GRAND RAPIDS, Mich. — It's the holiday season and that means shopping for presents for friends, family and loved ones.
By now, you're social media feed is probably filled with advertisements for the hot gifts this year. But what you might not realize is that a lot of those ads may not be from the company that makes the product.
Over the last several years, a new type of business model called "dropshipping" has made purchasing things online a bit more mysterious than it has in the past.
Marketing and Community Relations Manager, Katie Grevious, of the Better Business Bureau in Western Michigan spoke with us about what dropshipping is and how you can avoid a scam this holiday season.
What is Dropshipping?
Dropshipping is a type of business where anyone can sell products using another company's inventory. The dropshipping company will sell products, but use a third party to actually fulfill the order.
As an example, a dropshipper lists a product from a third party on their website and when someone purchases the product, the third-party company will ship the product to the consumer. Dropshippers will get a small percentage of the sale.
"When a consumer orders from that website, the website owner sends that information to the manufacturer, the manufacturer will package it up and send it to the consumer," explained Grevious.
The business model is very low-risk for people getting into dropshipping, but there still can be some large drawbacks to both the seller and the buyer.
Is Dropshipping Illegal?
No, dropshipping is not illegal.
However, the way the dropshipping business model is designed can lead to scammers using it as a tool to sell fake or counterfeit products, or even just taking your money.
"Drop Shipping is totally legal. You can do this in the U.S. and a lot of people do. But because it's so easy and the market is so saturated, it opens up a lot of doors for people who maybe aren't as good at running these websites as they should be, or for scammers to take advantage of this model and deceive consumers and tricking them into buying fake or counterfeit products as well," said Grevious
How Do Scammers Use Dropshipping?
Scammers can use a dropshipping model to sell you counterfeit products, or even just take your money and you don't end up getting any product at all.
"A lot of scammers will list popular name brand products, licensed items on those websites as dropshipping sites. And then when you order from them, either you're buying an illegal good, or what you're gonna get is going to be some sort of cheap knockoff, or you're not gonna get anything at all. And unfortunately, they make their dropshipping sites look identical to the legitimate ones," Grevious added.
Dropshipping websites are not legally allowed to sell licensed products, so when they offer these goods, they are usually counterfeit or fake.
Dropshipping websites may also claim they are based out of the United States, but the actual products are coming from overseas.
How Can I Tell If I Ordered From a Dropshipper?
While ordering from a dropshipper isn't necessarily bad, it can be helpful to know whether you are getting your product from the manufacturer or from a third party.
Grevious provided some tips on how you can figure out whether or not you bought from a dropshipper:
- Do a reverse image search of the product on Google and see who the actual manufacturer is.
- Check for a customs charge or fee in the shipping to see if it is coming from overseas.
- Check to see if your items purchased are coming in one package or multiple. If multiple, that means it is likely coming from a dropshipper.
- If shipping times are longer than expected, it could be coming from a dropshipper or from overseas.
How to Avoid Dropshipping Scams
Dropshipping can be a perfectly safe way to purchase an item online, but it can also be a way for scammers to take advantage of you.
The biggest precaution you can take when it comes to dropshipping scams is to do your research and make sure the website you are ordering from is legitimate. Also, if you are concerned about purchasing products
"A lot of dropshipping sites outsource to overseas. So look for little details, look up that company and find out if they are located in the U.S. and manufacturing in the U.S.," explained Grevious.
Grevious says to look out for the following indicators that you may be getting scammed:
- Compare prices for the product on other websites. If it seems too good to be true, it is likely a scam.
- Be wary of social media advertisements from companies or websites you've never heard of.
- Be aware that while you could receive your product from a dropshipping scammer, but if it is fake or counterfeit, the return process could be difficult or even impossible.
Grevious added that if you are ever unsure about making a purchase online, check BBB.org/ScamTracker and see if the product you are purchasing or the website you are purchasing from has been flagged for scams.
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