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Drop-Shipping: What you Need to Know Before You Buy or Sell Online

What Is Drop-shipping?

Drop-shipping is when a person, or company, sells goods on their website that they do not keep in stock. When an order is received, they send those orders to another company to ship the goods directly to the buyer. Because they are middlemen, they may charge more money. A drop-shipper keeps the profits from the high sale price.

How Does Drop-shipping Work?

  • Company signs an agreement with a wholesaler, manufacturer, or other retailer to provide the goods it advertises.
  • Customer places order online.
  • Company receives the order.
  • Customer receives an order confirmation.
  • Company forwards the order to the wholesaler, manufacturer, or other retailer.
  • That company ships the order.
  • Customer receives their product.

Drop-shipping is not illegal, but there can be problems for buyers and sellers.

Buyers Beware

  • Research the product before you buy.
  • Compare prices for similar products from other sellers.
  • Know where your order is coming from. Do an online image search of the product that the seller posted to see where it’s coming from and the true price. A seller may not give the location or may make you believe it is coming from a physical store.
  • You may not receive what you ordered, or it may never come. You may not know about problems until you receive the package.
  • Use caution when seeing social media ads.
    • Drop-shippers easily set up shops on social media. The Better Business Bureau reports the most common place to find sites selling fake goods is on social media, particularly Facebook and Instagram. These sites share ads.
  • Look for suspicious names or misspellings in the brand name or trademark. It can be hard to spot a fake item based on a picture.

Sellers Beware

  • Do not go into drop-shipping to get rich quick. This scheme targets people looking to make lots of money while working from home. There are many people doing drop-shipping. More competition means you may have to cut your profits to stay competitive.
  • You may be pushed to buy expensive seminars that claim you will be successful by the end of the course. These trainers make money by selling their training.
    • These courses may want you to purchase overpriced goods and trick people into believing they are shipping from a physical store.
    • These courses may offer, at a price, a way to buy a list of businesses where drop shipment orders may be placed. These “businesses” may be other buyers’ and sellers’ middlemen with no product to sell.
  • Few drop-shippers make large amounts of money. When people realize they overpaid, or are unhappy with the quality or shipping, they return the item. If they buy again, they may buy directly from the real company.
  • You don’t control the supply chain. You must depend on your supplier for quality, authenticity, and delivery. And you deal with buyers when there are problems.
  • Some suppliers may illegally use a trademarked logo, another company’s intellectual property, or send fake goods. Which means you could end up responsible for promoting an illegal scheme.

You can file a consumer complaint here. More information about the complaint process is available on our website. 

Consumer Protection Team
P.O. Box 30213
Lansing, MI 48909
Fax: 517-241-3771
Toll free: 877-765-8388
Online complaint form