eBay dropshipping is one of the most controversial business models out there today. On one hand, it is almost a risk-free way to make money online. But on the other hand, there are questions about whether it’s at all allowed and even if it is – how profitable could it possibly be to dropship on eBay since the rise of Amazon as the eCommerce leader?
I call this article the definitive guide for dropshipping on eBay because I want to try to give you answers to all of the questions you might have, share with you the good and the bad parts of it, as transparently as possible.
And of course, I will cover the how-to. How to get started? Hot to dropship on eBay? How much will eBay drop shipping cost and how much time will it take?
I’ve been a part of the eBay dropshipping industry since 2015, first as an eBay seller and later as the CEO of the popular dropshipping software DSM Tool. More than 200,000 people signed up to use our service and try to start their online business on eBay, so I have witnessed many success stories as well as miserable failures.
I want to help you get the best out of it. Should you choose to start a dropshipping business on eBay?
Let’s start from the beginning.
What is eBay dropshipping?
eBay drop shipping is a low-risk business model in which you sell on eBay products from other websites (like AliExpress or Amazon) which you don’t actually hold an inventory of. Then, only after you sell them to eBay customers, you actually purchase these goods at the cheaper price on the other website and ship them to the buyer from eBay.
This general explanation brings up a lot of questions, for example: why would someone buy from you a product on eBay when they can get it for cheaper on Amazon or AliExpress?
I will get to this question soon. But first, we need to break down the term eBay dropshipping into its basic pieces – so that we could then put them back together in a way that makes sense.
Let’s start with the first piece.
What is eBay?
On September 3, 1995, eBay emerged on the recently born internet. Its founder Pierre Omidyar who is worth 21.4 Billion dollars, according to Forbes, decided to call it by the catchy name “The AuctionWeb”.
In 2020, following the eCommerce boom created by the Covid-19 pandemic, eBay reached 100 Billion dollars in gross merchandise sales.
eBay is mostly famous for its auctions, especially for used items. The first item to ever sell on eBay was a broken laser pointer that was sold for $14.83 and the most expensive items were… Well just look at the picture below:
It is so famous for its auctions that you might think that trying to dropship brand new products on eBay doesn’t make sense.
But actually, according to eBay’s announcement from 2018, 80% of the items that are sold on their platform are brand new and 88% of the sales happen using the “buy-it-now” option and not via bidding on an auction.
Nevertheless, eBay is a super-interesting platform to sell on and it brings to the table an interesting opportunity, even for new sellers. You can check more stats about it in the eBay facts. But I do want to mention one alarming fact from there.
In the announcement from 2018 eBay mentioned that there are 171M of active users on the platform. The latest numbers state it has 157M of active users. It’s contrary to the fact that the gross merchandise sales keep growing (seems like fewer people spend more on average) but it’s a statistic that we can learn something important from.
I am going to claim in this article that eBay dropshipping is a great business model to start an eCommerce business with due to its low-risk structure. This is true especially if you are a complete beginner with no prior experience in eCommerce or digital marketing.
But as you can see from the numbers, eCommerce in 2021 is not only happening on eBay. Moreover, it is not even happening only on Amazon. New alternatives are being offered to potential buyers all the time, so even if you choose to start with dropshipping on eBay – aim to expand your business eventually and become an online entrepreneur.
Make eBay the starting point of your entrepreneurial journey, learn how to become a dropshipper. Speaking of which, I said we’ll break down this business model into all of its parts, so let’s move to the second part – what does it mean to become a dropshipper?
Don’t wait for the profits, make them.
Start a profitable dropshipping business with DSM Tool. Get a free course and a free trial for the software.
What is dropshipping?
Dropshipping is not a business model, it’s a way to manage the logistics of your eCommerce business. The idea is that you as a seller don’t need to handle the inventory, you use a logistics company (a dropshipping supplier) to handle it for you while you focus on making sales.
Dropshipping is actually such a popular way of handling logistics that even big retailers use it. I learned it when I saw Kohl’s announcement about their dropshipping network – I always knew Kohl as a retail chain. But even they use drop shipping suppliers for their online store. Same thing Wayfair does.
