How to Identify Drop Shipping Scams

Drop shipping can provide a great model for growing your business. When ambitious leaders correctly execute a drop ship model, sellers can rapidly expand their inventory selections at better wholesale prices while boosting both immediate customer appreciation and long-term loyalty. Better yet, a supplier that opts to dropship can achieve all these goals for less money than they were previously spending to source elsewhere.

Unfortunately, the standard dropship model can get a lot of flak, as the industry has attracted its fair share of online scammers hoping to get new and growing resale business owners like you to pay unnecessary fees, or even not deliver on their promise at all. Given the abundance of drop shipping scams, finding a trustworthy middleman can be a long and trying, research-heavy journey. Where do you begin?

What Is Drop Shipping?

When using a drop shipping model, an ecommerce business does not store its own inventory. No product that the store sells is kept on-site in a warehouse the business maintains itself. Instead, upon making a sale, a dropship supplier buys the item from a third-party business – often a wholesale or manufacturing supplier – that ships the item to the address the dropship customer has provided. A drop shipping ecommerce business thus never directly handles the product.

Benefits of Using Drop Shipping

Drop shipping may be less risky for a new ecommerce business because it requires no investment in inventory or warehouse space to store stock. This freedom from traditional wholesale models gives drop shipping businesses more flexibility in location and product offerings. The lack of inventory involved with drop shipping may also lead to easier scaling, product testing, and fewer materials and less space needed to launch an ecommerce business.

Why are there scam drop shipper services?

The growth of the dropship model has incentivized many types of drop shipping scams. Scammers may flood the internet with fake dropship company web pages that appear first on a Google search, even before listings for legitimate drop shipping companies. The high search engine rankings of drop shipping scams can be dangerous for anybody brand new to selling on Amazon, especially people who aren’t tech-savvy.

What Are Some Common Signs of Drop Shipping Scams?

The telltale signs of drop shipping scams can be broken down into the following categories:

Dropship-focused companies

Often, drop shipping scams come from companies that claim drop shipping is their primary focus, or even one of their largest services. Most businesses that actually provide drop shipping services do so as a secondary service, as their primary service is supplying wholesale in bulk to large retailers. If you find a company focused on drop shipping, you may do better to avoid working with that company.

The company is not based in the U.S.

Drop shipping scams based overseas are typically not drop shippers, but brokers who are acting as another middleman between your store and your customer. There is little to no efficient way to track them. Overseas shipments are also subject to customs and other delays, which means your customer may not receive their item for 30 days or longer. That delay is a customer relations nightmare for your business. Plus, time delays make it difficult to communicate with the company during regular business hours. Check to make sure a company is actually based in the U.S. by confirming that their address leads to a real warehouse or office space, and that the phone number is one truly issued in the U.S.

Dropship companies with no contact information or a fake address

Since drop shipping doesn’t require you to keep inventory of your own, you might not think much of knowing where your drop ship company’s shipments are coming from. After all, your address and contact info never have to enter the equation, so why should theirs? Be careful with this leap – in almost all cases, a dropship company unwilling to list its contact or address information might be out to take your money and run.

The bulk wholesale suppliers comprising most trustworthy drop shipping providers will readily make their ship-from address and points of contact available. Since these suppliers store large amounts of items in massive facilities, you can safely assume that a web search for the address will turn up a warehouse, industrial park, or commercial district instead of a residential address or PO Box. If you find the latter (or, of course, no address available at all), you have likely encountered a scam.

Drop shippers that advertise quick, easy ways to make money

If a drop shipping business tells you that it can make you a quick buck, you should immediately consider that it might be a scam. As with any new business, a drop shipping company will take time to properly grow and turn profitable, so when drop shipping companies claim they can pave a path for rapid and massive earnings, they’re instead luring you toward scams: high upfront fees and monthly costs that ultimately go toward nothing. A true dropshipping partner’s website will advertise not your potential for quick, easy money but instead wholesale details, as this service primarily drives their revenue.

Fake wholesalers and reviews

When searching for the perfect drop shipping partner, it’s entirely possible that you’ll come across drop shipping companies that are entirely fake. These scammers may appear convincing by presenting an embellished inventory while still claiming to sell their products at wholesale prices. Additionally, confirming that you’ve encountered this kind of scammer can be tricky since many legitimate suppliers do sell certain products at retail prices.

Complicating matters is that scammers can easily generate fake websites that closely resemble real and legitimate wholesaling businesses, including pages with an abundance of fake or misleading reviews and feedback.

Money is required to use the drop shipper

A key sign you’ve encountered a drop shipping scam is an upfront request to pay extra fees that real wholesalers would never ask for. These typically appear as annual, monthly, or initial account setup fees, and scammers may attempt to rationalize them by stating that their services enable you to buy bulk inventory.

