Whenever I explain to someone how I make money with this model, they often ask: is dropshipping ethical?
They think that because I don’t buy products in bulk, or because I sell some items at a high markup, that I am scamming people with my dropshipping store.
And I know that many people who are trying to make money online with dropshipping are concerned about the possibility of being unethical when dropshipping products to their customers.
I have written guide to answer this important question, and to help you know if it is fine to follow this path or if you should find another business model.
Let’s dive in!
Is Dropshipping Ethical?
Dropshipping is ethical as a business model, and it has been around for many decades, but like it is with any other business model, some people might use it unethically in order to scam people in certain ways.
For example, someone could open a physical shop and sell broken or low quality toys for a high price claiming that they are made with high quality standards.
And while opening a physical store for selling toys is ethical, but selling the low quality or broken items as if they were high quality is unethical.
And the same could happen with the ethical business model called dropshipping, where some scammers might sell replicas of branded products claiming that they are authentic items, or selling very low quality items at high prices that are usually close to the prices of high quality goods.
In short, dropshipping is an ethical business model, but it is up to you if you want to run your own dropshipping venture ethically or not.
Is Dropshipping Legal?
As a business model, dropshipping is legal, and there’s no specific law against it in most cases.
However, most important is that you don’t claim that you are the manufacturer or the sole distributor of the product when you are not.
Now if you want to sell the product under your name as a dropshipper, what you can do is to deal with a white label or private label dropshipping supplier through platforms like uDroppy.
Or you can sell print on demand products where you create your own unique design, add it to a certain product like a t-shirt, mug, phone case, …etc., and sell it online, and when you get an order, you pay a POD fulfillment company like Spreadshirt, Printify, or Printful to create the product with your design and ship it on your behalf.
Also, if you want to dropship products online, you better contact the supplier in advance and make them aware that you are dropshipping the products so that they don’t send an invoice with their price to your customer, or send any promotional material with their branding.
And if you want to dropship on an online platform like Etsy, eBay, or Amazon, read the terms and conditions of that platform carefully before you start selling there.
Why Others Claim That Dropshipping Is Unethical?
I found some websites claiming that some kinds dropshipping are unethical, like dropshipping from marketplaces like AliExpress that sell products at a low price, where dropshippers usually sell products at 3X’s markup.
But in my opinion, you should not think about it this way.
That can be true when said about high ticket items that are already expensive, and a 3 times markup can make them very expensive.
But for low ticket items, a high markup is necessary in order to make a profit, whether you are dropshipping or buying inventory in bulk.
For example, let’s take this 20,000mAh solar power bank that is sold on AliExpress for around $7.57.
If you want to sell it as a dropshipper, you would typically sell it for 3-4 times its price on AliExpress, which is around $21-$29.
Some claim that this is a high markup and that you would be scamming your customers for selling it at this price.
But I don’t think so.
Because a big part of the margin will be paid for marketing the product through paid ads, in addition to the transaction fee that you will pay when getting the order.
Add to that, there’s a risk of getting some refund requests when making lots of orders, and you have some operational costs to cover, such as the server cost, the tools you would use for your online store, virtual assistants costs, …etc.
You might end up for less than 25% of profit on the overall price you will sell at.
Just to make a reasonable comparison, let’s take a similar product on Amazon.
It is being sold their at around $22! And no one called that a scam or unethical.
Actually, the seller on Amazon is probably dropshipping the charger, which means that he is enjoying the same margin as you do.
Or maybe he is buying it in bulk at a lower price than the AliExpress price, which means that he is enjoying a bigger margin that the one you get from selling it at the same price at your dropshipping store!
Why is that considered ethical for him, but not for you?! Especially that it is the same product, same grade, and same quality.
What difference does it make to the end customer if you were dropshipping it, or buying it in bulk?
In my opinion, a 3 times markup is not something that would make dropshipping an item unethical, as long as it is within the normal range of similar products in the market.
These markups are very normal for low ticket items where you still need to pay for marketing and pay some operational costs.
Low markups for low ticket items won’t make you profitable.
For this reason, I don’t agree that dropshipping from AliExpress is unethical as others claim.
Just try to sell good products with good quality, and don’t make false claims about their functionality, brand, country of origin, or guarantees.
7 Tips to Run an Ethical Dropshipping Business
If you want to build a dropshipping business, but still wondering if you can make it the right way, here are seven tips on how to ethically do dropshipping:
Sell Good Quality Products
You wouldn’t want to buy something online, wait for weeks or even days to receive it, and when you try it, you find it broken, lower quality than advertised, or not as durable as it should be, right?
And the same would be for your customers.
If you want to dropship ethically, then only sell products that are good in quality, and stuff that you would be happy to receive when you order online.
It is not only the ethical way to do dropshipping, but the long term success in this business requires you to keep your customers happy.
The best way to make sure that your products are good in quality before you dropship them to your customers is to research and find reliable suppliers with many positive reviews from real customers for the same product you intend to sell, and then, order one or more samples for yourself without telling the supplier that you want to dropship them, and test the product by yourself to see if it was worth selling to others or not.
It might take some time or budget to do so, but it is better than starting to sell a product to others, and after it starts arriving to their doorsteps, they start complaining, filing chargebacks, and flood you with angry emails and negative comments on your ads.