But for you and for most of the readers of this blog the drop shipping concept is mostly related to a bunch of business models for making money online. I’ve done a comparison between a few of them in the article eBay dropshipping vs. Amazon FBA vs. Shopify dropshipping.
|Inventory||Advertisement Budget||Simplicity||Profit potential|
|eBay Dropshipping||Not required||Not required||Very simple, automated with DSM Tool||Low|
|Shopify Dropshipping||Not required||Required, usually costs hundreds or thousands of dollars||Complicated, requires knowledge in design, analytics and advertising||Very high|
|Amazon Dropshipping||Required, usually costs hundreds or thousands of dollars||Sometimes required||Harder than eBay, requires knowledge in import/export, but easier than Shopify||High|
This guide is about the business model of dropshipping on eBay. So now when the term dropshipping is explained properly, we can finally start to dive deeper into eBay dropshipping itself.
Dropshipping on eBay Explained
eBay drop shipping is based on something that is called Online Arbitrage. The word arbitrage comes from the stock market and it describes a situation where the stock of the same company has a different price in two markets.
Investors use arbitrage opportunities to buy the same stock for a cheaper price on one market, and then sell it on the other market while keeping the price difference. We, dropshippers, use the concept of online arbitrage to find price differences in eCommerce markets.
Take for example this product:
This product was sold on eBay 37 times, which shows it had demand and people wanted it (how to tell whether it still has a demand or not will be discussed later in this article). It was sold for $22.31 and then purchased on AliExpress for $7.99.
Even without explaining how the profit is calculated, you can clearly see that there is a price difference between the two markets. Now think that a new seller, let’s say you, would find this arbitrage opportunity. What would you do?
Here is what I’d do: I would open an eBay store, list this exact same item for 10% less than this eBay seller did, and try to dropship it from AliExpress too!
That’s, actually, what eBay dropshippers do.
To summarize the part about what eBay dropshipping is, I want to mention 5 reasons why you should start a dropshipping business on eBay.
The eBay dropshipping advantages:
#1 Free traffic
This business model makes sense mostly because of this reason. Free traffic is the biggest differentiating factor between eBay dropshipping and other business models that use the concept of dropshipping.
#2 No inventory
Because of the usage of websites like AliExpress for product sourcing you don’t need to buy any inventory ahead and store them by yourself in order to start making profitable sales.
#3 Simple automation
With dropshipping software you can manage your business flawlessly, the automation level that exists today really makes it simple to start making profitable sales quickly.
#4 No need to choose a niche
All eBay dropshippers have general stores, we don’t look for products in a specific niche we rather look for arbitrage opportunities – as long as the product from the dropshipping supplier is cheaper, no one cares which dropshipping niche it comes from.
The most common questions about eBay dropshipping
I hope that my explanations gave you the answer to the question: What is eBay dropshipping?. Nonetheless, I think that there is a lot of misguidance on the internet. That’s why before you start with the actual how-to (which I will cover too, as promised), I want to address the most common questions that might come up as you’re getting started.
Is dropshipping allowed on eBay?
Yes, and no. One of the most controversial topics about eBay dropshipping is the question of whether it’s allowed or not. At the beginning of 2019 eBay released its dropshipping policy which has been interpreted in various ways.
One thing is for sure, eBay writes clearly that “listing an item on eBay and then purchasing the item from another retailer or marketplace that ships directly to your customer is not allowed on eBay”. Pretty straightforward, so why do people still do that, why am I writing this guide years after the policy was released?
The answer lies in understanding the implications and enforcement of this policy
What happens if you don’t comply with eBay dropshipping policy?
What will eBay do to you if you don’t comply with their dropshipping policy? There are both official and unofficial answers and I will try to answer both.
On the official side, there is the eBay dropshipping policy itself that says: “Activity that doesn’t follow eBay policy could result in a range of actions including but not limited to: administratively ending or canceling listings, hiding or demoting all listings from search results, lowering seller rating, buying or selling restrictions, loss of buyer or seller protections, and account suspension.”
Moreover, if you start dropshipping on eBay using the online arbitrage method you will soon get this email:
So eBay says in the policy itself that not following the practices could (remember that word) result even in account suspension. But according to the email, and more importantly, according to reports from eBay dropshippers – the actual implication of the policy is that dropshippers can’t gain the top-rated seller status.
