How Shopify Dropshipping Works

Dropshippers are the ultimate middlemen. The trendy e-commerce model is what's behind the ads for products all over Facebook, Instagram, TikTok and YouTube. While some sellers make millions dropshipping from overseas without ever touching the merchandise, others use it as a get-rich-quick scheme that's hurting legitimate businesses and unassuming customers.

The model relies on targeted ads designed to stop consumers from scrolling long enough to make an impulse purchase, usually from a Shopify store set up solely for that product. The dropshipper doesn’t place an order until the customer does, and rarely touches the merchandise. It’s often shipped directly from China to the customer, which can cause delivery times of more than 90 days.

Nick Peroni started dropshipping in 2016 and now does it full time from his home in the Philippines.

“I was an Army veteran living in Philadelphia and trying to figure out what I wanted to do with my life and testing around just different kinds of business model ideas,” Peroni said.

Last year, Peroni said he tried selling 10 to 20 products before finding some big hits. His sales of a garden trimming attachment topped $1.9 million in six months in 2020, and in October he sold $150,000 worth of fleece-lined leggings in three weeks. Peroni uses agents in China to vet products and sourcing companies to keep shipping times down.

But dropshipping can also be a minefield for consumers.

“A lot of people just get into the business model and they’re lazy. They’re not looking at it like a business. They’re looking at it like a cash grab, like a get-rich-quick idea where we can sell this product using Facebook ads and make a lot of money,” Peroni said.

“What happens is then a whole cascade of different events where you buy fake reviews to distinguish yourself. You buy fake ratings, fake upvotes, a lot of ads, marketing, but all that adds up,” said Saoud Khalifah, founder of consumer protection software company Fakespot.

Fakespot has a Chrome plug-in that alerts shoppers if a seller on Amazon, Walmart, Ebay, Best Buy or Sephora can’t be trusted. It recently added capabilities to detect untrustworthy stores on Shopify.

“They made this a one-stop-shop for you to set up a store, and it’s just super easy for you to start selling online and a lot of these dropshippers know it,” Khalifah said.

In an analysis of more than 124,000 Shopify stores, Fakespot found more than 25,000 that engaged in some form of fraudulent activity like counterfeits, privacy leaks, or buying fake reviews. Of those, almost 72% showed evidence of dropshipping tactics being used in their business. On Shopify’s Help Center, there’s an entire section devoted to tips and strategies for dropshipping.

Athletic apparel company Gymshark used influencer marketing to grow a cult-like following, and now dropshippers are capitalizing on that success. Gymshark CCO Niran Chana said he’s seeing more and more copycat dropshippers selling knock-offs.

“Someone else is acting as the brand at that point. And we put a lot of investment into assets, content, etc. So for someone to come and almost copy that is frustrating,” Chana said.

Gymshark is building up its legal team to protect intellectual property, but Chana also called on Shopify to help.

“Where we could really do with their help and support is actually when people are abusing those brand rights and running away with a business model that is unsustainable for both themselves and/or Gymshark is they regulate that better. They have the right to be able to say we’re going to pull this site down or you guys are trading sort of uncompetitively,” Chana said.

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How Shopify Dropshipping Works

[Khayran]

It's not a scam as long as the product description is accurate and you receive the item. This is how most bussiness models work, buy cheap, and mark up. The difference is no inventory and online shopping

[RAYDEEY]

The irony, a drop shipper's ad started at the beginning of the video.

[BlackSpaniard]

It's very few dropshippers out there that are actually successful

[SuperPlayz]

If these dropshipping guys are making so much money, why do they need to sell courses teaching others their secrets.

[whatever_]

After 2+ year of listening to her narration, I can finally see whose voice I been learning stuff from...Thanks for enjoyable narration

[denequelee]

I've been saying this for years. Don't buy crap from Instagram guys 🙄 especially those "going out of business" sales.

[inconvenientexistenlism]

"Touch of Modern" is a prominent example of this, being nothing more than an email list sent out to its subscribers, selling products for far more than it actually is.

[ViPRMiX]

Why would anyone buy anything off Instagram or any other social platform for that matter? It seems so stupid to me

[SLone]

It's a great business model for people who don't want to full-out create a branded business from scratch, but the problem is, consumers have greater trust in brands with rich stories and products actually under a branded name. Dropshipping axes this part out, making a website like one of those mom-n-pop shops that sells randomly-branded items.

[ea]

Lol reporting on dropshipping 4 years after its popular. Congrats

[emrazum]

This is such a wasteful concept. Like how hard is it to just go on aliexpress or dhgate directly?

[justinr]

So don't buy from the little guy whose trying to make profit? Buy from your corporate overlords. You act like these companies don't buy from China. People saying, "oh it's a scam because we can buy it cheaper" Not realizing this is how most businesses make money, they buy from a supplier then they sell a product at a higher price. The only difference it the bigger businesses either a) buy out their supplier or b) are so big they can negotiate with a supplier to get even cheaper then a small business can. Droppshipping is not a scam, but sites that seem legit may be scammers keep that in mind and please excuse any grammar errors thank you.

[inconvenientexistenlism]

Amazon is the WORST for these drop-shipping opportunists jacking up the price of products NOT "Sold By" Amazon and even from brick and mortar. This is a vulnerability in bring down Amazon, when people start realizing Amazon isn't the cheapest place to buy stuff with these leeches coming on reselling products they bought elsewhere.

[bobofthestorm]

I'm a dropshipper. I will be honest with you. It's not an outright scam, but it certainly wouldn't pass US product standards if it were regulated. Basically you're just getting Chinese products, some of them are good, most of them bad, and there are the few that are downright ugly. The "Legitimate" ones are in the same boat.

People who fall in to these are impulse buyers. They see an ad, they buy. The usual "victims" here are usually also the same kind of people that are "victims" of credit card debt.

What else can I say but there is a market for this. People seemingly just want to be misled so to speak. Other "legit" industries do it all the time. We're not as bad as the worst though. At least we're not pharmaceuticals selling people false ailments and unnecessary cures.

[yusufdemirsoy]

My bf is very shallow, he uses *FLYTHEGRAM*

[MorpheusCh]

This has already been happening in China for a few years now. It's a big business in China where people stream on Tik Tok trying to sell products via drop shipping.

[MillionaireTrader]

First time seeing the face of the speaker

[krithikkumar]

I use simple technique.
If you see some interesting product in Instagram or Facebook ad then just note it down and then go to aliexpress and search that product, believe me you will get the same product in atleast three times lesser price.

[alystdesign]

Finally a news channel started talking about it.

[IReapZz]

I’m a millennial and I never buy anything from social media so I’m not sure how any of these people are going to sell to me