Dropshipping is a fantastic business model. But, you may need to familiarize yourself with it in the eCommerce sector. It relieves you from the hassle of holding shipments and inventory.
Most people prefer it for these reasons, especially novices. But, most people dip their feet in it without proper knowledge.
It is the beginning of problems. Unfortunately, many freshers meet scammers at least more than once.
Even though the model is gaining popularity, the dark sides can be scary. But scammers are clever and even target old customers.
Whether you are a new or consistent drop shipper, this guide is for you. Besides, we will reveal some dropshipping scams and how to stay safe from them.
Is Dropshipping a Scam?
Dropshipping is not a scam. Like any other business, it faces many challenges that most people call scams. But, the model itself is genuine.
Over 27% of the online retailers are drop shippers. A business scam can’t have such a number still interested in it. Also, big ecommerce companies like WooCommerce and Shopify are famous for it. They have dropshipping features and apps.
It proves that the model is a viable business avenue and not close to a scam. But, unless you understand it well, you might think that not keeping inventory is a cause for alarm.
It doesn’t mean that drop shippers don’t stock any inventory. On the contrary, they do but very little than physical stores.
We are also seeing many sellers on Amazon operating dropshipping businesses.
Read more about dropshipping
Is dropshipping legal? Few Considerations in 2022
Why Do Some People Believe Dropshipping Is a Scam?
Most people who are new at operating dropshipping businesses still believe it is a scam. We don’t want to even talk about those who know nothing about it. Here are some primary reasons why people think that dropshipping is a scam:
1) Poor Quality Products.
As a drop shipper, you will never touch the goods you sell. But, unfortunately, it means it is impossible to control quality.
You will get several complaints from buyers of low-quality goods. But, if you aren’t careful, such negative reviews and comments affect your business.
It is a path to failure if you don’t sort this out with your suppliers. Hence, most people conclude that dropshipping products are of bad quality.
The majority will generalize it as a scam.
2) Over-hype of High-Profit Margins.
Check online advertisements on the web or social media. You will see the hype of getting rich faster from dropshipping.
For instance, you can buy a set of earrings for $0.10 from the supplier. You then sell it at $5 on your dropshipping stores. Can you see the difference?
But, after signing up, you will see other stores selling the same earring set for $1. So, you will need to adjust your selling price to match theirs. Or others go even lower to meet sales volume.
The profits aren’t as you expect, especially if you are overambitious. If it happens to you in the first days, you will brand dropshipping a scam.
The dropshipping business model doesn’t have high profits like others say. Advertisements are meant to lure you to the business. Often, they hype the profit margins for you to fall into the trap.
Why Dropshipping Is Not a Scam - 4 Reasons
Many might find it difficult to believe that dropshipping isn’t a scam. But, here are some reasons to back up the genuineness of the model:
1) Fundera Research Findings.
Retailers in the dropshipping industry earn 50% more than non-drop shippers. Some reasons are low overhead costs, hands-free order fulfillment and inventory. However, retailers don’t cover expenses such as utilities and warehousing.
These aspects make dropshipping a legit business model. It is worth it and will remain profitable in the future.
2) Shopify’s Evidence.
Shopify is one of the popular ecommerce platforms. It has apps and tools to help create a dropshipping ecommerce store. More than 1.7 million sellers will use this site in 2022.
The company processes sales worth more than $5.1 billion. 29% of ecommerce sites use Shopify. Some examples are Tesla and Redbull.
You can agree both small and massive businesses rely on Shopify. The friendliness of this site makes most people consider it.
3) A Little into Amazon.
Amazon is a giant retailer. But more than 53% of items bought on the platform in 2021 weren’t from sellers. Instead, these were from third-party sellers.
Most use drop shipping for their order fulfillment. It is enough evidence that Amazon will keep growing.
We attribute this to the genuineness of the dropshipping business model.
4) Nasdaq Research Results.
Nasdaq predicts that almost 95% of online buys in 2024 will be ecommerce-based. As a result, many online retailers are shifting to dropshipping.
Most will rely on the model for order fulfillment and inventory management by that time. Thus, projections and expectations of this model will keep growing.
What Are Some Common Dropshipping Scams You May Suffer?
We aren’t bashing the legitimacy of dropshipping. But, like any business, it doesn’t lack unscrupulous dealers. It is the scammers we are talking about here in this business model.
Not everyone in the business is a scammer, whether a seller or supplier. But, a few buddies want to make quick money in the wrong ways.
1) Counterfeit Products.
