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.
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.