If you’re not able to gain the top-rated seller status, that means that you’ll have harder competition against other eBay sellers that have this status. If one of your products competes with theirs, you might not get promoted even with a lower price.
But if you ask me – I claim that we, dropshippers, have a far bigger advantage over sellers that comply with the policy. If one of our products is having a hard time completing on eBay we can just delete it from our store.
No inventory means we can change the entire store within a few clicks of buttons, something that eBay top-rated sellers cannot do.
Serious dropshippers change the products that are in their store all the time.
They find new arbitrage opportunities and if a top-rated seller decides to compete with them – they just remove the under-performing product from the store and replace it with another one.
Remember that I said remember the word could?
There is only one actual risk for suspension when it comes to dropshipping on eBay and that is the MC011 restriction. It is a verification process that eBay sends to sellers that underperform in which they also ask them to provide invoices for their inventory.
Since you don’t own an inventory – you can’t pass the verification and get your account back. There are “black-hat” ways to pass the restriction but you’ll have to look for it in Facebook communities or websites like blackhatworld.
I have investigated multiple MC011 cases and they all have similar characteristics. In most of them the drop shipping seller didn’t take care of the basics of their business management:
- Answering messages from customers
- Responding to return requests
- Delivering products in time
- Updating tracking numbers of the packages in time
- Answering eBay resolution center cases
If you choose to start a dropshipping business, first choose to take this journey seriously. By avoiding the MC011 restriction and constantly removing under-performing products and introducing new trending products you can run a profitable eBay dropshipping business.
eBay flagged accounts
The unofficial implication of the eBay dropshipping policy is the conspiracy within the dropshipping community that once you’re detected as a dropshipper your account gets flagged.
Flagged accounts, so it is claimed, lose their ranking and get no visibility from eBay. There are some fake recommendations that people share about how to avoid getting flagged, including drop shipping manually or using a “non-api” dropshipping software.
If you are worried about this matter and you don’t want to simply trust my word when I say it’s a myth, you can watch the complete explanation in the video below.
The reason, I think, is that the theory of eBay flagged accounts was raised in the past when dropshippers didn’t have to do as much optimization to their stores. I’ve heard tons of stories of people that posted a few hundreds or thousands of products and these just got constantly sold.
Years ago it was simple to manipulate the search engine of eBay. Today it’s not possible anymore and you have to bring value in order to get free traffic. That value is generated when you constantly introduce new hot-trending products for lower prices and when you optimize your listings and your store, constantly.
Once again, the conclusion is that taking your business seriously is the way to get through and become profitable. This naturally brings us to the next question, is it profitable to dropship on eBay?
Is eBay dropshipping profitable?
Dropshipping on eBay has a lower potential profit in comparison to Shopify dropshipping. But it comes with a much lower risk, some even call it risk-free, and you can make a few hundred to a few thousand dollars per month from it.
Not bad, right?
The reason its profit potential is lower is that in order to make profitable sales on Shopify you need to invest money in advertising. The risk there is that you lose your money but the gain is that if your campaign is profitable you can increase your advertising budget, get more customers and make more profitable sales.
On eBay, there are two forces that push down the profitability
- You are limited to the traffic from the eBay platform, you can’t increase the advertising budget for a product that sells well because there is no advertising budget
- The level of competition is high and the entry level is low. It’s far easier to start dropshipping on eBay than to start a Shopify business which is a great advantage for you if you are a beginner, but also for your competitors.
But how much lower profit is, in numbers? In order to understand the potential profit from a dropshipping store, we should look at other stores. Enrique from the DSM Tool team is going live every week on our YouTube channel and showing 10 profitable products examples. Here is a table of the products he showcased last week
The links to eBay are to the stores of dropshippers and the links to AliExpress are of the cheaper product. These 10 products generated $650 profit in the past 30 days to the dropshippers that were selling them in their stores and $2708 since they were published.
Whether you will be able to find such 10 winning products or whether they will perform the same in your store depends on many parameters. But the picture is clear, if you work well you can make money dropshipping on eBay.
It’s profitable, and how profitable it depends mostly on the effort you are willing to put into it. This is not a get rich quick kinda business, you’ll have to put time and effort in order for it to work and grow.
