Is Drop Shipping Legal? Why It’s Often Used Unethically.

I am very involved in the internet marketing industry and one of the things this entails is me to do is look at the various ways I can make money through it.

Drop shipping is certainly one of them and I’ve even written up articles like this one where I compare drop shipping to affiliate marketing as well articles like how to make money through drop shipping.

However, I’ve been coming around more and more to believing that drop shipping can be quite an unethical practice and in some places, even illegal and I’d like to give you my personal reasons on why I’ve come to this conclusion and what other alternatives you can look at to make money in an ethically sound way.

So let me clarify a few points:

Drop shipping, is it actually illegal? How Amazon and eBay look at it.

2 of the most common places where you’re likely to encounter someone selling via drop shipping are Amazon and eBay (actually, used to be), so on the question of legalities, you simply need to look at their policy on this.

Now what IS allowed based on what I read from both sources (which are basically the same) is that you can buy from a whole seller, own the product, then sell it on Amazon or eBay, but the practice of drop shipping which involves you NOT owning the product, but making it seem like you do, as a seller on these networks is NOT allowed.

This is where we have to talk about ethics in drop shipping:

I have a few reasons why I consider drop shipping to be unethical…

1) The consumer gets charged more through drop shipping practices.

I get it, drop shippers want to make a profit and the only way they can do it is to charge more for the product they own than what it would cost to get it from the wholeseller. It’s how the business works…

But there’s a difference between charging a little bit more than the market value and charging a lot more, which happens a lot with this business…

It is often FAR more expensive to buy through drop shipping, than the original whole seller/merchant.

is drop shipping legal

Let me give you an example,when I wrote my previous article on drop shipping vs affiliate marketing, I cited a personal experience when I was trying to get my hands on a good phone and because it was out of stock everywhere and as far I remember, out of production, limited supplies were available, but you REALLY had to look for it.

I did find them on both Amazon and eBay, but the problem was (and you can always tell this is a drop shipper selling it), the price was substantially higher than the actual market price for the phone AND there was only “1” in “stock”.

And while the market price for the phone I sought was about $300, the prices these guys were putting up were higher (one case had it at over $500!). 

Now I want to make something clear: I understand that prices fluctuate but to charge nearly twice as much for such expensive things is a bit much in my opinion. I suppose it’s a question of proportion… 

But then we get into another VERY common issue with drop shipping:

2) There are often misleading auctions and listings put up by the seller.

The same people who put up that there’s 1 product left in stock for whatever you’re seeking to buy, also tend to mislead the buyers in various ways. At least that was the case for me in at least 5 instances.

What happened was, in the cases where I was fortunate enough to find the model phone I was looking for, at a price that wasn’t that much higher than the market price, I tried to place the order, only to get an email in EVERY single instance from the seller that they were “actually” out of stock. 

After seeing this happen twice, the next 3 times this happened, I left a negative feedback to the seller because I was mislead. 

What these guys were doing was they would inform me that the model I wanted wasn’t in stock (even though their listing said they had 1) and they wanted to sell me another. 

Furthermore, they ALSO kept the listing up of the same model I wanted after I had the incident, meaning the next person to try and buy the phone from them would have the same problem.

This is VERY deceptive and unfortunately very common with drop shipping. This destroys the buyer’s confidence in that they’ll actually be able to buy from a GOOD seller. 

3) Issues with shipping and prolonged wait times:

Very often the listing/auction as well as the number of supplies in stock put up by the seller is an inflated, false number. They may often NOT have a single product in stock (and in reality they do not since they’ll just order it from the vendor directly and send it to you anyway) and will claim that they do.

Then when you place the order, they’ll obviously try to get it to you. But…

What happens if the drop shipper is lazy and takes their time with the order YOU placed? 

What if the seller goes to the company that owns what you want and they don’t have it in stock or there’s a long wait time?

It all leads to a negative experience for YOU. 

My final thoughts:

The above 3 reasons all logically point to why eBay and Amazon don’t like traditional drop shipping practices.