Scammers may also try to add a fee for simply purchasing in bulk, a charge that can add to your confusion about whether you’ve encountered a scam, as even legitimate wholesalers may require first-time clients to pay a fee. These fees can help the wholesaler supply better services and prices to sellers without having to buy in bulk (which is mutually beneficial in helping you keep a competitive edge). This cost usually only applies to the first order, and the drop shipper should confirm this setup for you over the phone and in writing.

Distributors or extra middlemen

A real drop shipper’s website won’t mention distributors or extra middlemen, as real drop ship reps have long-lasting relationships with importers and manufacturers whom they represent, eliminating the need for extra parties.

Specific company contacts

Your drop ship representative needs to be able to sort through all order issues with the importer or manufacturer, so you should know exactly whom at the drop shipping company you’ll be working with. Without a name, the company has minimal accountability, which you should mark as an immediate red flag. Only work with companies that are forthcoming about whom they represent and how they handle business.

How to avoid drop shipping scams

Never work with a drop shipping company without thoroughly researching it and verifying its legitimacy. Before you partner with a drop shipping company, investigate every publicly available aspect of its business. Read reviews from confirmed customers and check the review dates to reveal any suspicious patterns. Check the company’s social media accounts. Call a representative directly and talk through your business goals to see if the company’s methods make sense.

You should also check Amazon’s Seller Forums and speak to any friends or colleagues in the industry. If they’ve been in business for many years or experimented with drop ship companies, they have likely encountered drop shipping scams and can give you pointers on what to watch out for.

To clear up any confusion you might have, you can call the drop shipping company’s customer service number. The person you talk to should not hesitate to clarify the company’s wholesale prices and provide you with an accurate, detailed wholesale pricing list. If the company is unwilling or unable to produce a list of these, you have likely encountered a drop shipping scam.

You can further confirm whether you’ve encountered a drop shipping scam by asking the representative even more questions. If the representative winds up able to help you with other needs, the company might be legitimate but lacking an efficient ordering process. Since the Internet is full of scammers and real companies both favorable and ominous, only extensive research can help you decide which businesses fall into which category.

Catch a fake drop shipper

Although calling a drop shipping company is often your best route for determining its legitimacy, if you can’t reach the company, fall back on your selling experience to know what to look for among scams. If you lack experience, ignore all online reviews – many are fake – and instead search through trusted discussion forums like those on Salehoo.

On discussion forums and message boards, you’ll likely encounter many conversations that discuss which companies are not only real, but trusted and reputable among the drop shipping community. Although the research involved in finding a proper drop shipping company can be time-consuming (if not deeply tedious), finding a trusted partner saves all the money and effort lost when you encounter a scammer.

Additional ways to spot drop shipping scams

• Avoid membership fees: Although mentioned above, this tip bears repeating: If you see mentions of membership fees, you should immediately be skeptical. Find out if these fees are legitimate or whether they’re just illegitimate “convenience fees.”
• Never put yourself at financial risk: Make sure that the drop shipping company accepts your preferred type of payment, and be suspicious of any company that insists that you send a wire transfer or use Western Union.
• Ask for transparent policies: Carefully read over the company’s policies regarding returns and damaged merchandise. Don’t consider working with a company that doesn’t display its policies online. Legitimate drop shippers understand how large their liability is without these policies.
• Review the company website: Take a close look at the company’s website. How long has it been around? The less time for the website has existed, the more suspicious it is. Scam websites tend to be very new, usually just three to six months old, before they’re outed as scams and the website becomes inaccessible.
• Review the company contact information: Look closely at the website’s Contact section. Is there a physical location that corresponds to the mailing address, if one is present at all? Check on Google Maps if you aren’t sure. You should also check to see if the phone number is real; place a quick call to confirm.
• Get samples: Request samples to confirm that you’re dealing with an actual drop shipper. If you receive any pushback, take that as a huge red flag. If the drop shipper claims to be out of stock on the item, ask for a different but similar product instead.

What to do if you suspect a drop shipping scam

If you suspect a drop shipping scam, you can help prevent the company from preying on other sellers by reporting the scam to the government. You can report fake drop shipping websites to the Internet Crime Complaint Center or econsumer.gov, and you can find other government fraud reporting resources here.

As always, thorough research will help you decide whether you’ve encountered a scam and provide you with the most security in your quest for the perfect drop shipping partner. Only through this research will you determine just how your drop shipper operates and how much you can trust their operations and communications. Plus, finding the right match is vital for growing your business and branching out into your surrounding community: Not only will choosing a trustworthy drop shipping company ensure that your customers receive the high-quality, seamless service they expect, but having reliable, honest, responsible drop shipping partners will reassure you that your products will arrive in good shape and on time.

Looking for a reliable drop shipping partner? Reach out to the staff at OEM Experts, who can help point you in the right direction.