How much time will it take, this growth path to profitability?
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How much time does it take to start dropshipping on eBay?
It takes, on average, less than 7 days to make the first profitable sale. Pretty amazing for a business that requires no prior investment in inventory and no advertising budget, right?
This survey I conducted in the DSM Tool dropshipping community strengthens this claim. 68% of the dropshipping sellers said it took them less than 7 days.
Obviously, making the first sale and running a long-term profitable business are two different things. The complete timeline of starting a dropshipping business looks more or less as the following:
0-7 days of selling on eBay
In the first week, you are mostly dealing with setting up the business and learning its basics. During this time you will create your store, set up an eBay dropshipping software, and find the first few products you wish to sell.
7-90 days of dropshipping on eBay
During the first 90 days of selling on eBay, the payment processor (PayPal or eBay managed payments) will hold 20% of the funds of each transaction that you receive for 21 days.
You have to go through this procedure because this is how these companies limit the risk of fraud of sellers that sell items, never ship them, and “run away” with the money. But this 20% hold of funds is quite a headache for new dropshippers.
Above in this article, I explained what dropshippers do through the online arbitrage process. They find a product on eBay with high demand, source it for cheaper, and list it on eBay for a cheaper price.
That last part means that the average profit margin for eBay dropshippers is relatively low, in comparison to other forms of selling products online.
A low-profit margin is not a problem when you are able to make a higher volume of sales. Eventually, to make a $100 profit you can make 10 sales of a $20 product with 50% margin or 50 sales of a $20 product with a 10% profit margin – you get the same profit.
But let’s see what happens when we add the 20% hold of funds to the story, I am going to ignore the eBay selling fees for this calculation because I want you to understand the principle.
|50% profit margin||10% profit margin|
|Profit per sale||$10||$2|
|Cost of goods||$10||$18|
|20% Hold of funds||$4||$4|
|1st day cashflow||$20 – $4 – $10 = $6||$20 – $4 – $18 = -$2|
|Profit after 21 days when the 20% hold of funds is released||$10||$2|
|How much sales require to make a $100 profit||10 sales||50 sales|
|Credit required to make $100 profit||$0||50 * $2 = $100|
If you sell a product for $20 and then purchase it for $10 you get a 50% profit margin. Then, to make a $100 profit you need to pay your dropshipping supplier 10 times these $10 which is a $100 total cost.
But when the profit margin is 10% which is $2 out of $20 it means you buy the goods for $18. In order to make a $100 profit, you will have to sell 50 times which means paying the drop shipping supplier 50 times $18 which is a total cost of $900.
When 20% of your funds are being held, you only get $16 for that product you sold for $20, but you need to pay $18 to your drop shipping supplier, there are $2 missing for each sale that you make.
You have two options:
- Option number one is to only sell products with profit margin above 20%,
- Option number two is to use credit to finance the growth of your business in the first 90 days.
I suggest the second one because a 20%+ margin for every single sale so early in your business life is harder to achieve.
It means that during the first 3 months of your dropshipping business your growth and profitability are slow and that you might even have to finance it with credit. Not exactly get rich quick, but after 90 days you will start to see more and more of the profits, finally.
90+ days of dropshipping on eBay
After you complete the first 90 days of starting your business, you should focus on growing the business solely.
There will be the day-to-day of finding new products and listing them to your online store, removing under-performing products, processing orders, and giving customer support. But the are other activities that are related to growing your business that you can look into:
- Increasing your eBay limits – It’s actually also something you do already from day 1 because eBay only lets you list up to 10 items, and that’s not enough for running the business for 3 months. Make sure you read the tips how to increase eBay limits
- Finding new dropshipping suppliers – I highly suggest sticking to selling products from home and dropshipping products only from AliExpress and CJ Dropshipping in the first 90 days. Afterwards you can try to expand to wholesale suppliers or even to do dropshipping from Amazon to eBay.
- Expanding to new business models – Now that you’re passed the hold of funds mark, not only that you won’t need any credit to finance your growth but also a lot of profit that you gained in the first 90 days and was waiting in the hold of funds cycle will be available for you as profit. Before you buy a new iPhone, consider reinvesting the money in more risky business models like Shopify dropshipping, Amazon FBA etc.