Most drop shippers get their items from AliExpress. The platform has popular brands like Nike, Balenciaga, and Adidas.
The prices of items from popular high-end brands are lower on this site. You don’t need a billboard to know that these are FAKE!!! Some sellers even claim to be the original equipment manufacturer of the items.
Again, more NONSENSE!!! Many people long to own luxury brands. But prices don’t allow it. There are plenty of cheap knock-offs flooding the market.
2) Deceiving Samples.
Do flawless samples always mean you are dealing with a genuine seller? Unfortunately, it isn’t always the case. Most suppliers have deceiving models. Actual products, in reality, don’t match what you see in pictures.
The supplier might not scam you by not delivering. Instead, they send cheap and low-quality items than samples.
You will get this from customer complaints.
3) Fake Gold Sellers.
Selling gold jewelry is the easiest way to involve in high-ticket dropshipping. But you can’t trust everyone with this.
You can be a gold supplier on sites like Alibaba. But, you need to pay some thousands of dollars.
Some cunning customers use this to their advantage. They sign up for gold supplier memberships.
Such scammers will defraud you of your fortune and then bail. We don’t mean that it is the case all the time.
Alibaba is a legit site, but such scammers don’t lack it there.
4) Disappear After Payments.
Some suppliers perform a Usain Bolt character on you. You can’t fathom the speed at which they disappear with your money.
Once they get your payment, you will never hear from them. But, before that, the supplier offers a very tempting deal.
They call them once-in-a-lifetime opportunities for you to trust them. Such suppliers deal offline with clients to trespass Alibaba’s Trade Assurance.
5) Sales Rep Scam.
While some suppliers can be unethical, their sales reps can be mischievous. Such sales reps are at the last step of quitting their jobs. You will discover that they will scam the supplier and buyer before muting.
Sales reps like this can offer very irresistible prices. These are way below market prices. You will transfer money to their accounts as they want. You lose protection from Alibaba Trade Assurance.
That is the end of the road for you if you find yourself in such a situation.
6) Get-Rich-Quick Schemes.
Many people fall prey to get-rich-quick scams. It is a common thing nowadays. You will see such things on social media.
Here is how it works. First, you are approached by someone claiming to be a professional in this sector. Most scammers say they know the actual formula for success.
You will want to know how the formula works. Thus, greed to earn more takes over you, and you pay the training fee to the scammer.
It might not be a considerable amount, but once you send the money, they hit the block button. How will you find them? Who will you report to in this case?
7) Phishing Emails.
You might get emails from ‘platform staff’ like Shopify. The sender says in the email that they need to update your account.
There is a link in the email for you to click to allow the update. But, of course, clicking the links opens the gate wide open for your troubles to begin.
The scammer resets your account’s information. Others change your disbursement account. In short, you are harming your business without knowing.
8) Customs and Import Duties May Be Charged.
In the dropshipping process, the buyer doesn’t pay for the charges. Moreover, they don’t pay customs during importation. So the drop shipper must do this.
Nowadays, drop shippers want to ask for such extra costs from you. It is another scamming avenue they use. the drop shipper charges the client extra to increase their profit margins.
How to Avoid Dropshipping Scams?
Both novices and amateurs in the dropshipping sector have met these scams. So if you are on this page to find helpful information, you are in the right place.
The section below enlightens you on how to keep yourself safe from these scams.
1) Verify Company License.
You might be working with a supplier outside the ecommerce marketplace. It is crucial to check and confirm their business license and registration number.
Most scammers fear giving basic registration details online. They also want to be safe from law enforcement officers.
Some companies present fictitious firm addresses, fax, and phone numbers. Others entice buyers to reach them only through mobile phones.
You can use an area code to conduct a simple search on the phone number’s location.
2) Unrealistic Offers.
If the deal seems too good to believe, it could be unrealistic. Price shouldn’t be the sole determinant when dropshipping.
Most scammers set ‘unrealistic prices for products. They intend to lure customers. Once you trust them, they run with your money.
Or, to try clear their schemes, send poor quality items. It is better to pay more but get top-tier goods. You must keep your business aside from the competition.
3) Search Online Databases.
Check authorization apps such as QiChaCha if working with Chinese companies. The Chinese government has certified the platform.
Type the name of the supplier’s company. You can check if they didn’t pay restitution or were sentenced.
Extra information on the company is crucial. Registered organization and address help you know the companies you intend to work with at the moment. The same method applies if you are dealing with suppliers from different places.
But, you have to search for sites with databases of registered companies. They should be from these countries.
4) Fake Reviews.
