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Dropshipping is a business model for ecommerce that has become popular in recent years. The reason for this is not because it benefits consumers more, rather it allows the seller to have a higher profit margin. While it is indeed a legitimate ecommerce model that has been utilized to great success by some brands, there are several pitfalls that make it difficult to tell the line between a dropshipping business and a dropshipping scam.
Dropshipping is a legal middleman business. Let me explain: You may find affordable supplier of clothes, electronics, or anything else abroad, like on AliExpress, Amazon, eBay. So, you register yourself there as a buyer. Dropshippers themselves do not own any inventory. They simply create online stores and market the products sold by third-party sellers.
The marked price on the dropshipper’s product includes their own profit margin which can be as high as they desire. It depends on how much the dropshipper thinks that consumers will be willing to pay based on effective advertising.
As a dropshipper, you target trending products online and show your ads for them via Facebook, Twitter or Shopify. When a buyer places their order on your listing, you place an order on their behalf with the original supplier and pocket the difference. The products are then shipped directly to your buyers.
You never really handle the product. So, you cannot guarantee the quality or condition. Your ability to provide after-sales support also depends entirely on the supplier. You simply are a savvy middleman dropshipper!
Dropshipping scams take advantage of weaknesses in the shipping system or unwitting buyers. In some cases, they may not even be intentional scams. Problems with the original supplier may lead to orders getting delayed, never being delivered and poor customer service. In other instances, the dropshipper tries to scam the supplier.
A tell-tale sign of a dropshipping scam is unbelievably low pricing. Whenever you come across extremely great discounts on products online, pause for a moment to Google the product and see its average market price. This is a common way scammers use to get online shoppers to buy from them.
In 99% of such cases, the shoppers regret when the product is delivered. It is always sub-standard, faulty/broken or completely different from what was advertised. You will simply lose money.
Genuine dropshippers put customer service support in place. Try to check the responsiveness of a dropshipper’s customer support before you order by asking questions related to the product and delivery times. This can give you a true sense of genuine dropshippers and mere scammers.
Scammers are unresponsive about fine details of the products or they may take too long to respond.
Gaming the system is not a new tactic in scams. That’s how most scams actually thrive. Dropshipping scammers order from genuine sellers' web shops on Shopify, Amazon and eBay.
Then, even when the product is delivered to the buyer, they still file a claim against the seller that their order was not delivered. They demand a full and immediate refund like in the image below:
Here’s the problem: Dropshippers cannot track orders in the shipping system because they give their buyer’s address for direct delivery. Dropshippers also DO NOT handle the product.
The scam is on the actual seller. The dropshipper will file a claim to Amazon that they haven't received the order. Amazon will be inclined to refund them. Accounts that are notorious for this get flagged and suspended in due time as similar complaints accumulate.
Sellers can identify dropshippers this way:
If you are a seller, you will be tempted to pay these dropshipping scammers to continue doing business. A better solution is to raise your price above theirs. That way, they will source their products elsewhere.
Some buyers can also be scammers. When a product is delivered, they claim it arrived broken or damaged and can’t work. So, they demand a full refund. When asked to send photos of the damaged product, they are unable to do so.
Sellers know that products get shipping damage in the course of deliveries. Scammers know that several damage claims a year from clients is a reasonable rate and the seller will usually regard it as normal. So, scammers exploit this to avoid paying and justify refunds.
Big sellers will simply do the refund and accept it as a normal business loss. The scammer ends up getting the product and their money back thanks to this little trick. A careful seller asks for proof of damage before issuing a refund. Or, demands that the product be returned.
