What Is Dropshipping, and Is It a Scam?

by Matthew Hughes 

The internet has radically changed how retailing works thanks to companies like Amazon and eBay. If you’re on Instagram or Facebook, though, you’ve probably also encountered advertisements for shockingly cheap boutique goods from companies you’ve never even heard of.

Chances are those brands don’t exist outside of a Shopify storefront. They’re merely reselling low-quality Chinese goods at marked-up prices. Welcome to the murky world of dropshipping scams.

Dropshipping Is Not a Scam, But Scammers Are Using Dropshipping

A merchant that uses dropshipping is just a middleman. You place an order with that merchant, but another company—a manufacturer, retailer, or wholesaler—ships you the product. The merchant takes his cut and never has to handle the inventory. This technique has been widely used for decades by most legitimate businesses to cut down on storing inventory in multiple locations and ship things to the customer more quickly.

The problem is that these days dropshipping is often used as part of an online get-rich-quick scheme. All you need is a website and some social media advertising, and you can sell people products from your online store. You don’t have to keep anything in stock or make anything because someone else manufactures, stores, and ships the actual product.

Let’s say a factory in China is selling widgets for $3 each. A drop shipper can set up a website and social media campaign that advertise and sell these amazing, high-quality widgets for $15 each. The drop shipper might never even handle the widget herself and have no clue about their actual quality.

Whenever an order arrives on the website, the drop shipper purchases a $3 widget and the manufacturer then sends the product to the customer. The drop shipper pockets the extra $12.

All That Glitters Isn’t Gold

Most people encounter drop-shipping scam merchants while doing routine tasks, like aimlessly browsing social media. Amidst the baby pictures and deliberately-crafted food snaps, they spot an advertisement for designer-caliber tech or clothing at a low price.

Unlike the easily spotted advertisements offering fake Ray-Bans, this ad claims the product comes from an independent boutique. If you click it, you’ll see a website that looks professional. There might even be a backstory or photo of the design studio where the product was made. It’ll also likely come with an SSL certificate to further suggest legitimacy.

So, you type your credit card details and wait. And wait. Eventually, a package will land on your doorstep, except, instead of coming from a Los Angeles fashion house, it came straight from China.

Disappointment quickly sets in when you realize the product doesn’t quite meet your expectations. The material might be all wrong, or the stitching might be low quality. Rather than something that looks like it came straight off the catwalk, you’ve got something that could have been fished out of a Goodwill bargain bin.

Stories like this are far too common in the online selling world. You could even argue it’s an inevitable part of the business model. Sellers rarely (if ever) quality-check their wares. Neither they, nor their customers, have any idea what the product is really like.

Anatomy of a Dropshipping Scam Operation

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