Checking supplier reviews is the perfect way to verify if they are authentic. But, some suppliers buy reviews.
Suppliers buy fake reviews from social media users and online freelancers. Such remarks are challenging to differentiate from genuine ones.
Instead, go through the negative feedback. After a customer writes a negative review, the supplier buys more fake reviews to cover up for this one.
If you spot such a trend, know there are high chances it is fishy. Read through customer complaints. If you notice the same issue with a product, the supplier could be tempered with the reviews.
5) Avoid Putting Yourself at Financial Risks.
The dropshipping company should accept the mode of payment you use. Avoid suppliers who want you to pay through Western Union or Wire Transfer. unless you have been working together for a long time.
6) Request for Open Policies.
Go through the company’s policies on matters of damaged goods and returns. Avoid working with companies that don’t display their policies online.
Genuine drop shippers know how significant the liability is minus such policies.
7) Check the Company’s Site.
Look at the company’s site. You can discover how long the company has been working around. For some companies, it opens a window for suspicion if it hasn’t been online for a long time.
Most scam sites are new. These could be four to seven months old. After this, the website can be inaccessible.
Look at the site’s contact section. Is there a physical spot corresponding to the mail address on the site? Is there a mailing address in the first place?
What to Do When You Come Across a Drop Shipping Scam?
The only thing to do if you suspect a dropshipping scam is to report it to the government. You can report scams to crime complaint centers.
Check online for other resources for fraud reporting. Before that, research well to find out if these are actual scams.
Research helps you know how the dropshipping agent you choose operates. In addition, it enables you to gauge to what extent you can trust them, their communications, and their operations.
You need to find the correct match to grow your business. A genuine one ensures your customers get high-quality goods. Quick service isn’t a compromise.
How we can help you do dropshipping?
Dropshipping is the best business model if you don’t want to handle inventory. You may need a continuous supply of products through a genuine and reliable supplier.
All dropshipping platforms have their pros and cons. Thus, online businesses must vet drop shippers, depending on specific needs.
We help you find dependable suppliers on your behalf. In addition, our team audits factories to ensure clients get good quality products.
You can import products from China at low prices and build a brand.
FAQs about Dropshipping Scams
Yes, dropshipping is a legitimate business model. Most entrepreneurs around the world use it.
But, like any other business, you won’t get a few scams here and there. The most crucial thing in this sector is to get a reliable supplier.
Not all dropshipping sites are legit. A few are out here to swindle money from unsuspecting clients.
Check seller reviews, data and contacts to confirm their authenticity. If possible, use company verification sites to research further.
You want to be cock-sure before committing to a supplier. Also, ask around your circles if people know about the sites you choose.
Request for reviews or contacts of people who are dropshipping using these sites.
Most people fail at drop shipping. We can rate this number at 89%. The majority think that this is a get-rich-quick avenue.
Others get into it with greed. So you may need to have a good plan before getting into dropshipping.
Invest your resources in research first before starting. There is a lot of information online and offline on dropshipping.
Be careful of what you consume. But unfortunately, not everything you read or listen to is true about this business model.
If you doubt anything, seek the help of sourcing agents. You want to get things right before investing your money in dropshipping.
Dropshipping is very successful. It is a fantastic way of earning money this year and in the future.
The business model gives buyers quality goods at lower prices. You can sell this at high profits if you have a ready market.
Once you stabilize the business, you can get good money from sales.
Dropshipping is one of the ways of getting rich. But it isn’t a quick affair like most people hype it.
The business model is gaining popularity faster. Thus, it shows how viable it is at the moment.
You can earn thousands of dollars in the year’s first half. With time, you can scale this to six figures and more.
It is absolute proof that you can make good money from dropshipping.
Scams are inevitable in any business. No matter how secure you make yours, someone is always planning to outsmart you.
If they are successful, it can end your business. You might notice this earlier and save yourself from impending loss. Many reliable suppliers sell high-quality products.
But, a small percentage of ‘SELLERS’ are scammers. So, as you engage with them, be competent at spotting the red flags. Dropshipping scammers are everywhere. You can find these fraudsters on social media and e-commerce platforms.
What you should know is that dropshipping as a business model is legit. But, some dealers are scams. We hope this article was helpful if you are researching how to venture into it. Remember these scams and how to avoid them.
To help other freshers not fall for the same, we advise reporting scammers to the government.
Dropshipping is one of the booming businesses right now in the ecommerce sector. It attracts a significant number of wholesalers and retailers online. Contact Fulfillbot to get assured support in this field.