If you are an avid online shopper, you probably have heard the term “dropshipping” more than a few times. Many online venders are utilizing dropshipping services to store and ship their products to American consumers. While there is nothing unlawful about dropshipping, it has a reputation for being connected to scams all around the globe.

What Is Dropshipping?

Dropshipping is the process of moving goods “from the manufacturer directly to the retailer without going through the usual distribution channels.” This type of retail fulfillment was rarely heard of until the online retail giant, Amazon launched its Fulfillment by Amazon (FBA) program in 2006. The service entails both the storage and shipment of goods by retailers, in this case, Amazon.

How does the FBA program work? The process is initiated when a customer purchases an FBA product. From here, the order is processed and shipped to the customer. The manufacturer is no longer involved in the process after the goods are shipped to Amazon.

The Target Of Scam

Dropshipping has been a target of scam artists since it launched in the 60s. The launch of the public Internet and Amazon’s FBA program opened up scam opportunities but nothing impacted the industry like the launch of Amazon’s ‘Friends and Family Gifting’ program. This launch brought hundreds if not thousands of scam artists into the industry. Who are these scam artists? They are the dropshippers on eBay, Walmart, Amazon, AliExpress, and other online retail marketplaces.

Cons Of Dropshipping

There are many cons to dropshipping. The most notable con involves innocent customers who have their personal information – name and address – shared with third parties. In order for the dropshipper to place an order, personal information must be given to the third-party retailer.

It is against the law to share “sensitive personal information” with third parties without the customer’s approval or knowledge. The risks involved in this process are way too many to mention them all in a single article. However, the biggest risk falls onto the unaware customer who has their SPI exposed to third-parties.

If the dropshipper is willing to share your information with third-party retailers, what makes you think they won’t sell it to telemarketers and other companies for personal gain? Other risks include identity theft and fraud.

Who Is Complicit In These Schemes?

The biggest dropshipping scams involve Amazon, eBay, Walmart, and AliExpress. All of these companies are aware of the unlawful tactics taking place directly on their online marketplaces. And, they refuse to do anything about it.

Even though Amazon has a history of terminating employees who violate their privacy policies, they refuse to ban members who are blatantly dropshipping utilizing their Prime accounts. How does Amazon know which Prime members are dropshipping? Easy, they know by the large number of gifts purchased monthly. And, this is not to mention that the Amazon Prime member resides outside the United States.

Amazon prohibits dropshipping on its marketplace. The company bans dropshipping sellers without giving it a second thought. But, refuses to do anything about its products being dropshipped to other retail customers.

Anyone who is familiar with Amazon knows the company allegedly sold “personal customer information” to other retailers. The company is also known for artificially inflating its stock price. A group of shareholders sued the company in 2001 for allegedly “disclosing false or misleading information” leading to its inflated stock price.

Rumors have it, Amazon is losing hand-over-fist on its Prime two-day shipping service. In 2016, the company reported a loss of approximately $7.2 billion, according to GeekWire. When you consider these losses and the hit Amazon took from COVID-19, it doesn’t appear any action against dropshippers will be coming any time soon.

eBay is also complicit in these schemes. The company vowed to take a stance against dropshippers in late 2018 but failed miserably. If you visit the site, you will see that eBay’s dropshipping ban promises fell flat. There are just as many if not more eBay Amazon dropshippers today than ever before.

Work-From-Home Scam Artists

The work-from-home dropshipping scam is causing the American economy to lose millions. The majority of the dropshippers live outside the United States. So, when consumers purchase from these dropshippers, their money exits the U.S. economy and enters foreign economies.

The American economy has taken a major blow from the COVID-19 pandemic. As thousands of small businesses remain closed and millions of workers on unemployment, it may take years for the economy to recover.

Amazon and eBay marketplaces are gateways for Chinese products to enter the American market. This alone is hurting American manufacturers, not to mention the thousands lost each month on China-based dropshippers.

Conclusion

While you may not have an issue buying from dropshippers, you must consider the risks, including identity theft and fraud. There is also the risk of getting the wrong product and even worse, not getting a product at all. If the dropshipper is based internationally, there will be no option to return the item for a full refund. Do you think the dropshipper is going to take the risk of having their Prime account banned? No, because he probably paid damn good money for it. Word of advice, do not buy from eBay sellers with stock photos, this is a sure sign of a dropshipper.

What to eBay customers have to say about these scam artists? Most of them do not support it. But, does eBay or Amazon care? Not a bit.