Drop Shipping is a Scam

Drop Shipping Business Platform

The drop shipping industry is a supplier / merchant based business and relationship that is designed to make both parties wealthy. The drop shipper provides overhead, marketing and delivery for the product whilst the merchant markets and sells the product via e-commerce. This is the general thesis of the industry and has become extremely popular among auctioniers, online merchants and otherwise curious persons who wish to augment their income.

This sounds like a great revenue sharing platform that gives both parties an equal slice of the pie... right?

Wrong. Drop shipping is designed to make the supplier wealthy while leaving the merchants as expendable pawns who scrounge to make pennies on the dollar selling product they will never see. Drop shippers benefit from a flooded online market full of their products where they cannot in anyway lose money.

A Brilliant Plan

So you want to get into e-commerce but don't have the space for overhead, the start up capital, and you want to make money quickly? "Perfect" says the drop shipper, that is the demographic they need and who they are hoping will sell their product.

They give you some quick tips on their website, and they seem to recommend making an 'eBay Store'--perfect, done! The store is made, and you know exactly what to sell--you have always been an audio person and want to sell speakers and audio equipment. Do they have these products? "Sure do" says the service rep on their customer service line. You would look for the products yourself on their website, but that area seems to be only available to members. "Drat" you think, but that's okay, all you have to do is pay a low monthly fee for access to their list of items you can sell. You decide to review: $13.99 or so a month for an eBay store, $29.99 a month for access to the drop shipper's resources (they hold the items in their warehouse, supply you with marketing, and ship the item out for you when you sell it, what a deal!). It's a no brainer for you, I mean it may cut into profits, but hey--they are doing you a favor!

You decide to commit to your business, and name your eBay store something like "Happy's Audio Galore!", or something. You begin to pull items you feel will do well and conform to your store's theme and insert the correlating marketing, pictures, and descriptions of the products into your store. You take interest in a generic pair of floor speakers that the drop shipper keeps in stock. They reveal that their cut will be $54.99 per pair sold--you can set the price of the product to whatever you want. You decide a fair price will be $79.99 and post the item in your store. Money should be flowing in shortly!

A week goes by and none of your items have sold, even the speakers. Why? The price seems reasonable, the description is quality, and customers can find it on the site. You decide to look at your competition for the same item, and wham! It seems that eight other merchants are selling the exact same item as you are, most of them having the exact same description. Some of the merchants are even selling the speakers for a price as low as $49.99. How are they even making money on the product? They aren't. They are selling the speakers on the cheap in order to hopefully lure customers in to buying items in their store that actually make a profit.

The market is officially flooded for this particular item, as is the market for most other items on the drop shipper's site. The only other items that are available seem to have little or no competition probably because they are unpopular, or don't seem to fit store themes for other merchants. Great, all you are left with is leftovers that will most likely not sell. You can't even have a theme for your store now, and no one wants to shop at an eBay store that looks like a flea market.

Wait a second, there was a sale! One of your items did indeed sell. You process the order and you couldn't be happier--finally a ray of light! "Item unavailable at this time" says the error when you try to process the order with the person's information. Are you kidding me? You don't have it? That's right, the item is unavailable. It is your responsibility as the merchant to make sure the item is stocked and available from the drop shipper's warehouse. It says so in the fine print. Now you are in trouble and are forced to cancel the sale and issue an immediate refund. What a nightmare.

My Story

To keep my personal story with drop shipping short and sweet, my sentiments were that above (well, less goofy, but simular nonetheless). It seemed like a win-win situation and could earn me easy money.

I made a metals-only shop as the theme for my eBay store and only sold popular household and handheld metallic goods. The only sale that helped me get into the black was an order for sixteen metal cigar containers as party favors for a customer's wedding. After that I cancelled my account on there, coughed up any remaining fees and closed down my eBay store. I was lucky, but never again.

Closing Statements

Listen, you can make money online and on sites such as eBay and Amazon if you have the time, the energy, the connections and the knowledge to succeed, but I highly discourage drop shipping as one of your tools. The supplier will usually only sell generic, cheaply-made product that may leave you stuck with dissatisfied customers, or even (gulp) returned and/or broken product. It is a business platform that is excellent for making them money--since someone will always be available to sell it for them. They depend on a flooded market to maximize exposure for their products, and care little about whether you make money or not.

