eBay’s Updated Drop Shipping Policy Bans Arbitrage – Creates Other Policy Conflict
Reading Time: 3 minutes eBay updated its help section about Drop Shipping and it now clearly bans arbitrage.
Arbitrage is the practice by a seller to list a product on eBay that the seller then will purchase from another marketplace for fulfillment, most commonly Amazon.
This differs from a seller using Amazon FBA to ship products because the seller owns the products stored in Amazon warehouses.
In arbitrage, the seller is not the owner of the products and makes money from the difference in the selling price charged on eBay and the price the seller pays on the third-party eCommerce site.
Last year the arbitrage listing service SalesFreaks claimed eBay was already downgrading search results on “likely” arbitrage listings.
READ MORE: eBay Being Accused of Manipulating Search Results on Some Listings
The language in the Drop Shipping section now makes it clear that arbitrage will no longer be tolerated on eBay, “…listing an item on eBay and then purchasing the item from another retailer or marketplace that ships directly to your customer is not permitted.”
The marketplace also now admits that it may reduce the visibility of potentially offending lists, basically confirming SalesFreak’s suspicious.
“Make sure you follow these guidelines. If you don’t, you may be subject to a range of actions. We may limit, restrict, or suspend you from buying, selling, or using site features. All of your listings may be removed, displayed lower or not shown in search results, without refunding any or all applicable fees. You may also forfeit special account status and discounts.”
Real Drop Shipping
Sellers in the arbitrage business call their business “drop shipping.” But real drop shipping is shipping products directly from a supplier instead of a seller’s warehouse.
eBay clarifies that the practice of using a supplier’s warehouse is allowed.
“Drop shipping, where you fulfill orders directly from a wholesale supplier, is allowed.”
But this brings up an interesting question. Several years ago eBay removed the ability by sellers to list generic item locations such as “USA”, “National Warehouses”, etc.
The company’s own shipping algorithm only uses the seller’s zip code to determine shipping speed and cost (if applicable).
eBay also does not provide a method to list a product coming from several zip codes if a seller operates multiple warehouses or ships from different fulfillment centers.
The marketplace is specific in its rules sellers must adhere to regarding about an item’s location.
“In the item location section of your listing, you should clearly specify the city, state (where applicable) and country where your item is located.
You should also make sure that all the information in your listing matches – for example, any mention of the item location in the item description must be the same as that in the item location field.”
Effectively, the item location policy “bans” drop shipping from suppliers as it is highly unlikely that a supplier is located in the same zip code as the seller.
By the Item Location policy, sellers that ship products from suppliers cannot mention they may be shipping from another location.
But now in its updated Drop Shipping policy eBay says drop shipping is allowed from a supplier.
It appears eBay created a contradiction of policy!
eBay Needs to Address Need for Real Drop Shipping
Many large online retailers routinely drop ship from suppliers and usually disclose this information in their product listings.
While banning the practice of arbitrage is good for the integrity of the marketplace, eBay now needs to address the need of sellers that have legitimate reasons to drop ship from a supplier.
By stating the marketplace allows drop shipping from suppliers, eBay needs to adjust the item location policy or its platform. The marketplace needs to give sellers the opportunity to disclose that an item may ship directly from a vendor.
This contradiction in its selling policy is not helpful to honest and legitimate sellers.
Solving it will only benefit buyers and bring more trust to listings and the marketplace.
What do you think of eBay’s Drop Shipping policy and how it may impact your business? Please use the comments section below or head over to our Facebook Group for Small Business Sellers and interact with other small business owners.
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Richard Meldner
Richard is co-founder of eSeller365. He has over 17 years of experience on eBay which includes tens of thousands of sales to buyers in over 100 countries and even has experience with eBay’s VeRO program enforcing intellectual property rights for a former employer. And for about two years Richard sold products on Amazon using Amazon FBA in the US.
To “relax” from the daily business grind, for a few weekends a year, he also works for IMSA as a professional race official.
I think this was a bad business move for Ebay. They (Ebay) has the potential to make a lot of money from “arbitrage” and or drop shipping sales. The seller using these methods is assuming all the risk. I sold several items this way. The only issue I had is items no longer being in stock. The bottom line was I found great deals online that offered free shipping. I purchased them and had them sent to my Ebay customers. The products came with warranty and everything else. What’s the problem? Ebay was making money from my sales. I don’t get it.
I have no problem with it as I ship from my vendors. I disclose this in my listings. eBay also can tell where the item ships from and discloses my vendor location . Many people drop ship from amazon & other places & it is lucrative for many, but has many problems associated with it as well. One of the problems will be the loss of income for eBay which will cause them to raise the fees on the rest of us. They are already doing this. This will make it more difficult to sell on eBay for the rest of us and cause a loss of sellers overall for eBay. We’ll see how it goes.
I’ve never been a fan of arbitrage, and allowing it would definitely be against eBay’s best interests. By sheer definition, the eBay seller would have to raise prices by a MINIMUM of 25-30% to cover fees, shipping and slim profit margins. Why would anyone shop eBay if they knew they could get it cheaper from the original listers on Amazon or Walmart? And yes, most would know because people nowadays shop around. In addition, it’s long been Amazon’s policy that Prime cannot be used for anything but personal purchases and those extra shipping costs will pile up.
Allowing arbitrage quickly turns eBay into a last-resort site. That’s not what eBay wants, of course! To be honest, I’ve never heard of anyone becoming very successful with dropshipping arbitrage. They may make a little money, but they’ll never become a mega seller. Arbitrage is, by design, doomed to relatively lower sales.
As for the zip code policy affecting dropshippers, I disagree. I’ve been dropshipping a portion of my inventory for probably 10+ years and I’ve never had a problem with the item location. Every company I know has one primary warehouse and the suppliers/importers/manufacturers always provide that address & zip to its authorized retailers. If a supplier won’t, something’s fishy and you need to move on. It’s only with arbitrage that you don’t usually know the item’s location.
The dropshipping model works, but it isn’t easy and it’s not the way to a quick fortune; arbitrage, on the other hand, simply makes no sense for eBay or for its sellers.