The drop shipping model has become increasingly popular due to the huge cost savings and flexibility that it gives the individual retailer. Unfortunately, not many people understand the concept in its entirety and are therefore susceptible to scams. The only way to avoid a drop ship scam is to understand what services they offer and what they do not offer.
Simply explained, the drop shipping model is one in which the retailer is not required to carry any inventory of his own or do any shipping or tracking. They pay a drop shipping company to do this for them. The cost is often lower than what an individual would pay for the service. Buying in bulk gives these companies negotiating power that individuals do not possess. It also means the retailer does not have to spend time doing backend logistics. Other savings for the retailer include not spending money to hold inventory and related security/spoilage costs.
The big negative aspect of the drop shipping model is that you have to share your complete database with a drop shipper. While this may be low risk for a new business, it can be a very risky proposition for an established business. For example, some will send their own collateral and even competitive quotes inside the package. Others sell the database to competitors for large sums of money. There are also issues of unreliability, delays in shipment and low quality product, which can affect the retailer’s reputation. It is therefore important to research the credentials of the company before partnering to avoid losses at a later date. One way to do this is to read reviews or ask for customer references. In any case, it is best to start small.
http://www.wholesaleforum.com/discuss is a wholesaler business forum that informs users on the basics of the supply chain, spotting drop ship scams and concepts like the business model.