eBay Aggressively Banning Drop Shipping / Arbitrage Accounts

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Last month we published news that eBay changed its policy regarding drop shipping which directly affects accounts that use arbitrage to sell items on eBay.

Drop shipping arbitrage is the practice of listing an item on eBay without having it in stock and sending it from another online retailers such as Amazon, Walmart, or other.

Last year sellers engaged in that form of arbitrage noticed that many of their listings were being downgraded by the marketplace.

READ MORE: eBay Being Accused of Manipulating Search Results on Some Listings

At the time there was no “stated” policy prohibiting drop shipping arbitrage, but it was clear eBay is no longer interested to support the practice.

Even online retailers such as Amazon, a popular source for products to sell on eBay using arbitrage, updated its buying policy that effectively prohibits the practice too.

Fundamentally, marketplaces (such as eBay), brands (product manufacturers), and supplying retailers (online retailer such as Amazon) prefer straight forward supply chain sales.

It boils down to consumer transparency and dropshipping arbitrage sales seem to increase the risk of consumer confusion, complaints, and returns.

eBay Crackdown

With eBay changing its policy on these kinds of arbitrage listings, it also seems they have stepped up their crackdown on such sales.

In a popular Facebook forum, the number of sellers stating their accounts are being closed or their items are virtually invisible has risen dramatically.

eBay is even asking some sellers to validate the ownership of the products listed on the marketplace after it placed a restriction on the sales account.

A few members in the forum claim their accounts only lasted for a few days before eBay shut them down or severely restricted new listings and sales.

While eBay may never completely rid the platform of arbitrage sellers engaged in drop shipping from retailers, it seems eBay has developed tools that can quickly find such listings, cancel them, and restrict the sellers.

For sellers who are thinking about trying dropshipping arbitrage sales, it seems the days are basically over and they’ll spend more time trying to evade eBay detection than making sales.

For clarification please note: The eBay policy does not prohibit “Retail Arbitrage”, which is a form of arbitrage when sellers purchase goods from retailers at a discount (discontinued, season end, etc.) and then sell that product on eBay. In that case the seller has the item in stock and eBay has no issues with such sales. 

READ MORE: eBay’s Updated Drop Shipping Policy Bans Arbitrage – Creates Other Policy Conflict

What do you think of eBay’s crackdown on arbitrage? 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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8 COMMENTS

  1. There are thousands of Dropshippers that pay ebay hundreds of thousands of dollars in fees per year. I don’t think ebay has considered the impact of what this will mean for them when that revenue is lost.

    • Most dropshippers (or drop shipping arbitrage sellers to be correct) offer products already offered on the site. Having worked at a major brand in the automotive aftermarket business that eliminated “problem” sales channels without loss of revenue, I believe the impact will be the same on eBay. Someone that has the item in stock will sell the product. In other words, the sale remains on eBay, just goes to another seller.

      From a brand’s perspective I think this is good for the marketplace. It protects sellers that invest in inventory and can provide the proper customer service. While I won’t say every drop shipper is a problem, a large number are just poaching sales from sellers that stock products.

      Not to mention issues around consumer warranties and intellectual property, IMO eBay is better served working with sellers that sell products through standard supply chains. That can also mean drop shipping, but usually means drop shipping from a wholesale distributor or the manufacturer’s warehouse. eBay has been very careful to make that distinction as they don’t want to lose that business.

      Richard

      • Then, your statement means only the big guys will have a platform. EBay sellers whose accounts were fine should be allowed to sell. If eBay loses alot of money, the it will only have itself to blame.

        • The majority of sellers on eBay are micro and small businesses who invest money into inventory and marketing. They are not the “big guys”, but usually family run or single person operations trying to make a living. Fundamentally, that is who eBay is trying to help with this policy.

          Richard

  2. Your reporter needs to know the difference. Retail arbitrage is when you actually buy the item and have it in stock yourself. Dropshipping is when you don’t buy it until it has sold on another site and then go purchase it and send direct.
    These are two different models. I fo Both and understand both. But to say that arbitrage is drop shipping is totally false.

    • In the context of the story it is correct. The story is about dropshipping arbitrage, not retail arbitrage.

      The problem is that the term “dropshipping” is a bit misused by dropship arbitrage sellers. There is “legitimate” drop shipping that eBay specifically allows when it is shipped from a standard supply chain wholesale distributor or manufacturer. What eBay is trying to do away with is dropshipping arbitrage where the product is sourced from another online retailer such as Amazon.

      However, to make sure that is properly understood, a note has been added to the story.

      Richard

  3. It would be different if everyone they look at are really dropshipping. Some people buy from the stores as items are on sale and use the stores photos. Also people buy pallets and sell their products with store photos. Ebay is going to end up running off all their sellers because of accusations they are making. Then they will lose all their millions they charge in fees.

    • eBay can identify the drop shippers doing arbitrage from the retail arbitrage sellers. I don’t think this will impact retail arbitrage sellers and those are not the ones they want to lose.

      For the drop shipping arbitrage to really make any sense for a seller, it requires them to use automation software. The behind the scene method on how those listings are posted is what is going to give it away. Retail arbitrage seller mostly use their own image and if they do use listing software, it will be something like Sixbit Software, InkFrog, or similar.

      So if you are doing retail arbitrage, I don’t think you will be impacted by this at all.

      Richard

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