Speaking of reinventing money, how much do you need to invest in order to start dropshipping on eBay?
How much does it cost to start dropshipping on eBay?
Some say $0, but I think it’s not a realistic answer and it’s only correct in theory. There are a couple of expenses that are related to starting a dropshipping business that you should take into consideration.
I’ve already done a cost breakdown to a new eBay dropshipping store. Here is, in short, the summary of it:
eBay dropshipping Course
You can get a free course when you sign up to DSM Tool, the eBay dropshipping software. This course will walk you from A to Z through the process of getting started with eBay dropshipping. There are other courses out there that cost money as well so it’s up to you to choose your instructor.
I am not trying to say that this eBay dropshipping course is better than the others, even though I did put the effort in trying to make it so. What I am trying to say is that it’s a cost you might have to take into account if you want to start a dropshipping business on eBay with one of the paid courses.
Here as well you can start for free with eBay dropshipping software, DSM Tool. It offers a 7 days free trial. After that, you will have to outperform the cost of the software in order for your drop shipping business to be profitable.
Since it starts from $25/m it’s going to be an easy task. My recommendation is to also use the automated orders feature that will save you time and let you focus on product research for eBay dropshipping.
The pricing of DSM Tool, to view the full list of features visit the DSM Tool pricing page
Hold of funds credit
By definition, this isn’t an expense, all of the credit you will use in order to overcome the 20% hold of funds that I explained earlier in this guide is going to get back to you once the funds are released.
But, since you do need credit I think it was worth mentioning it here as well.
eBay insertion fees
When you set up a seller account on eBay they let you create up to 200 listings per month free of charge. This credit renews every month, but every listing that you keep active in the store uses one credit per month.
This should not be something to worry about as a beginner, by the time you will insert 200 listings per month to the eBay platform you should definitely become profitable. If you aren’t – don’t insert more than 200 listings and work on your product sourcing techniques.
We’ve covered all of the questions about how to start a dropshipping business on eBay. I hope that you have already gained some knowledge about the journey you’re expected to take (if you did, please share this article with others and support our mission to keep this content free).
Let’s move to a practical mode and talk about how to actually jump-start that business.
How to dropship on eBay?
In order to start a dropshipping business on eBay you have to take the following steps:
- Create an eBay account
- Create a PayPal account or signup to eBay managed payments
- Setup a seller account on eBay
- Setup recommended settings for drop shipping on eBay
- Setup a dropshipping software
- Find products to sell, including products from home
- Build a process for store optimization and growth
Let’s go over these steps one by one.
Creating an eBay and PayPal accounts
Both of these are quite simple, you can follow this step-by-step guide or just do it yourself. The process of creating an account on eBay and PayPal is pretty much self explanatory.
Moreover, eBay has been rolling out for quite some time already their managed payments solution which replaces the need for a PayPal account to run an eBay store.
If you are an international seller you should also consider opening a Payoneer account, it will be used as a “bank” that you receive the funds into, and you get from them a credit card to make the purchases with – a pretty comfortable way to manage the business aside from your personal finances.
Setting up a seller account
In order to turn your eBay account into a seller account, you need to connect a payment method to eBay. They use it to charge your eBay selling fees, which they invoice at the time of the sale and charge every 15th of the month.
Alternatively, you can sign up for the managed payments service, and then you could start selling as well. The selling fees for managed payments are being deducted immediately at the moment of the purchase.
The easiest way to start this process, once you have signed up to eBay, is by clicking on the “sell” button and following the instructions.
At this point, you should already have a product in mind that you want to sell from home. In many cases, in order for eBay to prompt the payment setup that turns your account into a seller account you have to manually list an item.
Take it as an opportunity to get to know the listing functionality of eBay. What kind of information are they asking you to fill up? What options cost more or less? What is the insertion fee that they ask you to pay and what additions to the listing make its price go up or down?
Once you have at least one product from home that you are willing to sell on eBay listed and pending to get sold, you can start setting up the dropshipping settings.