At face value, when someone goes to Amazon or eBay for example and wants to buy something, they are expecting a seller who says they HAVE the product the consumer wants to actually have it and if that person ends up being a drop shipper, doesn’t actually own it and many different factors can occur that can ruin the user experience, that would fall directly on Amazon and eBay and make them look bad.

This is why they have these policies against drop shipping in place.

While I agree that in many instances, a drop shipping approach to business can earn you more money because you can charge more, I see some ethical issues with this (the 3 above are the major issues), because as I said, sometimes, this can go out of control and frustrate the buyer (I personally experienced that).

Is drop shipping still legal elsewhere? Yes:

While this business model may be illegal on certain major eCommerce sites, you can still practice it if you own your own eStore and understand how to market it to audiences.

For example, Shopify has emerged as the alternative and it is used by many people, although most fail. What I can tell you is that there’s decent drop shipping programs like Oberlo that would help you with this business if you’re still interested in doing it.

However, I have said that traditional affiliate marketing is better in my opinion than drop shipping because while you don’t own the product you’re promoting, you’re still leading the buyer to a person who does own it and is responsible, so they will get a fair price for their purchase and the shipping will be on time.

Compare that to drop shipping when the buyer will likely get the opposite experience, and you have a big issue that can destroy the trust and reputation of the seller. This is not the type of business I will be practicing nor endorsing in the future.

I think if you’ve been on the receiving end of negative effects of drop shipping, you would agree with me.

Why then, would you want to be the person engaging in it?

Stick to affiliate marketing (learn about it from Wealthy Affiliate) or at least OWN the product you’re going to sell to the buyer, so at least they know you actually have it and will get it to them, Then set your prices however you deem it to be fair.

18 thoughts on “Is Drop Shipping Legal? Why It’s Often Used Unethically.”

  1. A very informative bit of information about drop shipping and I can only confess that I never really thought much about the subject until I read your post. The only way I can see it is that when you order items from places like eBay , if they are advertising “last 1 in stock” type of adverts then there is something wrong if they claim to be a noted retailer. Best to buy from more noted places like Amazon.

    • They do this on Amazon too Andrew and sometimes, the only chance to get that popular item you want is to risk buying it from a potential drop shipper. At best, you get the item as advertised, at worst, you can return it, but it’s just a hassle.

      • I know that buying items online saves the hassle of going to the shops, but in the past I have realized that there is nothing like going into the store and buying an item like a computer and seeing an actual demonstration prior to buying.

        • This is true, but for certain people Andrew, the more and more they become exposed to the online world, the more they rely on product reviews from other buyers instead of testing it out on their own, and the convenience factor of buying something without going anywhere almost always trumps the necessity to touch it.

  2. Great article.

    I actually resell on eBay, so the idea of drop shipping always fascinates me. I’ve considered doing it myself but honestly I don’t know if it’s really what I’m after. While I enjoy making money on the selling platform, for me the true passion is finding vintage and used stuff at thrift stores and auctions and flipping them for decent profits online.

    With that said, I always wonder if there are genuine people who sell stuff for reasonable prices through drop shipping.

    Chances are they’re probably few and far between, but it’s always an intriguing question to ask.

    Thanks for sharing!

    • Interesting stuff you mentioned on thrift stores and finding stuff there to resell. I assume if the market and person interested in the item is willing to pay a good price, then it shouldn’t be a problem to sell. The negative side of drop shipping that I was referring to was more related to popular items that people want and know what the market price is for, and the people who know that, that do drop shipping to charge far more for it. 

  3. Hi Vitaliy,
    Very informative – I didn’t realize that drop shipping had so much going on behind the scenes like that. It made me take pause and remember that I’ve encountered similar experiences when ordering things online. I felt compelled to buy an item that was more expensive because I thought there was only one left….it was probably a drop shipper! Thanks for providing this information – I’ll keep it in my back pocket for the next time I purchase something online.