Offer New Products That Are Difficult to Find
When a product is new to the market and has added value to it, you can sell it at higher markups and make a good profit, especially when it is difficult to find at other places.
But after a while, the product might saturate the market, which leads to some newbie online sellers and dropshippers to start selling it at very low margins.
And while it is still ethical and your full right to sell it at a good markup that would make you good profit, but when people see that you there are others who sell the same product at a much lower price, they might think that you are doing something unethical, even though you aren’t.
It is just that other sellers don’t know how to run their businesses and think of making more sales quickly with their low prices.
But if you want to avoid getting into this whole mess, it is better that you find new products with unique features that aren’t easily found online or offline, and offer them to your target audience.
This way, your potential customers won’t be able to compare your prices to others’ prices because others don’t sell what you sell.
To find such product, you can use some tools that can save you some time, like Viral Vault by Jordan Welch, which suggests two new products every day for you to sell, along with marketing tools and audience targeting suggestions.
Alternatively, you can sell print on demand products with your design on them through fulfillment services like Printful and Printify, or you can ask suppliers from uDroppy to create private label products for you with exclusive features that will differentiate your products from others’ products.
Sell at Reasonable Prices
As I mentioned earlier, sell your products at prices that make it worthwhile for you to run a dropshipping business, but at the same time, don’t exceed the prices of comparable products in the market by a lot.
Don’t try to make your product look much better that it actually is, claim that it does what it doesn’t do, or make people think that it is a certain brand when it is not.
To sell at good prices and make profit while doing dropshipping ethically, follow the two previous tips above in order to find unique and good products to sell on your store.
Tell The Suppliers You Are Dropshipping
You are doing the marketing and taking the risk of losing money on advertising and refunds, and it is a must that you sell at a higher price than the suppliers’ price if you want to build a successful dropshipping or any commerce business.
But you don’t want your customers to know how much you originally paid to get the product from the merchant, because they will always ask why did you sell at a higher price than the vendors price, even if your margins were slim.
That’s why you need to tell the supplier that you are selling their products through dropshipping, and ask them not to send invoices with the products with their own prices that will make your customers angry at you and start asking you for refunds.
If you are using AliExpress, there are many suppliers that are open to do dropshipping without sending invoices or marketing material with the products, but you need to agree with them before you start ordering items from them.
Or, you can use the “Dropshipping Center” tab in your AlixExpress account to find suppliers who mainly work with dropshippers.
Alternatively, you can use different platforms or directories with dropshipping suppliers such as Doba and Wholesale2b.
Provide a Money Back Guarantee
It is always a good practice to have a refund policy and offer satisfaction or money back guarantees when selling online, even if you sell your own products or if buy in bulk and fulfill orders by yourself.
You don’t know if the product will finally arrive the customer in good shape, and it is not their mistake if it arrives broken.
And it becomes more important when you dropship products, because no matter how much you try to control the quality of the products you sell, you can’t have full control over the suppliers who ship directly to your customers.
That’s why you need to have a money back guarantee and offer refunds for unsatisfied customers if you want to build and manage a dropshipping business ethically and succeed on the long run.
Not only that, but when you offer a clear money back guarantee, you encourage more of your store’s visitors to make their first purchase, as I mentioned in my list of ways to boost sales on Shopify stores.
Don’t Lie about The Brand, Country of Origin or Delivery Times
As I explained earlier, don’t sell replicas and make people think that you are selling authentic products from certain brands, don’t lie about the origin of a certain product and say that it is made in US or in Germany when it is made in China.
And most important, don’t promise a 2-day delivery when you know that it would take 2-4 weeks for the product to arrive to the customers.
Doing any of the above is unethical when doing dropshipping or any other business model, and it will just lead to lots of fraud complaints and charge backs that might finally force you to close down your dropshipping store, and probably, getting sued!
Actually, this is one of the main reasons that most dropshippers fail.
If you want to dropship with fast delivery times, you can use tools like SaleHoo Dropship that helps you find reliable dropshippers with fast shipping times from United States.
Provide a Great Support
Nothing worse than contacting someone you purchased a product or a service from, and not receiving a reply within a reasonable period of time.
Doing so when dropshipping will make your customers think that you are scamming them, even if you are not doing so.
It is important to keep your customers feel that their money is in safe hands when buying from you, by regularly replying to their phone calls, email inquires, and questions on social media in ads, posts, or in direct messages.
People buy from Amazon because they know that their money is safe as Amazon won’t let its merchants to scam people, and if you lack good communication with your existing or potential customers, then you can’t succeed in your dropshipping business.
Conclusion – Start Your Dropshipping Business Ethically
There you go.
You can now see that dropshipping is an ethical business model, but it is up to you to run your dropshipping business ethically and succeed on the long run.
And you have learned seven great tips that I wish I knew when I first started dropshipping years ago, which can help increase the success rate of dropshipping businesses.
Treat it as a business, because it is a business.
If you are interested in starting with dropshipping today without any technical knowledge in building online stores, then you can check out my guide on how to sell on Shopify without inventory with dropshipping.
I offer it for free.
And if you want a more in depths training with step-by-step tutorials for building an ethical dropshipping business, then Franklin Hatchett’s Ecom Elites course is the way to go, especially that it is sold at a very low price compared to other courses that are actually inferior to his course.
And if you still have any question or need help in anything mentioned here, please, let me know in the comments’ section below, and I will do my best to help you out 🙂