Drop Shipping Sucks - and will never work on eBay! Download

My name is Chris Bernard. I worked for 11 years in the wholesale & drop ship industries and was considered one of the leading industry experts. During that time I worked with many of the world’s most prominent drop ship companies. However, in February 2007 I was abruptly blacklisted from the industry just for speaking the truth! The truth that would cut into the drop shipping gold-rush profits and would demand the industry reinvent itself…

To really understand the problem with drop shipping, you need to understand its origin.


Before the internet, companies that had products to sell but didn’t have retail (brick-and-mortar) stores would sell their products through catalogs and door-to-door sales. So, they needed a sales force to go out and actively find buyers. These types of sales teams are often referred to as "feet-on-the-street". Literally people to walk around and sell products.

Drop shipping allowed companies to have people selling their products by distributing their catalogs, knocking on doors, and recommending their products to friends, family, and neighbors… Without the overhead costs of traditional employees.

With drop shipping, companies wouldn’t have to provide benefits such as insurance, retirement plans, etc. and companies would only pay out per-sale (commissions). This was ideal because a company would never have to pay for a salesman who wasn’t producing results and could grow a huge sales force without any financial risk.

Companies like this still exist today. Mary Kay, Kirby, PartyLite, Lia Sophia, etc are all examples of drop ship companies that still run the "old-school" model of business. Catalog & door-to-door sales driven by real people.

But the key element to drop shipping was, and still is, a secured market. The companies above sell products exclusively through personal sales reps and do not sell in retail outlets, to wholesalers, to the public. This is what makes them work. The prices, distribution channels, and markets are all tightly controlled.

This is not true with the drop shipping companies that litter the internet with claims of huge profits selling popular items such as iPods, laptop computers, jewelry, etc. Any product that is not controlled by the manufacturer and sold exclusively through personal sales reps (AKA. drop ship sales) will not be profitable online. Why?…

Resale (buying and re-selling for a profit) is all about buying power. And with drop shipping, you have none. Zero. You are often buying just one of an item, and thus, have no buying power. Because true wholesale pricing is all about quantity.

A huge established retailer, like Wal-Mart for example, has extraordinary buying power. They don’t just buy one iPod at a time, they contract to buy thousands. Let’s look at the numbers using a gold necklace as an example…

Let’s say a wholesaler’s cost on a gold necklace is $10 and the wholesaler sells the necklace to a famous department store for $11.50 each (cost +$1.50) with a quantity of 10,000 pieces. The wholesaler will profit around $15,000 on this sale.

If you want just one necklace for $11.50, the wholesaler will profit less than $2.00 and have to breakup a case of merchandise. No serious company is going to make this sale. Not even a drop shipper.

Would you bother selling items and doing a bunch of work for $1.50? Well, neither will any other company — and it’s not fair to expect that of them.

That is why drop shipping is not true wholesale. With drop shipping you can buy just one necklace. But you can expect to pay at least 25% more for the product. That would make the price $14.75 each in our necklace example.

But we’re just getting started… On top of the product sale price, there is almost always a handling fee associated with drop shipping. This is usually $2 – $3 per item, brining your cost on the necklace to a base price of $16.75 or more.

This is why many people using drop shipping services end up complaining that they can find the product for less money retail. After all, in the example just given the retailer could sell the necklace for $15 and still profit.

Remember, the old-school drop shipping companies (such as Mary Kay) mentioned above do not sell to Wal-Mart or other retailers. They only sell through reps and, in general, all reps get the same base price. So in those cases you can get the lowest price and can potentially compete.

So are you beginning to understand why you cannot find a quality, low-price drop shipper of name brand merchandise?

There is more working against you than just buying power unfortunately. The sad truth is that even if you could find a drop shipper who would sell you one gold necklace at a time for $11.50 you still wouldn’t be able to sustain a successful online business due to reason number two…

Market value determines the price at which you can successfully sell a product. Market value is not a constant; it is an ever changing variable which can be influenced by supply-and-demand, competition, technology costs, and other factors. The market value of a product is almost always changing. For a simple example of this, look at the DVD player.

An original DVD player, when they first hit the market, sold for more than $600. These days, a much better DVD player costs under $60 — or less than 10% of the original retail price.

While it took the DVD player a few years to drop so dramatically in price, it can take as little as a few days for the market value of a product to plummet in the online marketplace. Especially when dealing with online auction sites such as eBay.

To understand this process, let’s look at the gold necklace again and assume you were able to get the product drop shipped for the $11.50 price. That…

Drop Shipping Sucks - and will never work on eBay!

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