If you're like most eBay businesses, you maintain an inventory of products and ship when you get orders. With this arrangement you have complete control of the order until you hand it off to the USPS, UPS, or FedEx.
Drop-shipping is a process in which you sell items you don’t keep in stock. Instead, you collect the money and forward the order to a distributor or manufacturer, who ships to the customer, usually using your packaging. The drop-shipper bills you for the sale.
Drop-shipping sounds appealing because you can offer a wide variety of merchandise without maintaining an inventory. And for many web-based stores, it works well. But there are many disadvantages of using drop-shipping at eBay, including:
You may be required to pay expensive setup fees — always avoid any drop-shipper who requests this.
You may have to make monthly minimum orders regardless of your sales — watch out for this requirement.
If the drop-shipper screws up, it may be difficult — since you're the one in the middle — to obtain a refund from the drop shipper for the customer. That means you're the one making the refund or you're the one stuck with the negative feedback.
You will have little control over an item's price The drop-shipper may suddenly mark up an item, cutting into your profits.
Drop-shippers are often in long lines of distribution, so that if any step along the way has a problem — manufacturer, wholesaler, middleman — you will suffer.
You will unlikely have any warning before the drop-shipper runs out of stock — again, more negative feedback.
Drop-shipper lists are often sold on eBay which means that companies often flood the eBay market with similar merchandise.