Drop Shipping is a Scam

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.

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.

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.

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.