Online Bookselling and Dropshippers - Why Bother with Having a Physical Inventory?

Copyright 2006 Michael Mould

The Internet is full of online, home-based, business opportunities, and one of the most prolific of all scenarios promotes having a business person create a website and sell products that they never need to own, stock, or even touch, i.e., a virtual store where customers buy products and the seller has them shipped directly to the customer from some warehouse source. In theory, this sounds like a win-win-win scenario, but in practice many sellers have had their businesses ruined, their reputations tainted, and their credit destroyed because of a breakdown in the system or some sort of scam.

For the most part, customers are really only interested in getting the product they purchased, but there are some that try to scam the unsuspecting seller into accepting bogus payments, shipping C.O.D., etc. At the same time, the legitimate buyers are the ones that can ruin the reputation of a virtual store - and justifiably so - by complaining about long delivery times, out of stock merchandise, and lack of customer support on product specific technical issues.

It is rare that the drop ship warehouse gets hurt by any of this, after all, they are not a part of the buyer/seller transaction. However, there are a number of these warehouses set up for the sole purpose of scamming buyers and sellers. They suggest they can supply items at prices that even a diligent person could not find for so little, and thus entice the unwary seller to promote their products. Quite often, these warehouses are outside the US in some country with a reputation for products at ridiculously low prices like China.

Once the seller starts promoting the products of these warehouses, things may go very smoothly for a short period of time. The seller promoting the products of the drop ship warehouse may even realize some real profits. This is part of the scam intended to build the confidence of the seller who ultimately lists more and more items at higher and higher prices until... Well, suddenly the seller finds himself selling a few dozen TV's or high end electronic equipment, collects the money from the buyer, places an order with the warehouse, pays for the merchandise, and gets a message from the supplier that this item is not in stock, but will be shipped in another four to six weeks.

During this four to six week period, this seller - and likely many more just like him - continue to take orders, place orders with the supplier, and spend most of their time explaining the delay to their customers. Then after the six weeks have gone by they begin to frantically send emails to the supplier that go unanswered and suddenly the supplier closes up their website and flees with the money of all the sellers, leaving the sellers to refund buyers out of their own pockets.

I am sure you have heard one variation or another on this topic, but now they have migrated into online bookselling in another way - not necessarily the scams, but the drop shipping opportunities.

The predominate marketplaces have checks in place and policies against the listing of virtual inventories to minimize the probability of fraud to protect their customers and ultimately themselves from any liability. Still there are online booksellers that use drop shipping to fulfill their orders. On occasion, I get an order placed with my online bookstore for a book with a request to ship it to a customer with no invoice information enclosed in the shipment. I fill these orders as requested because there are many online booksellers that for one reason or another find themselves selling a book they no longer have in their inventory. These are normally attributable to honest mistakes that I have even made myself. However, when I personally make these mistakes, I cancel the order and refund the customer, but I tell the customer about the mistake and offer to help them locate a similar copy they can buy. I do this in lieu of having one drop shipped to them for the following reasons:

1) The online marketplaces for the most part prohibit the acceptance of an order for a book you do not physically have in your inventory.

2) I have been able to maintain a 100% customer feedback approval rating and do not want to rely on another bookseller to ship an order in a timely manner.

3) If I place an order to be drop shipped I have no visibility of how the other bookseller will package the book and/or whether it will be sufficiently protected.

4) I grade books conservatively, but based on descriptions I have read in other sellers' listings I don't have a lot of confidence in their grading policies.

5) I am not worried about being ruined by any one sale or having to give any one customer a refund, but I know that once someone compromises their principles, integrity, or ethics, they tend to continually degrade their expectations of themselves and even a minor compromise can ultimately lead to ruin.

It isn't just a matter of what it might do to my business or my reputation to me, I also have a problem with selling anything I don't have, particularly if I can't answer a customer's question regarding the product. I guess this comes from being a buyer myself and my expectation that the party selling something to me should be able to answer my questions and I have a personal distaste for paying a middle man to sell something to me when I could just as easily buy it from the source myself.




Michael E. Mould is the author of "Online Bookselling: A Practical Guide with Detailed Explanations and Insightful Tips," [Paperback ISBN 1427600708, CD-ROM ISBN 1599714876] and developer of "Bookkeeping for Booksellers," [CD ISBN 1427600694] a 19 sheet linked and tabbed Excel Workbook designed to assist online booksellers with the calculation of their in-state retail sales tax obligations and the preparation of their Schedule C tax forms. "Bookkeeping for Booksellers" also provides 55 integrated graphs to visually show an online bookseller just how their business is performing. If you would like to learn more about online bookselling, please visit: http://www.online-bookselling.com or send Mike an email at: mike@online-bookselling.com

Forbes.com: Market News Updated : Europe Redoubles Efforts To Restore Confidence Germany arranges bailout of Hypo; Belgium, Luxembourg sell control of Fortis units to BNP Paribas. Author : Tina Wang Publ.Date : Mon, 06 Oct 2008 03:55:00 GMT Europe's Governments Do It Their Way As their banks teeter, Britain, Spain and Iceland look at individual solutions as Germany and Belgium go it alone. Author : Lionel Laurent and Tina Wang Publ.Date : Mon, 06 Oct 2008 12:15:00 GMT U-Turn For UniCredit After denying any need to raise capital, the bank said it will raise 6.6 billion euros to remain profitable. Author : Javier Espinoza Publ.Date : Mon, 06 Oct 2008 12:40:00 GMT Germany The Latest To Offer Blanket Protection Chancellor Angela Merkel chooses to act unilaterally to shore up the country's financial system, after having rejected a coordinated European bailout along the lines of the U.S. initiative. Author : Parmy Olson Publ.Date : Mon, 06 Oct 2008 08:42:00 GMT Wall Street Prepares For Earnings Data Next week, investors will shift their focus from Capitol Hill to corporate profits. Author : Carl Gutierrez Publ.Date : Sun, 05 Oct 2008 16:00:00 GMT Ping An Debilitated By Fortis Stake The Chinese insurer will write off $2.3 billion in the third quarter on its 5% holding in the failed Belgian-Dutch firm, revealing that the impairment would have material impact on earnings. Author : Vivan Wai-yin Kwok Publ.Date : Mon, 06 Oct 2008 11:57:00 GMT Wells Wins Rounds In Fight For Wachovia New York appeals court overturns order extending exclusive period for Citigroup to seal deal with ailing bank. Author : Liz Moyer Publ.Date : Mon, 06 Oct 2008 03:24:49 GMT Euro Banks Still Leery Money markets refuse to loosen up as European governments race to shore up faltering banks without concrete plans. Author : Parmy Olson Publ.Date : Mon, 06 Oct 2008 10:01:18 GMT BNP Goes Belgian With Fortis Buy The French bank strengthens across the border with a major acquisition. Author : Lionel Laurent Publ.Date : Mon, 06 Oct 2008 10:45:00 GMT South Korea Is Looking Like East Asia's Weakest Link The country's financial system has functioned much more on credit than its neighbors, and now the global credit crisis has made borrowing from abroad far more expensive. Author : Tina Wang Publ.Date : Mon, 06 Oct 2008 10:22:00 GMT

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