While scrolling through Instagram Reels, you naturally pause when an attractive product catches your eye: a sleek laptop bag for travel, a cheap set of popular novels, an ultra-fast wireless charger on sale, beautifully embroidered linen shirts, or leather-bound notebooks with custom gold foil inscriptions. Before you know it, you are entering your credit card number or UPI pincode.

Caught up in your shopping spree, you may not have checked the true origin of the product, or other customers’ reviews of the seller. What’s more, you may not even realise that the “company” you paid is just a decorated webpage created with AI and owned by a person who does not hold a single product.

This is the economy of drop shipping: the business practice that allows almost anyone with an internet connection to sell products that come from others.

Here is what you should know as a customer.

What is drop shipping?

This is a business practice where an online individual or agent — who does not hold any product — takes orders from customers and passes them on to another maker/seller who actually holds the product. The product is then delivered to the customers, either by the original maker/seller or a third-party delivery service. To put it simply, the drop shipper inserts themselves into the transaction as a middleman. One or even multiple drop shippers might stand between buyers and the original makers of the product they want.

A graphic showing how a basic drop shipping process works
| Photo Credit:
Sahana Venugopal; infographic created on Canva

The success of Amazon, the largest e-commerce retailer in the world, can be credited at least in part to drop shipping practices. In its earliest days, Amazon did not commandeer giant international warehouses packed with products; rather, the company was a web-based middleman that fulfilled many customers’ orders by sourcing the books they wanted.

Though Amazon’s product delivery model has drastically evolved, the company allows drop shipping to take place via its platform. Other channels such as Shopify also enable drop shipping and help users manage the logistics. Alternatively, drop shipping might take place through channels such as WhatsApp, Instagram, Facebook, and lesser-known websites.

In essence: if you have ever bought any product online, there’s a chance that you placed your order through a drop shipper rather than the original seller.

How does drop shipping work?

Drop shippers can work with both domestic and international manufacturers and customers. Some try to fill an existing gap in their local market (such as affordable school textbooks), some capitalise on market trends (such as the popularity of iPhone cases), and others build hype around rarer products (such as foreign luxury fashion). