Nessel cautions residents about drop-shipping scams

Michigan Attorney General Dana Nessel is urging caution among residents regarding the potential risks associated with drop-shipping, a business model that has garnered attention recently.

In the drop-shipping model, a company signs an agreement with a third party — the manufacturer, another retailer, or a wholesaler — who ships the goods directly to the buyer. The drop-shipper is positioned in the middle of the retail transaction between the seller and the customer and keeps the difference between the retail and wholesale price.

The worst operators in this space likely do not have such agreements in place. They instead use a website to lure consumers into buying something they could get cheaper from the source.   

Drop-shipping itself is not illegal, but potential pitfalls exist for both buyers and sellers, which is why Nessel advises Michigan consumers to exercise vigilance and take the precautions outlined in her alert, Drop-Shipping: What you Need to Know Before You Buy or Sell Online (www.michigan.gov/consumerprotection/protect-yourself/consumer-alerts/shop ping/before-you-buy-or-sell-on line).

In an online video, Nessel encourages shoppers to follow these tips:

Research the product AND the seller.   

• Do an online image search of the product that the seller has posted to see where the product is coming from, how much it really costs, and who else is selling the product.   

• Compare prices for the same or similar products from other sellers.

The Department of Attorney General issued a notice of intended action last Thursday to a Mississippi-based company that is purported to have taken orders and payment for furniture they never delivered, nor refunded upon request. ACF Wholesale has until January 8th to respond.

Residents who believe they have been defrauded by a drop-shipper, or fallen victim to any other consumer scam, are encouraged to file a complaint with the Department of Attorney General.