Dropshipping is not a scam. It’s a legal and legitimate retail/eCommerce business model that started sometime in the 1950s, long before the .com boom and before the internet became a part of everyday life.
Dropshipping is a scam-disposed business, with many scammers and scam-like or MLM-like schemes. Thus, before you get into it, you need to know what to look out for to protect yourself from fake dropshipping schemes, suppliers, opportunities, and scammers looking to rob you dry, with no dropshipping business to show for it.
Today’s article will concisely explain why dropshipping is not a scam, discuss common types of dropshipping scams and how to avoid them, and show you how to recognize dropshipping scams.
Let’s get started:
Table of Contents
Why Dropshipping Is Not a Scam: 7 Key Statistics & Facts
The following statistics and facts prove that dropshipping is not a scam:
1. According to Grandview Research, the US and India-based market research company, the dropshipping market was worth $102.2 billion in 2018 –yes, that’s billions with a capital B–, with projections showing the market will continue growing at a CAGR rate of 28.8% from 2019-2025. That the market is worth billions is proof that dropshipping is an actual, well-performing business model, with lots of money circulating in this market.
2. According to Fire Push, as high as 35% of eCommerce stores globally use dropshipping for order and inventory management and distribution. Given that there’re an estimated 12 million-24 million global eCommerce sites, that means over 8.4 million–based on 24M–stores use the dropshipping business model. This proves that the dropshipping business model is not a scam; it’s a legally-recognized business model. Now here’s the kicker: if dropshipping was a scam, don’t you think all these store owners would have caught onto it, and their businesses would have gone under a long time ago?
3. Research data also shows that over 27% of all online retailers use the dropshipping business model to support their operations. Although that also means 73% of retailers have not fully transitioned to dropshipping, again, given that there are over 24 million retailers, it means a significant number of online retailers have trusted the dropshipping system enough to transition fully to it. If that is not proof enough that the dropshipping business model is legit, nothing is.
4. According to Nasdaq, by 2040, as much as 95% of all online purchases will be eCommerce-based. Thus, we can conclude that, because more and more online retailers are fully switching to the dropshipping model, by 2040, more retailers will rely on the dropshipping model for inventory management and order fulfillment. This could explain why all expectations and projections are that the dropshipping market will continue growing bullishly well into the future.
5. You know Amazon, the giant retailer that has made Jeff Bezos the billionaire he is, right? Did you know that according to Statista, as high as 53% of products bought on Amazon in 2021 were from third-party sellers, many of whom use dropshipping for order fulfillment? Given this, and because Amazon will probably continue growing exponentially, we can surmise that the dropshipping market will also continue growing, proving that this business model has long-term viability and is, thus, not a scam.
6. You have heard of Shopify, considered one of the most powerful eCommerce platforms, featuring a host of tools and apps that simplify the process of creating a dropshipping-based eCommerce store, right? Did you know that over 1.7 million merchants use Shopify and that in 2022 alone, Shopify processed sales worth over $5.1 billion? Did you also know that 29% of eCommerce websites, including Redbull and Tesla, to name a few, use Shopify? If small and large, well-known eCommerce platforms rely on Shopify, a platform known for and made famous by its dropshipping friendliness, it must mean dropshipping is a legitimate business model. After all, I doubt Elon Musk and his board or Dietrich Mateschitz and his executive team would be willing to trust a system they know won’t work in their favor.
7.According to Fundera, a Nerd Wallet-affiliated site, dropshipping retailers often generate 50% more revenue than non-dropshipping retailers. Some core reasons for this are hands-free inventory and order fulfillment obligations for retailers and low overhead costs –because retailers do not need to cover costs like warehousing, utilities, etc. These facts make dropshipping a legitimate business model that will probably continue being worth it and profitable well into the future.
As a bonus point, more and more suppliers, wholesalers, and manufacturers are now preferring to sell their products to dropshipping retailers instead of selling from their online store because, by doing so, they can generate as much as 18.33% more profit.
Although these statistics and facts clearly illustrate that dropshipping is a viable and legitimate business model, as mentioned earlier, the dropshipping space is not without its fair share of scams. After all, where there’s money, they will always be a few unscrupulous people out to make a quick buck off unsuspecting, unknowledgeable victims.
Therefore, before you decide to go into the market, you need to know how to differentiate genuine drop shipping opportunities, do your due diligence, and pause before committing your money to a dropshipping opportunity.
Let’s now focus on common types of dropshipping scams to ensure you know how to recognize them:
3 Types of Dropshipping Scams (And How to Avoid Them)
To ensure it hits home, let me repeat this: dropshipping is not a scam, but it’s a scam-prone market. Thus, be careful as you consider every drop shipping opportunity, supplier, wholesaler, or manufacturer you land upon at any given moment.
The best way to protect yourself from drop shipping scams is to know the most common ones, which include:
#1: Get-rich-quick schemes
Get-rich-quick schemes are one of the most common types of dropshipping scams.
In this scheme, a platform, often a members-only or paywalled website, or a person claiming to be “a successful drop shipper” will offer to give you a “fool-proof dropshipping formula.” The premise is that this formula will have you generating thousands of dollars in dropshipping revenue in as little as days –some even promise hours of turnaround.
Often, the catch is that to get this “super-secret formula,” you have to pay a subscription fee –. Here’s the problem and why this is a scam you should avoid at all costs:
First, it’s true: there are successful dropshippers who have put together courses meant to help people learn the ropes of the dropshipping business, including offering some insider tips.
