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.
- Here is Amazon’s policy on drop shipping and it basically says you can’t do it.
- Here is eBay’s policy on drop shipping and it is basically the same as Amazon’s.
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.
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.