  4. Hi Vitaliy,

    A very interesting perspective about drop shipping! It seems like there may be a bit of a negative culture going on in the drop-shipping industry. I haven’t experienced it myself. My eCommerce business, I outsource and import the product myself, taking care of fulfillment through a third party vendor, for which I am ultimately responsible.

    I have been wanting to explore drop shipping for my next online store, so will keep this in mind when I identify suppliers. In my brief research, I have also been advised that some drop shippers are not actually the beginning of the supply chain, in fact they are a re-seller, not the manufacturer…so we must be careful with that. It adds cost to you and the customer.

    In the end, I believe it also comes down to the values, honesty and authenticity of the business person. When we sell a product, we have a duty to the customer…even if the product is not ours, and even if we do not take care of fulfillment. It is our legacy to the world.

    • Hi Sven, thank you for sharing your position on this subject. With the way you currently operate your eCommerce business, I would say it is very ethical and even though you said you though about doing drop shipping, I would say if the current eStore you have is doing well, why not expand the business by selling in other niche markets in the same way you currently do it?

      • Thanks Vitaliy! Expansion is definitely a consideration and utilizing the same business model to do this will be effective.

        At the same time I’m exploring opportunities for multiple income streams, and together with this, the opportunity to learn a new model (like drop-shipping). I love learning new things, and along with this…the considerations and aspects to be careful of.

        It is great that people like yourself are sharing personal experiences with drop-shipping, helping those that have not yet ventured into it!


        • No problem! I’m glad you’re looking at this from a way to expand your business, but at the same time to keep it ethical. Drop shipping can absolutely be a legal/ethical combo for your business, but I was just trying to clarify how there’s people who abuse the opportunity it brings and that in turn causes it to get a bad reputation and also ruins the reputation of the places which allow it (Amazon, eBay).

  5. Vitality, I had no idea dropshipping could be such a hassle. I’ve never had such an experience. I agree with your post, especially your #1 recommendation! I feel I’m better off since I found WA where I learned to be THE middleman instead of learning how to do the drop shipping thing being like a second middleman.

    • Hi Steven, I wouldn’t say drop shipping has you turning into a “second middleman”. You are technically also an affiliate if you do this type of work, but the specifics are different. You’re talking about doing something as simple as making a link to a product, vs the buyer thinking you’re selling something, buying from you and then you have to go through the process of setting up the order with the actual seller. 

  6. Hi Vitaliy,

    Thanks for sharing your thoughts about drop shipping. As I understand it, drop shipping is about buying merchandise from a wholesaler then offering them for sale as a retailer. So it is quite a legal business. I agree with you it may be more expensive for the final buyer because you add another person to the chain!. I think the main issue is coming from the misleading auctions and lists. I also agree with you that traditional affiliate marketing is much better than drop shipping for making money online.

    • Hi Amin, actually with drop shipping, it’s a little bit more “complex”. You do buy from the Wholesaler, but only after the person you are selling to actually makes the purchase, then you go ahead and place the order to the wholesaler to deliver the product to the buyer.

  7. I totally agree on what you’ve explained! Thank you for this article. I tried drop shipping some months ago and I didn’t like some things I had to do. 

    I was learning from people who were already drop shippers, but I didn’t agree on some practices as they violated my personal values. 

    For example, I didn’t like to lie about the number of supplies. Another thing is, they told me to tell the supplier to hide the real price from the delivery note and that made me feel bad because if I were the customer, I know I would suspect if I didn’t see the price on the delivery note, that would make me not trust the seller.

    Even though I made some money, I quit drop shipping because of the reasons above and I decided to focus on affiliate marketing, and I don’t regret it!

    Have a great day =)


    • Hi Miren, we appear to have similar ethical measures which is why we can both relate to the reasons we do not engage in drop shipping. However, what you said about hiding the price from the seller on the delivery is something I hadn’t heard before.

      The more someone has to hide something, the more it arouses suspicion and it is NOT an ethical way to engage with customers. If you and your customer have trust, they will come back to you and buy from you again and if they don’t, that’s a 1 time sale (or hustle) that you’ll never be able to redeem.


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