Dropshippers act as intermediaries in the e-commerce world, capitalizing on a popular model that drives the ads you see on Facebook, Instagram, TikTok, and YouTube. While some make substantial profits without ever handling the products themselves, others use dropshipping as a shortcut to quick riches, negatively impacting legitimate businesses and unsuspecting consumers.

The dropshipping model typically involves creating targeted ads to capture consumer attention and encourage impulse buys from a Shopify store set up specifically for a single product. The dropshipper doesn't purchase inventory until a sale is made and rarely handles the product. Often, items are shipped directly from China, leading to potentially long delivery times exceeding 90 days.

Nick Peroni, who started dropshipping in 2016, now runs his business full-time from his home in the Philippines. Previously an Army veteran from Philadelphia, Peroni explored various business models before finding success with dropshipping. In 2020, his sales of a garden trimming attachment reached $1.9 million in six months, and he sold $150,000 worth of fleece-lined leggings in just three weeks. He relies on Chinese agents to vet products and sourcing companies to minimize shipping delays.

However, dropshipping can be problematic for consumers. Peroni notes that many newcomers approach dropshipping as a quick cash grab rather than a legitimate business. This often leads to questionable practices, such as buying fake reviews and ratings to boost credibility, as explained by Saoud Khalifah, founder of consumer protection software company Fakespot.

Fakespot's Chrome extension helps shoppers identify unreliable sellers on platforms like Amazon, Walmart, and Shopify, recently expanding to detect dubious Shopify stores. Khalifah highlights that Shopify's easy setup process has attracted numerous dropshippers who may exploit the platform.

An analysis by Fakespot of over 124,000 Shopify stores revealed that more than 25,000 engaged in fraudulent activities such as counterfeiting, privacy breaches, or purchasing fake reviews. Nearly 72% of these stores used dropshipping tactics.

Brands like Gymshark, which grew through influencer marketing, are now seeing their success copied by dropshippers selling counterfeit products. Gymshark's CCO, Niran Chana, expressed frustration with this trend and called for better regulation from Shopify to address abuses of brand rights and ensure fair competition.

Gymshark is strengthening its legal team to protect its intellectual property and hopes Shopify will better regulate dropshipping practices to prevent these issues.