According to a survey conducted by Marketing Signals, as high as 90% of all eCommerce businesses –dropshipping is an eCommerce business model– fail within the first four months. Can you imagine that? What does that tell you?
It should tell you that you should always be wary of any platform or person that promises to “give you a secret formula” or plan that will help you create a successful, revenue-generating dropshipping store overnight –or in an unfeasible timeline.
How to avoid this scam
The best –and perhaps– the only way to avoid this scam is to remember that there are no “secret formulas” to dropshipping success.
Starting a success-prone dropshipping business only has three core, tried-and-tested steps:
1. Find a product and reliable and trustworthy dropshipping suppliers
2. Create your eCommerce store,
3. Effectively market your products
You can pay someone to show you how to do all this -and it’s good to invest in self-education. However, you don’t need or have to, especially not when there are so many free resources you can use to find winning products and reliable dropshipping suppliers, create your eCommerce store like a pro, and create an omnichannel marketing plan.
Remember that any drop shipper or dropshipping platform promising to help you make money quickly is fooling you and making money off you –the scammers use the “subscription fees” to display an extravagant life on social media, to brainwash the unwary. Be on the lookout for that.
#2: The “downpayment to partner” scam
This scam and the last one are similar, but this scam is common among wholesale dropshipping companies.
In this scam:
A dropshipping wholesaler will ask you to pay a fee to access an automated dropshipping system that generates income fast or a catalog of high-value products “guaranteed” to do so well in the market that you’ll be smiling whenever you look at your bank balance.
Don’t fall for such gimmicks:
This idea is a scam because usually –except for a rare few– genuine and legitimate wholesalers do not ask retailers who want to help them move their products for a downpayment. Authentic wholesalers and suppliers understand that asking for that is a barrier to entry for small and medium-sized businesses.
They also know that the more such retailers they partner with, the better their chances of selling more. Thus, they’re usually unwilling to risk this potential profitability by asking people to “pay a downpayment or fee” to access a system or product catalog.
Authentic dropshipping wholesalers and suppliers will only ask you to fill out an application form and provide your personal/business details like tax ID. Any wholesaler that makes fees part of that process is out to scam unsuspecting victims.
How to avoid this scam
The finest way to circumvent this scam is to use popular dropshipping platforms like Alibaba, AliExpress, SaleHoo, Oberlo, CJDropshipping, and others to find dropshipping suppliers for your business.
Additionally, you can avoid this scam by working with a professional dropshipping sourcing and fulfillment agency like Bestfulfill.
Professional dropshipping and fulfillment agencies like Bestfulfill have the capacity and professional know-how to help you navigate the dropshipping landscape.
They can help you source for products, warehouse them, customize and brand the product/product packaging, and fulfill orders to your customers, making managing a dropshipping business that much easier.
#3: Contact information Scams
Scanty contact information is another common dropshipping scam. Here’s how it works:
Scammers don’t want you to know who they are or access their contact information –you might call or give their “real number or addresses” to the authorities after they scam you.
Therefore, even when they have a website or profiles on dropshipping platforms like AliExpress, they will have scanty or no contact information. For example, they won’t provide an email address, phone number, or street address –checking for a location address is crucial when dealing with wholesale dropshippers.
How to avoid this scam
The best way to avoid this dropshipping scam is to work with suppliers with detailed contact information cards –and ONLY THEM! At the very least, only work with suppliers who have a listed email or phone number. If a supplier/dropshipping wholesaler claims to have warehouses in different regions, look for region-specific contact information.
Additionally, if you’re working with a smaller dropshipping supplier, ensure they have contact options like live chat
These are the three most common types of dropshipping scams. Let’s focus on how to identify other –or all– drop shipping scams:
How to Identify Dropshipping Scams
Use these tips to identify dropshipping scams so you can avoid them:
- Check the track record: Legitimate dropshipping opportunities, suppliers, and wholesalers have a track record to show how long they’ve been in business, the number of customers served, etc. If a drop shipping opportunity lacks this, it could indicate it’s fake; approach with caution and be wary.
- Lack of legitimate contact information: As we’ve discussed, dropshipping scams don’t want you knowing their real contact details or address, lest you tell on them. If an opportunity does not have traceable contact information, it’s most likely fake.
- Get-rich-quick promises: This is the easiest way to identify drop shipping scams or scam-like opportunities. Remember that dropshipping is a real business model. Therefore, like any other business, it takes time to achieve success. Any person or website that promises to help start a dropshipping business that helps you get rich quickly is taking you for a fool: don’t fall for it.
As you have seen, dropshipping is not a scam, but it’s a scam-prone business with tons of scammers out to take advantage of unsuspecting dropshipping newbies.
Knowing what to look out for can help you protect yourself from all drop shipping scams.
Q1: Can you make money from dropshipping?
Yes, you can make money from dropshipping.
Q2: Is it a good idea to start a dropshipping business/store?
Yes, it is a good idea to start a dropshipping business. After all, the business has low risk, low capital, or low/nil inventory management obligations, making it easier to start and scale such a business.
Q3: What are the most popular dropshipping platforms to find suppliers?
Popular dropshipping platforms where you can find dropshipping suppliers are:
7. Worldwide Brands
9. Wholesale Central
Q4: Can you get rich from dropshipping?
With diligent, committed and dedicated work and the right business approaches, you can get rich from dropshipping. However, DROPSHIPPING IS NOT A GET-RICH-QUICK SCHEME. If you want to become a rich drop shipper, you need to invest in it like your financial life depends on it, which it probably does.