Dropshipping: this is what you need to know

Did you order a package from an Icelandic online shop and then waited for weeks for your order to be delivered because it turned out to come from abroad? Then you are probably dealing with dropshipping. You probably overpaid for your package too. This article explains dropshipping, how to recognise it, and what to look out for before placing an order online.

What is dropshipping?

Dropshipping is a new business model increasingly used by online shops. When a webshop uses dropshipping to fulfil orders, the online shop has no storage space or stock itself. Your order is forwarded to a foreign marketplace, supplier or wholesaler. This third party will send the package directly to you on behalf of the webshop.

How does dropshipping work?

Dropshipping works like this: you place an order at an online shop. Does it use dropshipping to fulfil orders? Then the online shop itself has no storage space or stock. Your order is forwarded to a foreign supplier or marketplace and they send the package directly to you. 

Is dropshipping a scam?

No, dropshipping itself is not a scam, but scammers are using dropshipping. These days dropshipping is often used as part of an online get-rich-quick scheme. The entrepreneur only needs a website and social media advertising to sell products from their online store.

Example of dropshipping
An online shop advertises with cheap offers. Two for the price of one or 60% discount ‘Grab your chance now before it’s too late’. You place an order and think you got a good deal. Until you find out that the package comes from China or another non-EU country. You go to investigate and discover that the same product is on sale at AliExpress or Wish for a fraction of the amount you paid for it. In practice, dropshippers (online shops that use dropshipping) often do nothing more than place an order on your behalf with a foreign online shop such as AliExpress or Wish. It’s not a scam, but it does feel that way sometimes.

How do I recognise dropshipping?

An online shop does not always indicate that it works with dropshipping. Sometimes online shops mention that they order directly from a supplier, but even then it is not immediately clear that dropshipping is involved. So how do you recognise dropshipping? These are the most important signals:

• Vague or long(er) delivery times
  Dropship suppliers are often located in Asia. That is why it often takes weeks, sometimes even months, before you receive your order. Because online shops have no control over delivery times, they will often mention unclear or long(er) delivery times on the website. 
• Indication of private address
  Does the online shop have a private address on the website for returning packages, for example? Then the chances are it is a dropshipping business. Always check the address in Google Maps. 
• No original product images
  Online shops that work with dropshipping often use product images from the suppliers. Take a screenshot of a product image and upload it into Google Images to see what other websites (e.g. AliExpress or Wish) use this image.
• Language errors
  Often the product description is poorly translated from English. So be alert when you stumble across strange sentence structures and language errors. 

What are the benefits of dropshipping?

You as a consumer can also benefit from dropshipping. Dropshipping is by origin a fulfillment model that skips traditional distribution channels and ships the products directly from the wholesaler or manufacturer to you. It opens doors for consumers to a wider array of products.

What are the disadvantages of dropshipping?

Dropshipping is not always beneficial for you as a consumer. These are the most significant drawbacks:

• No reliability products 
  Products from outside the EU that are sold in the EU must comply with the European product requirements. Dropshippers, in most cases, do not see or control the products they sell. Therefore, they cannot guarantee that these are of good quality. Don’t be surprised if counterfeit, unsafe or poor quality products are delivered. 
• Long delivery times
  If you are thinking of ordering something from a Dutch online shop, you probably expect a fast delivery. Many dropship suppliers are located abroad, mainly in Asia, which means you can expect long delivery times. Weeks, sometimes even months.
• You probably pay too much
  The earnings model of the online shop that acts as an intermediary, is the price margin that is added to the sales price. The price will therefore probably be higher than if you place an order directly at a marketplace such as AliExpress, Wish or Alibaba.

Do I pay VAT and import duties when dropshipping?

The online shop is required to inform you before you buy that the supplier is based in a third country and the potential fees and costs involved. In practice, this often does not happen with dropshipping with the result that you get unpleasantly surprised by the customs costs at the time of delivery.

Is your package held at customs?
If you are faced with unforseen customs charges, you may refuse the package and are entitled to a refund of the purchase price. The online shop where you placed the order is responsible for such returns and refunds. 

Am I entitled to a warranty?

When you place an order with an online shop, you are entering into an agreement with it. In dropshipping, the contracting party is the dropshipper (online shop), not the supplier. The dropshipper is responsible for delivering a good product and must comply with the legal return and warranty rules. These are the most important rules:

• You may return the order within the 14-day cooling-off period. 
• The online shop has no obligation to give you a Dutch return address. The dropshipper may provide the supplier’s address for package returns. Please note: the online shop must have mentioned this in the sale. They must also clearly indicate the costs of returning the order in advance. Such costs and fees can be quite substantial! 
• Have you received a defective product? Or does the product break down within the warranty period? Then the online shop has to offer a solution. It may not hide behind the supplier.

How do I know where a web shop is situated?

Check the terms and conditions on the website to find out where the online entrepreneur is located. Web shops that focus on the European market have the legal obligation to state in the general terms and conditions where the head office is situated.

What can I do in case of a misleading offer or fraud?

Did you make a purchase based on misleading information? Report it at Neytendastofa (The Consumer Agency of Iceland).  Even if you have doubts about whether you have been cheated or deceived. If several consumers report this, the Consumer & Market Authority may decide to investigate the seller, impose a fine or force the seller to provide an appropriate solution. Have you been scammed? Then also report this to the Police (Icelandic website).