Get the Drop on Drop Shipping Scams

by Paul Mroczka

Published on this site: April 5th, 2006 - See more articles from this month

If you are an Internet retailer, a storefront retailer who also has a website, a mail order retailer or a catalogue company, you may find the concept of drop shipping attractive. After all, drop shipping eliminates the need to buy inventory, store it, and ship it out yourself. Working with a good manufacturer, importer or wholesaler that will drop ship offers numerous benefits, including low overhead costs and higher profit margins than you might realize through regular affiliate programs. The beauty of using such a service is that it allows you to focus time, resources, and energy on building and expanding your customer base and not on sending out products you have already sold.

The drop shipping process involves four basic steps:

1. You advertise specific products and take orders for those products.
   
   
2. Upon making the sale, you receive your money.
   
   
3. You then send the order along with the money for the wholesale and shipping costs to the manufacturer, importer or wholesaler.
   
   
4. They ship the product directly to the customer.

It is a simple, efficient process. That is as long as you are working with a quality, trustworthy drop shipper. If you end up contracting with an unreliable company or a scam artist, your reputation, profit margin, and entire enterprise can suffer and be destroyed. When deciding which companies you will conduct business with, there are a few practices of which you should be wary.

Most often you will be looking to work with a few companies or perhaps even one company whose products you will represent and sell. In essence you are marketing specific goods with the resulting sales benefiting your company and the manufacturer, importer, or wholesaler.

With this in mind, you should never be required to purchase a membership in order to sell another company's products. The types of companies that charge such fees usually say they offer a complete array of goods backed up by a marketing department. They will even include your own e-commerce website that you can use to sell their items. Such turnkey businesses are replete with large initiation and setup costs, monthly membership fees, and other hidden expenses. Additionally, you are often only allowed to offer their products on their site.

Does anyone ever make a profit from these turnkey businesses? Yes, the people who sell them to unwitting retailers make large sums of money. Do not fall for this scam. The only fees you should ever be charged are those for the product and for shipping the product. Legitimate drop shippers may charge you a fee, which is however refundable once you have commenced trading.

Additionally, never pay a drop shipper a membership or license fee for the right to have them drop ship for you. The concept sounds ridiculous, and it should. It's another con. They are already making a profit from the effort you are putting into
selling their product, why should you pay a license fee for the right to have them ship that product? Should you pay for the shipping? Of course, but that should be on a per item or shipment basis and no additional charges should apply.

There are also lists of bogus drop shippers that are sold to potential retailers. A legitimate business can spend hundreds of dollars on such lists, which are really names of middlemen posing as drop shippers. Contracting through these sham shippers will result in you paying much more than you should for your products.

You may also be tempted to buy relatively cheap lists of drop shippers. These lists are inexpensive because they contain out-of-date and/or false information. When you try to contact the companies on the list, you will find that they have gone out of business or never even existed.

Finally, whatever companies you contract with, make sure that you have it in writing that the manufacturer, importer or wholesaler will not market to your customers. The customers you directly sell to and the drop shipper, through your order, ships to, belong to you and not them. You have done all of the ground and legwork to sell to your customers and usurping them is not an option open to your drop shipper. Any legitimate company will agree to and honor such a contract.

Be sure to ask companies about their drop shipping policies, including charges, length of time for delivery, return polices, and backordering procedure.

Paul Mroczka is chief editor at http://www.esources.co.uk, a UK dropship and drop shippers portal based in London, UK