Navigating the Competitive Drop Shipping Scam Market

As e-commerce has continued to grow, the popularity of drop shipping has followed. A drop shipping business model involves setting up an online store while not having to keep an inventory of the items sold. Instead, the items purchased by the store’s customers are bought from a third-party vendor and shipped directly to the customer. This removes a significant amount of the coordination and cost traditionally associated with running an e-commerce business.

Consumers who believe that they have not participated in a transaction or engaged with advertisements related to a drop shipping business, should look closer at ads in their social media feeds. Platforms like Instagram often feature promotions for items such as designer consumer goods that have been marked down considerably. After being drawn in by what they consider to be a deal and encouraged by time sensitive offers, a consumer will often receive the item that they purchased but discover that the quality of the item is far poorer than even the discount price. In many cases, consumers do not even receive their orders.

In March 2018, Gimlet Media’s Reply All explored this practice that originally intended to remove the hassle for small business owners but instead is being used to take advantage of online shoppers. The reporting primarily focused on those using AliExpress, the online retailer owned by Alibaba, to carry out what many consider to be a scam. The reporting details the behavior described above but goes further into product selection for the scheme and the presentation. In the case study detailed, a generic watch available for $2.00 is being sold for $40.00 plus shipping under multiple fake designer brand names depending on the market. The reporting emphasizes the growing frequency of these scams in social media feeds.

The Atlantic reported a similar story in January 2018 about a store featuring camel hair coats, detailing the individuals behind these schemes. The story details the experience of Rory Ganon, a 17-year old from Dublin who has made over $1 million USD over the past year through simply setting up a Shopify store and using targeted advertising. While these numbers might be impressive, Ganon’s monetization of his strategy has also earned him additional income apart from his day job. Rory and other drop shippers turned YouTubers have created online classes to teach those interested in developing similar stores. Rory’s class and other popular options such as Diamond eCommerce give subscribers access to hours of content for around $200. The reporting covered by Reply All and The Atlantic details that these sites are bringing in around $28,000 USD a month.

The drop shipping market scam making use of AliExpress has gained significant amount of attention causing many to invest large sums of money into classes and ads without seeing any revenue. Additionally, apps such as Oberlo have been created to allow users to select products directly from AliExpress to feature in their Shopify stores. As many online see the revenue of those who have been successful in scams and the number of individuals continuing to be conned by these scams, it is unlikely that drop shipping scams and tangent businesses aiding these schemes are going to disappear anytime soon.