Recommended settings to dropship on eBay
The recommended settings for eBay dropshipping are the following:
- Business policies
- Store name
- Payment method
- eBay seller hub opt-in
- Global shipping program opt-in
- Enabling out-of-stock
- Excluding shipping locations
- Return preferences
- Unpaid item assistant setup
Like every step until now, there are videos to cover and show you step by step which buttons to click to set up all of these correctly in the eBay dropshipping course. by DSM Tool.
If you prefer to follow a written guide, I recommend you to go through the following guides:
When these are ready, move to my favorite part – setting up the best software for dropshipping: DSM Tool.
Setting up a dropshipping software for eBay drop shipping
The dropshipping software is what makes this magic possible. It automates for you with the most important aspects of the business:
- Listing products from other websites in one click
- Syncing the price and stock of the products from your drop shipping supplier to eBay
- Automating the orders processing
- Automating customer support
It even generates positive feedback automatically for you.
Such advanced dropshipping software will require learning how to use it in the best way possible (here I mention the eBay course again, right?). I recommend following these guides to optimize your dropshipping software as a beginner:
When the dropshipping software is ready, it’s time to do dropshipping product research to find profitable products.
How to find items to dropship on eBay?
Finding items to dropship on eBay can be done by yourself manually or with the help of software. To find profitable products to sell, I recommend using the “sniping method” which requires a separate guide to explain in-depth, luckily the guide on how to find profitable products for eBay dropshipping does just that.
In this video masterclass, Enrique from our team covers the topic as well, and in the free dropshipping course, you will find a whole chapter about this topic.
I already mentioned it but let me say it again just to emphasize its importance. Selling second-hand products from home on eBay dramatically reduces the risk of trouble for new accounts on eBay.
It’s time to open that childhood box of stuff you didn’t touch for years and sell some of these. Look at it as the source for cash flow you will need for the period of the hold of funds.
Developing a healthy routine for your dropshipping business
The last part of starting a dropshipping business is everything but “last”. As a business owner, you are now responsible for the health of your account, traffic generation, and customer service.
eBay account health metrics
In the eBay seller hub you will find the seller level report that includes the metrics that you need to maintain in good health.
I mentioned in the part about the eBay dropshipping policy that dropshippers cannot gain the top-rated seller rank. But it doesn’t mean they can’t go below standard. If you won’t make sure to take care of your account’s health metrics, you will drop below standard and it will become much harder for you to get that free traffic.
For eBay dropshippers, the competition with top-ranked sellers already reduces the total potential traffic their stores can generate. It’s still enough to make great profits, but if you drop below standard expect a long period of time of almost no traffic while you fix it.
Make sure you provide an excellent service at all times – it’s your business, own up to it!
However, good health metrics by themselves aren’t enough, you need to develop the habit of traffic generation by learning how to optimize SEO for your eBay store.
SEO stands for Search Engine Optimization. It is the practice of making your products appear in the first place in the results of search engines such as Google or eBay.
There are many parameters that the eBay search engine takes into account when deciding which listings will appear first in the search results. For example, your eBay seller level is one of them.
There are three things you need to know about eBay SEO:
- How to perform an on-going SEO optimization to the store
- How to perform an SEO optimization to a specific listing
- How to use promoted listings to boost visibility
I want to mention one thing about eBay SEO that you should remember. A lot of people think that the process of SEO is related to preparing and optimizing the listings before you publish them, things like writing a better eBay listing title or choosing better images.
They are important indeed, but it’s only a part of the full picture of the eBay SEO practice. Think of SEO as a goal in the store level, the optimization of specific listings is just a way to support the account optimization as a whole.
Yes, now you are ready to start a dropshipping business on eBay!
Don’t be afraid to read this article more than once, it might even be useful to bookmark it and the other articles I linked to. You can bookmark it to your browser or open a document file and copy the links there.
If you feel overwhelmed, it’s good. The challenge of getting started with a drop shipping business is an opportunity for you to learn how you handle the process of building your own online business.
I can’t promise you will succeed, it will be irresponsible of me to do so. But I can promise you are going to learn a lot. You will learn about yourself as an entrepreneur and you will experience first-hand the world of making money online.
It’s exciting, welcome aboard!
To support our mission to keep this content free comment below and let me know what you think of the guide – should I continue making these free guides? Sharing it with a friend that might find it interesting would be appreciated as well 😉