Dropshipping is an increasingly common business model in online stores. It means that the seller does not store the goods in their own warehouse but instead buys the product from another supplier after receiving the customer’s order. This supplier then delivers the product directly to the customer, sometimes even from a different country to where the seller is located. The model is easy for the seller, as they neither keep the products in stock nor pay for them beforehand. Instead, they only buy the product once the final customer has placed an order. For the consumer, however, it is difficult to recognise when they are dealing with dropshipping. The consumer does not always receive information on where the product is sent from or whether the seller actually delivers it themselves. There are also dropshipping scams to watch out for.
In European online shops – and specifically in online stores presenting themselves as Finnish – dropshipping has been seen in sectors including electronics, interior goods and clothing. In these cases, the goods are often sent from China. The products are usually advertised on social media such as Facebook or Instagram and can often lead to impulse buys.
In many cases, dropshipping is used by stores built on the Shopify platform, through which online shops are easy to set up and easy to close. Shopify itself is a fully legal and widely used e-commerce platform which is home to a lot of trustworthy online stores, but the simplicity of the operating model has also attracted scammers.
Supply difficulties and missing information
The most typical problems with dropshipping are that the consumer ends up with an incorrect or faulty product or that they encounter delivery problems, such as long delivery times or products that never arrive. These problem situations can be difficult to resolve: the division of responsibilities between the seller and the supplier may be unclear and there may also be conflicting information on the store’s website.
The key principle is that if a product is purchased from the online shop of an EU-based seller, the EU consumer protection rules apply and the seller is the main contractor. In some cases, sellers do not disclose their location, and this information can be hard to obtain. It may be mentioned in the terms that the goods come directly from a warehouse – in China, for example – but at the same time the seller does not give their own geographical location.
For e-commerce within the EU, there are requirements for a right of withdrawal of at least 14 days for the majority of products sold online. Sometimes all the products are on sale, and the seller claims that because of this there is no right of withdrawal. Quite often the product comes from China, which only becomes evident when the product arrives after a long delay. It is often not possible or sensible to return the product to the manufacturer in China if the buyer has to pay for the shipping. Questions of product safety may also arise.
If the product ordered is shipped from outside the EU, the online store should openly state the delivery time, as good sent from countries such as China can take a long time to arrive. It is also important to take into account customs duties and VAT on goods from outside the EU, which have been subject to significant changes as of July 2021.
How to rate the reliability of an online store
When you visit an attractive but unfamiliar online store via, for example, a social media link, you should carefully examine the pages before making any purchases. The fact that the pages are in Finnish doesn’t mean that the store or the products are located in Finland.
- See what the seller tells you about themselves and their business processes: can you find information about order terms and conditions, returns and company location? Does it say ‘Shopify’ at the bottom of the page?
- Remember to check the terms of agreement (order or delivery terms, T&C or Terms and Conditions). The terms should include information on the country and address of the seller. Similarly, they should also cover matters such as cancellation of orders and dealing with any problems that arise. If you cannot find this information, do not make an order.
- Can you find the company’s registration number on the website? If there is no business ID and no other kind of trade register number, be careful. It could be a scammer or a private individual.
- If a quality certificate is displayed on the website as proof of the store’s trustworthiness, visit the website of that quality certificate to see if the store is listed there. Sometimes scammers just copy the certificate onto their pages.
- Use map services. For example, if the online shop gives an address to which returned goods can be shipped or where the company is located, check where this is. Is it a business address or a private address? What does the mapping service seem to show for that address?
- If the company’s website shows you the store’s local ‘owner’ but you have some suspicions, you can use an inverse image search in a search engine to check where else the same person’s photo can be found. Has the same image been used to promote online stores with different names in different countries?
- Check the payment options. In general, online stores always offer several payment options and at least the options of credit card and PayPal, which provide protection to the buyer in case of problems. If these payment options are not available, it is wiser to go elsewhere.
- If you have doubts about the reliability of an online store, check other users’ experiences of the store. Use a search engine to look for the store name plus ‘experience’ or ‘review’. Sometimes reviews can also be falsified, so take a healthily critical approach if you find only highly positive reviews.
Ongoing monitoring by European Consumer Centres
The European Consumer Centres of a number of countries, including France, Germany, Slovakia and the Netherlands, have reported a marked increase in recent years in both dropshipping and related complaints, which often involve incomplete or misleading online information and delivery problems. In Finland as well, the ECC has been contacted about this matter.
Problems related to dropshipping can be difficult to identify, however, and can end up being recorded as more common complaints about online shopping or delivery difficulties. The European Consumer Centres have worked to monitor the dropshipping phenomenon within their network during 2021 and will communicate their findings, where appropriate, also to the EU supervisory authorities for consumer protection.