More by this Author

  • Top 10: Best Car Interiors for 2009 (15-25k)
    9

    The stakes are higher for this bracket of the best car interiors of 2009! There are more vehicles present, and the standards are higher for this sector. Once again, the graded areas include: Quality of Interior...

  • Top 10: Best Car Interiors for 2010 (15-25k)
    36

    Welcome to the Top 10: Best Car Interiors for the 15-25k class! Many of the vehicles that crushed the under 15k class are no match for this higher division. The exceptions are getting lesser and the demands much...

  • Top 10: Best Car Interiors for 2009 (25-35k)
    10

    Can the stakes get any higher? They sure can! There are less vehicles in this bracket but the standards are even higher. Once again, the graded areas include: Quality of Interior Materials Amount of Soft Touch...


Comments 32 comments

Cris A profile image

Cris A 7 years ago from Manila, Philippines

Not another?! I'm still reeling from that "as seen on Oprah" chain mail scam! LOL kidding aside, thanks for this warning. If only brilliant minds lare used differently. :D


sunstreeks profile image

sunstreeks 7 years ago from Western Washington

For honest individuals dropshipping doesn't work so well. For those who are fine with selling fakes on Ebay, the market is huge. There are many dropshippers that offer free shipping, and no monthly cost to use them. Say a dropshipper requires a min order of 10. You list 10 items on Ebay. When the 10 items sell and if they are fakes and listed correctly (features listed, brandname left out) they will all sell. You tell the drop shipper where to send and voila. Profit.

The problem with honest individuals is that these dropship programs sold to them are too complicated. You have to buy a website, pay a membership fee, do this do that. Successful dropshippers find a product, put it on ebay, send the winners address to the dropshipper, and collect the money. Simple as that.

Sorry you got caught up in a bad deal. =(

I've considered doing dropshipping but I'm too chicken to try it.


Direxmd profile image

Direxmd 7 years ago from Sonoma County, California Author

Granted--you can be successful with drop shipping--but it takes a lot of research, hard work, great marketing, competitive pricing (sometimes slash & burn pricing), great knowledge of your drop shipper, outside marketing and above all--a nonflooded market with decent demand.

A nonflooded market with decent demand? I don't remember the last time I saw that on eBay.

At least it is an experience, and you will have stories to tell about (I mean I was jumping for joy when I saw that sixteen item sale!).


WHoArtNow profile image

WHoArtNow 7 years ago from Leicester, UK

Hi Direxmd, I agree with you that 90% of drop shipping is dodgy as and the money they promise is never as good as the money you'll make. However, you shouldn't group all drop shipping into the banner of "scam" because this is not true.

The website I work on is currently setting up "white label sites" this is a database driven site where you apply your own skin. You will get our product at a fair price so you can sell at a mark up. But you skin it to look like your current website.

All you have to do is market the website. We make everything to order so you'll always have stock. We won't be charging for "access" to the site's supplies and we can even arrange and supply unique artwork for your individual site.

We are mainly setting these up so small art gallaries, artists, bars, bands (etc etc) can make a side income. We won't promise you can make a full time wage until we have someone doing it and can prove it!

Please note, I'm not trying to "sell" something here, mainly because we haven't got it up and running yet (but we will within the year) I just want people to know that not all drop shipping is a scam, you just have to make sure your working with a reputable company who is fair and understands that they will make money as long as you are making money.

Good article though.


Direxmd profile image

Direxmd 7 years ago from Sonoma County, California Author

Well I would love to be proven wrong WHoArtNow, I would like to see you and others succeed :) by all means prove me wrong. Marsha Collier wrote in Starting an eBay Business For Dummies (2nd edition) to stay away, stay away, stay away from drop shippers. Too bad I got the book after my experience.

Tell me when your website is up :)


Chris - The Dropshipping Sucks Guy 7 years ago

Glad to see I am not the only one blowing the whistle on this terrible trend. Drop shipping is not a good model for eBay business and that is the bottom line. I actually run an anti-dropshipping website!

The profit margins are too slim, the customer service is too difficult to manage, and there is just no way to compete on eBay.

I wrote an article called "Drop Shipping will Kill Your eBay Business in Under 30 Days", it can be read here http://ezinearticles.com/?Drop-Shipping-Will-Kill-... If you do not want to post the link on your blog you can delete it, but I thought your readers might find it interested.


Direxmd profile image

Direxmd 7 years ago from Sonoma County, California Author

Hey chris, thanks for your comment--and those are my sentiments exactly. Also fyi, the link is dead :/


jGaunt profile image

jGaunt 7 years ago from London

Well this is why many online prefer to do affiliate marketing. You don't have to deal with the client at all. Still I am sure there are many honest dropshippers and Ebay sellers online.


