auction Seller's Resource and Vision-One Marketing. All Rights Reserved.

Tools and Resources for Amazon Sellers | Contact Us | Privacy Policy | Guest Contributions | Shipping & Return Policies
Home | Training | Free Articles | Tools & Resources | Web Wholesale Search | Testimonials | Blog

Please Note:  Some of the products and services mentioned in this website, in articles, banner ads and newsletters and blog posts are for products and services for which I earn a referral fee or commission. We always evaluate anything we recommend very carefully and each year we turn down literally dozens of opportunities to recommend products or services where we can earn a commission. Even though we earn a fee on some of our recommendations, we only recommend products and services that we feel will deliver good value and with rare exceptions, they all come with a money back guarantee.