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June 19, 2008

EBay Warning: Dropshipping? PayPal Is Holding Your Money!

EBay has been the ideal home based business for years. Most of us started with the ‘clean out the garage’ model, and over time graduated to dropshipping, and in many cases, it has turned into a pretty significant fulltime income.

Over the last several weeks, several VERY disturbing changes have taken place at EBay as EBay seems intent on wiping out the very business base that built the behemoth, to focus on the corporate clientele that have taken a much larger position on EBay over the past couple of years, using EBay to sell off their excess inventory directly, rather than selling to the large discount chains as was the previous habit.

Here’s an overview of some of the most significant – and damaging – changes that affect you and I, the folks that have built home businesses around EBay….

1) The EBay Feedback system now only allows Sellers to leave POSITIVE for Buyers. On the other hand, Buyers can leave any kind of feedback they want for Sellers. This means that if you have a problem with a Buyer (gee – that never happens, right?) you are pretty much out of luck! So, if the Buyer feels that he should have received his widget in 3 working days – even though you clearly state that it takes no less than 10 working days for the widget to ship – he can give you a negative! And you are pretty much powerless since there is no arbitration system in place.

2) Neutral Feedback? HAH!! Guess what? They no longer exist! All of your neutral comments have now been converted to NEGATIVE feedback ratings. Top PowerSellers have lost their PowerSeller status and the perks that went along with it – including the extra discounts that were often factored into their pricing. Although the PowerSellers were given a period of time to ‘correct’ the situation – the bottom line is that Buyers are not terribly responsive to such requests – and this means that a huge percentage of PowerSellers…aren’t. An interesting side note here is that one PowerSeller that was hit by these changes… also one of the speakers at this week’s EBay Live Conference in Chicago……should be a very interesting speech…….

3) The Final Straw…….dropshipping is huge on EBay. My hubby has been very successful dropshipping on EBay – both through EBay partners such as Doba and others, as well as resources of his own, through his 25 years in the wholesale gift industry. Today he received an email from PayPal stating that any orders that were ‘known to be dropshipping” would result in a 21 day hold on the funds from the customer! The only way around this is to send PayPal the tracking notice when the product ships and supposedly they will ‘release’ your funds.

Personally – I have dealt with PayPal in the past over disputes – and the response times are horrible. Basically, this means that if you have been earning a living dropshipping – you will now have to be financially solvent enough to cover all of your sales out of your own pocket, rather than paying for the product with the funds from PayPal. This pretty much will kill the entire dropshipping business model for most people on EBay.

4) No digital products – Ebooks were a HUGE seller on EBay and it was a great business model! Automated download, a real ‘set it and forget it’ business model if handled correctly. But apparently it was not handled correctly by many and now ebooks and other digital items must be sold in DVD format and physically shipped. exactly why it was such a great business – you didn’t have to ship anything!

At one point, we had 4 stores on EBay and thousands of products, but we have been ‘branching out’ and are looking at other products, such as the EBay Affiliate program, niche store scripts etc.

After this latest round of changes, and the notice today from PayPal, we will be pulling 99% of our products off EBay.

As a home business – it no longer works for us.

Over the next few days we will be posting reviews of the various store models as we take them for a test drive – we will bring the pros and cons of every system!!

Melody Wigdahl is a serial entrepreneur, lifelong geek and founder of Work At Home Ideas For Women, and The WomensNet Network, Home Of The Amber Grants For Women Entrepreneurs , a networking and resource site for women entrepreneurs. Melody has been working from home for more than 2 decades – web based since 1996 – and loves to share ideas and stories with other entrepreneurs!