Dropshipping is a great way to start a business and learn more about the eCommerce industry.
It saves you the trouble of having to keep inventory and ship it.
This is one reason why it has grown in popularity over the years, especially among people who are just starting out.
This is where the problem starts, though. Most new business owners jump right into dropshipping without being ready.
They forget that dropshipping has a dark side, too, and that there are a lot of shady suppliers out there ready to scam you.
Don’t want to be a victim? Then keep reading and we’ll tell you about some of the most common dropshipping scams.
Is Dropshipping a Scam?
Dropshipping has been around for a long time, and 27% of online retailers use it as a business model. If it was a scam, why do so many entrepreneurs run successful dropshipping stores without getting caught?
Popular eCommerce platforms like Shopify and WooCommerce are also known for having apps and features that make dropshipping easy. This just shows that dropshipping is a good way to run a business and is not a scam.
Why Do Many People Believe Dropshipping Is a Scam?
In the online shopping world, there are more and more scammers who send low-quality or fake goods. Because of this, a lot of customers and even some failed business owners think dropshipping is a scam.
But what people often forget is that scams can happen in any kind of business, no matter how it looks. You just need to be careful about where you buy things and whether or not the seller has good ratings and reviews.
Common Dropshipping Scams and Their Solutions
There are many dropshipping suppliers on the internet, but not all of them are as trustworthy as you might think. Let’s talk about some of the most common dropshipping scams and how to avoid them.
Most of the products that dropshippers sell come from AliExpress. Big-name brands like Adidas, Nike, and Balenciaga are being sold there for ridiculously low prices, which is a clear sign that they are fake.
Some merchants may say that they are the Original Equipment Manufacturer (OEM) of the product, but that is completely false.
People are very interested in luxury goods, which makes it easy to make a lot of money. That’s why there are so many cheap knockoffs on the market.
There are already strict agreements in place for Apple and other big brands. Usually with a small group of manufacturers, distributors, and wholesalers that you’re not likely to find on AliExpress.
How to Avoid This Scam
Dropshipping fake goods is never a good idea because it can lead to copyright problems and a lot of other legal problems.
We think you should stay away from them completely unless you are working with a reputable distributor or the manufacturer directly.
One way to make sure a supplier is real is to send an email to the brand’s official address. Most big brands would answer and tell you if they work with the merchant.
Checking reviews is another way, but it’s not as reliable because some customers don’t know how to tell the difference between real and fake products.
If the samples you get are perfect, you should be able to trust the supplier, right? But that’s not always true.
Many suppliers send samples that look good, but the real product might be broken or of low quality.
As a dropshipper, you can’t look at every product in person, and they take advantage of this.
They wouldn’t steal your money directly, but instead they would give your customers low-quality products so they could make a lot of money.
If your customers are complaining about the quality of your work a lot, this could be why.
Then there’s a different group of scammers who would just send your customers trash.
This is even riskier because it can completely ruin your brand’s reputation.
How to Avoid This Scam
The best way to solve this problem is to hire a third-party QA agent to check each product before it ships.
The agent can talk to the supplier directly and send broken items back to the supplier’s warehouse.
Then, you can ask why the products aren’t good enough and quickly return or exchange them to have a good shopping experience.
You can also send sample orders to a different address to find out what the supplier sends.
This method might be cheaper than hiring a QA agent full-time, but what if the quality of the product starts to vary after a few orders?
So, if you’re not sure about the quality of the product or if the seller seems sketchy, the best thing to do is to use a third-party service.
Fake Gold Sellers
If you want to sell high-priced items through dropshipping, you could sell gold jewelry. But again, the problem is that you can’t just give it to anyone.
You can pay a couple of thousand dollars to become a gold supplier on Alibaba.
Smart con artists can take advantage of this by signing up for the Gold Supplier membership, stealing a lot of money, and then running away.
We’re not saying that this is always the case, though. Most gold sellers on Alibaba are real, but you should still think about the possibility.
How to Avoid This Scam
If you’re using Alibaba to find a gold jewelry supplier, check their years of experience, catalog, and certifications.
Just remember that there is always some risk when dropshipping gold, and we don’t recommend working with random suppliers.
If you can’t find reliable suppliers of gold jewelry, you can look at our list of the best POD jewelry companies.
Disappear After Payments
Some suppliers are so lazy that they don’t even bother to lie. They would just disappear as soon as they got the money.
Most of the time, they’d offer you a deal you couldn’t refuse and say it was a once-in-a-lifetime chance to gain your trust.
Most of the time, these suppliers would rather do business offline than use Alibaba’s Trade Assurance.
How to Avoid This Scam
If you’re working with a supplier from Alibaba, the easiest way to avoid this is to not transfer any money offline.
Trade Assurance is an escrow service that Alibaba offers. It is meant to build trust between buyers and sellers.
It makes sure that the product quality and shipping time match what the supplier said they would do. The seller won’t get the money until all of these conditions are met.
Because of this, many sellers who want to take your money and run ask you to pay outside of the platform, which would make the trade assurance useless.
But you have to be more careful if you work with a supplier outside of Alibaba or AliExpress.
You can use a third-party escrow service or look at the supplier’s reviews on trusted sites like Trustpilot.
Sales Rep Scam
You can also be tricked by a sales rep who is not honest.
Most of the time, this means that the sales rep is about to quit and try to scam both you and the supplier out of money.
They will offer prices below the market that are too good to pass up, and they will ask you to send money to their personal account.