Chris 7 years ago

DUH! Here is the link - http://ezinearticles.com/?id=779829 to the article on how dropshipping will kill your ebay business. I hope it works this time. Again, thanks for the great blog post!


Direxmd profile image

Direxmd 7 years ago from Sonoma County, California Author

Thanks a bunch chris! I posted a link on this article (towards the bottom) to your site. I would appreciate if my article had a link on your site as well as a testimonial! If not, that's fine too. Thanks for your input and your viewership.

Cheers!

-Mike

P.S. I like your site by the way! Very clean and informative.


sunforged profile image

sunforged 7 years ago from Sunforged.com

Drop shipping as a process is actually very lucrative, everything good you hear about  is true...IF you set up the arrangement yourself with the manafacturer. Your expereince sounds a lot like you were using DOBA..if you were you certainly should have mentioned this so others would know about your specific experience.

Dropshippers like DOBA are nothing but middlemen..so of course your profit margin is small, as they are already taking most of it...and its very important to do your market research before deciding on what items to sell.

Even something like DOBA could be profitable if used correctly...here's a trick, once u sign up for a free trial with the service, you will most likely pick the wrong items (electronics/video) items you think sell well as did everybody else who started the program, hence a saturated market

You get frustarted and cancel...now DOBA has your phone number and will start calling you offering you incentives to join back up..eventually they will offer a 30 day free trial with a website and coaching, I tell them to screw off..but i think its actually worthwhile if one is new to the ebay game.

In those 30 days - this time pick the right products - im talking toasters and tea cozies and spoons...not the high ticket items that you were initially attracted to

I made several thousand a month dropshipping mp4 players from a chinese wholesaler two years ago... I was able to stay in the market for almost 6 months...then my wholesaler mixed up some orders, was slow..and destroyed my rep...so what.. I still made out like a bandit, gave a few refunds..and started over with a new account

Dropshipping is not a scam...but dropshipping services are


Iphigenia 7 years ago

I also had a bad experience and lost money with dropshipping - the goods were really poor quality and I had dissatisfied customers from the start. Dropshipping service providers are very aggressive in their marketing towards potential dropshippers. Even people who had an initial good experience ended up with having a bad one like the guy who commendted above. Greta Hub - worthwhile warning ....


Lgali profile image

Lgali 7 years ago

I agree with you that 90% of drop shipping is dodgy as and the money they promise is never as good as the money you'll make


Benjimester profile image

Benjimester 7 years ago from San Diego, California

That does sound like a nightmare. Middlemen are always the worst scammers. If I had my own country, people would get shot for scams like this. Thanks for the good info.


Direxmd profile image

Direxmd 7 years ago from Sonoma County, California Author

Thanks for all your comments guys, sorry that I haven't gotten back to you sooner.  I think you have all hit it on the head in one way or another.

Iphigenia,

That's true, the business is plagued with subpar goods and disatisfied customers.  By design--you can't do a lot about that :/

Lgali,

Indeed, the money they promise you will make is never as good as it gets.  That's one way in which it can be perceived as a scam.

Benjimester,

It is a nightmare Benji, nothing but middlemen trying to make a buck out of you.  Then again, what is an easier job than being a middleman? ;)


wordly 7 years ago

I have bought Drop Shipping Sucks, its a good product overall, you can readmy review here =>> http://mypsreview.com/2009/06/drop-shipping-sucks-...


HonestDropshipper 7 years ago

Forget "dropship suppliers." You know those ones that will dropship millions of products for you. The best way to find an honest dropshipper is to call the manufacturer of that product and see if they'll ship single items for you. If not, ask for a wholesaler that will. I make a ton of money dropshipping direct from the manufacturer, BUT I've been doing it for awhile and have invested a ton of time learning and refining.


Drop Shipping 6 years ago

I wouldn't say drop shipping is a scam. There are a lot of people on the Internet posing as drop shippers who are scammers that skim money off the wholesale price. Then theres crap like Doba where you pay monthly fees for expensive generic junk. If you find a legit drop shipping source you can make good money with it.


pastella13 6 years ago

There's some really useful comments here. I was cautious of trying drop shipping with middlemen because as you say, you can't see the products until you sign up, and what good it that. Straight from the manufacturer is the way, but I haven't tried it although I'd like to give it a go.


