JeffAndJanice.com

Saturday, January 22, 2005

My latest obsession is eBay. I've been looking for ways to make a buck online (you know about my Google story), and I decided eBay was the way to go. I work with someone who is also starting to sell, and she's only lost money, as far as I can tell.

I'm scouring the web for wholesale stuff to sell. It's not easy, since most wholesalers close their doors to Joe Sixpack who wants to make an extra buck. They just don't have the time to deal with us, which I understand.

I've been looking into dropshippers. I've been familiar with the concept since the pre-internet days. It's hard to imagine, but there was a time you could only reach customers with print ads, or catalogs, or mailers. They'd send the payment, by mail, you'd take your cut, and send the rest of the money to the dropshipper, by mail, and in just a few short months, the customer would get their product.

Today everything's fast. But I still can't find the profits. The numbers just don't add up. Here's what I posted today on the eBay discussion forums:

Dropshippers offer items at what can laughably be called "wholesale" prices. When comparison shopping on eBay, I see many products selling for less than the dropshipper's charging me as wholesale. So, if I'm lucky, I'll be able to sell the item, but only get a few bucks for my trouble.

My first inclination was to think "but I've got nothing invested, so if I make $10 on a $300 item, it's still profit."

Well, yes, there's an element of truth there, but if you want to make any real money, you'll have to sell a lot of items. Sounds easy enough. I'll just list ten of them, instead of one. They all sell, and I make $100!!! (exclamation points borrowed from the drop-ship companies).

So now all I have to do is shell out $3000 to the drop shipper, and I'm in the black. Only I don't have $3000, or I've got the credit for it, but I'll max out my credit cards just to make $100. (notice how the exclamation points disappeared). If I want to make $1000 per month, it's easy. I just need $30,000 of credit.

So now I'm $3000 in debt, and I have to wait for all the accounts to clear before I can make another $100.

But lets say one of my customers uses a bad credit card, and PayPal reverses the charge AFTER I have paid for his product. The Drop Shipper has already sent the item, and they accept no responsibility. Other retail businesses have enough of a markup to absorb the occasional loss, but with this business plan, I'm out $300, which will put me deep in the hole, and take me months of selling to break even. And that's IF I don't get stiffed again.

Am I the only one who thinks it doesn't add up?

My obsessive personality has some advantages. While I'm inclined to jump into any scheme that presents itself to me, I'm also obsessive enough that I dwell on them, and become consumed -- and get the facts. The internet was made for people like me, who have to dig and learn about something, and can't find enough information in the public library (don't you love living in the future? Hard to believe the public library was once our main source of information!)

My obsession with the idea compelled me to examine it from all angles, and run the numbers, and conclude that I'd really like to own one of those dropshipping companies. But as their customer, I'll only lose money.

I haven't given up. I'll keep looking for something that will make a profit.

UPDATE: I hadn't run all the numbers. a $10 markup on a $300 item would put a seller in a hole, since the eBay and PayPal fees would exceed $20.

another hasty insight by Jeff on 1/22/2005

Saturday, January 22, 2005

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