Once you send the payment, the Alibaba trade assurance will no longer protect you, and we all know what comes next.
How to Avoid This Scam
We’ve already talked about how you should never send money to a supplier outside of Alibaba/AliExpress if you’re working with them.
If your sales rep makes such a proposal, you should turn down the supplier right away.
Many people have lost money on schemes to get rich quickly. It happens all the time now, especially on social media.
Someone will approach you and say that they are a professional dropshipper who knows the “ultimate formula for success.”
You’ll be told how the formula can help you make thousands of dollars and help you reach your income goals. But the catch is that you have to pay a small fee to learn the formula.
You probably know where this is going by now. As soon as you send the money, your dropshipping guru would block you and disappear.
How to Avoid This Scam
We know that a lot of successful people have spent hours making dropshipping courses so that other people can learn how to do it. They can show you case studies and give you tips from the inside to help you get started.
But the truth is that there is still no surefire way to turn your business into a money-making machine overnight or in a way too short amount of time.
Anyone who tells you that is flat-out lying and trying to take advantage of you. At most, they would copy a course and tips from somewhere else and send them to you under their name.
The only way to avoid this scam is to realize that there is no easy way to get ahead. Dropshipping is just like any other business in that it requires hard work and effort.
It’s fine to pay a professional dropshipper to help you learn on your own. But since there are so many free ways to learn about dropshipping online, it’s not really necessary.
Anyone who tells you that if you pay them a subscription fee, you’ll start making money right away is trying to trick you. Some con artists would go to great lengths to prove this by making a social media profile with thousands of fake followers.
Tips to Avoid Dropshipping Scams
If you work with suppliers outside of Alibaba, there is no protection for your trade that will keep you safe. You can still spot shady suppliers, though, if you remember the following:
Verify Company License
If you’re working with a supplier outside of an eCommerce marketplace, you should always ask for the company registration number and business license number.
Most people who try to scam people online don’t give basic registration information so that law enforcement can’t find them.
They might, for instance, give a fake business address, phone number, and fax number, or try to get buyers to contact them only through their cell phones.
Using the area code, you can easily find out where the phone number is.
Remember that if something seems too good to be true, it probably is. When dropshipping, price shouldn’t be the only thing you think about.
Many con artists would set prices that were too high to attract customers.
As soon as you start to trust them, they will either run away with your money or send you things that aren’t as good as they said they would be. If you have to, pay more for high-quality goods, because that will make you stand out from your competitors.
Search Online Databases
If you work with a Chinese company, try looking for them on authorization apps like QiChaCha. It’s a platform that the Chinese government has signed off on.
Try typing in the name of the company that your supplier works for to see if it comes up. You can find out if they were given a sentence or if they didn’t pay back what they stole.
Also, more information about the company, like the registered address and registered organization, helps you understand the company you are working with.
You can use the same method even if your suppliers are from other countries. But you’ll have to look for a website with a list of registered businesses from that country.
Checking a supplier’s reviews is the best way to make sure they’re real, but only if the reviews are real. Now, a lot of suppliers are getting fake reviews that are hard to tell apart from the real ones.
What you can do is look for reviews that are bad. After a customer writes something bad, suppliers often get a bunch of fake reviews that are all good.
Even though it’s true that you can’t please every customer, you should be suspicious if you see a positive review after every few negative ones.
Try reading the customers’ complaints. If most of them have the same problems with the product, it’s likely that the seller is changing the reviews.
Visit Suppliers Factory
We know that it’s not possible to visit the factories of our suppliers because a trip around the world takes a lot of time and money.
But you can ask them to send you videos or pictures of production, inventory, the environment, and other things.
Setting up an online video meeting is even better and can reduce the chances of fraud.
If you don’t want to do that, you can also hire a professional sourcing agent who will check the quality of the products in person.
FAQs about Dropshipping Scams
Is Dropshipping Legit?
Yes, dropshipping is a legitimate business model that people all over the world use. Even so, if you don’t have a reliable supplier, you can get ripped off as a dropshipper just like you can in any other business.
Are Dropshipping Sites Legit?
Most dropshipping sites are legit, but you should always be on the lookout for a few bad apples. When you’re not sure about a seller, check online reviews to make sure they’re real.
Do Most People Fail at Dropshipping?
Yes, almost 90% of dropshipping stores fail. This is because most people think dropshipping is an easy way to make money. Most of them don’t have a plan and aren’t willing to put in the time and effort their business needs to succeed.
What Is the Downside of Dropshipping?
The biggest problem with dropshipping is that you have to depend on your supplier for everything. If they run out of stock, you run out of stock, too. Also, you can’t look at every product in person, which can lead to quality problems.
How Much Does the Average Dropshipper Make?
How much money a dropshipper makes depends on the products they sell and how many of them they sell. On average, about 15% to 30% of each sale goes to the business. This can cost between $1,000 and $5,000 a month.
But the vast majority of dropshippers fail and barely make any money. So it all depends on how you market your business and how much work you put into it.
Why Do Buyers Think Dropshipping Is a Scam?
Dropshipping is popular all over the world because it is easy to use. A lot of people who don’t know much about eCommerce and scammers have started to use this business model.
They send poor-quality goods to customers or just take their money and run. Many buyers now think that dropshipping is a scam because of this.
When you work with dropshipping suppliers online, you are always at risk of being scammed.
If you’ve never done it before, you should be careful with each step. Read reviews and order a sample product from a supplier before you decide to work with them.
The most important thing to remember is that there is no easy way to be successful.