DropShip 6 years ago

Drop Shipping is not a scam. Just like how not all people one ebay are scammers. There are those who claim to be drop shippers who do scam, just like there are in almost every major way to make money online. Sweeping generalizations just don't work in this case.

@ Pastella13, no real drop shipper will make you sign up prior to seeing their products. Most will show their products on a website already, and if they have a price that will typically be their retail price. Most make you sign up with them before they will show you their wholesale prices however.


John 6 years ago

"and man was cursed to work the land by the sweat of his brow."


easylearningweb profile image

easylearningweb 6 years ago

Wow, I'm glad I read your article which explains a lot and the additional comments helped a great deal as well. I heard about drop-shipping but I was wondering about people's experiences with it and the outcome. This was very informative. Good hub!

Regards,

Easylearningweb


g37752 profile image

g37752 6 years ago

not true at all. I pay 1 of my suppliers 25K a year in purchase. I make everywhere from 5%-100% for each item i sell.


dswan9 profile image

dswan9 6 years ago from Amsterdam and London

glad I read the article before I wasted money on my unrealistic expectations. Best to go direct to the suppliers and work out a rate and ship yourself.thanks


JP993 profile image

JP993 6 years ago from England

Dropshipping is a sound business module for anyone. Yes there are pitfalls but there are with anything you do. Dropshipping is very newbie friendly and that's why its so popular. Like with any business you have to work at it and constantly learn and evolve the business to make it work. You can make a 6 figure income with dropshipping if you know how. Many companies have taken advantage of the fact that people with little online experience take up dropshipping and that's why dropshipping gets a bad rap. If you find a dropshipper a 2 second google search will tell you if they are reputable or not. Ive written quite a few hubs on dropshipping and give some of my dropshippers away.


eurostarjewelry 5 years ago from Bangkok

Have you guys tried eurostarjewelry.com

I had been sing this site for drop shipping I was quit sucessful. very impressed with there site


sean mcallister 5 years ago

u guys need to go to the power sellers union and stop giving these ripoffs power over you not one bad thing i heard about them check them out your problems will be solved


Sarah Stone 4 years ago

Thanks for the article and all the really helpful comments. I've been considering offering my products to be drop shipped for some while now and may well do so now to be one of 'the good guys' :)


WorkAtHomeMums profile image

WorkAtHomeMums 4 years ago from Australia

Totally agree with this. Just not worth it.


Richard 4 years ago

Great article and comments! I always like to know how others are doing. I have been designin my webstore for several weeks, and now I am ready to fill it with products. The problem I have is that it seems to be more than difficult to find a dropshipper willing to do business. I am currently working on the 4th one. The first manufacturer/distributor advertises with a dropship program. So, I thought great, exactly the products I was looking for. I signed up and then nothing for a week. Then I called them and they created my reseller account. However, they were not willing to provide product images. This is an absolute deal breaker. On to the next distributor. Hmm, this one had provided a data feed with lots of data garbage in it. Even with different approaches to convert data, it was impossible to upload about 1000 products into my store's data base. I would have had to re-write the product names and descriptions first on a one-by-one basis - are you kidding me? On to the next one. Their first response was "we look forward to having you onboard!" Their products have great reviews, and are exactly what I am looking for. They do charge a $200 sign-up fee, but considering their quality items, I'd take that as a business expense. Sounds great, right? Hmm, it's been several days, and they are non-responsive to a few questions I had about their dropship program. I also contacted a 4th one - no answer either. What do I need to do? I am running out of eligible suppliers. Has anyone experienced something like that?


natelion 3 years ago

It is probably safe to say that 90% of drop-shipping sites are a scam, but definitely not all of them. At one point I used a middleman site that I had to pay a monthly subscription to, and still made money on it. Not every transaction, but in a month of multiple transactions per day, you can still make money with those by selecting the right items. There are some really good drop shipping sites and some deals you can get directly with manufacturers that are fantastic.


Nate 22 months ago

The problem is that you are using a dropshipping company. What you have to do is find the manufacturer or a distributor that will dropship for you. This makes it much easier to become successful in your niche. These get rich quick dropship companies are really there only to take your 60 dollars a month.

    Sign in or sign up and post using a HubPages Network account.

    0 of 8192 characters used
    Post Comment

    No HTML is allowed in comments, but URLs will be hyperlinked. Comments are not for promoting your articles or other sites.


    Click to Rate This Article
    working