Dropshipping is a method of reselling in which you offer merchandise for sale without actually maintaining a physical inventory. Through agreement with a wholesale distributor you offer a product for sale through either fixed price or auction. If the item sells, you forward the wholesale cost plus shipping to the distributor and the distributor ships the item to your buyer. The difference between the wholesale price and the selling price is your "profit".
Its an attractive arrangement on paper as you neither have to purchase, store, or ship merchandise. In reality, it can be much different. Your product availability is completely in the hands of your distributor. Items that are out of stock or not shipped in a timely manner will quickly skyrocket your negative feedback. While this is probably the primary issue with using dropshippers there are several other caveats that must be considered.
It is absolutely essential that you know the true wholesale cost of merchandise before you commit to selling it. Many dropshippers do a great business selling items to naive ebayers. Research thoroughly with a tool such as
Terapeak to get a feel for how well an item sells, the average selling price, and how deeply the market is saturated with a particular item. Another issue that must be factored is the "fee" that many distributors charge for making their service available to you.
Do the math very carefully. Your profit per item sold will be based on the winning bid (or BIN) minus your cost for the item, listing fee, final value fee, any extras such as gallery fees, Paypal or CC fees, and any (pro-rated) distributor fees. It can get very tight.
If it sounds like a negative post then so be it. The reality is that the majority of Ebayers who base their business on dropshippers tend to crash and burn. A wiser move for most, after thoroughly investigating their potential business partner (distributor), is to slowly integrate dropshipping into an existing Ebay business and carefully evaluate the results.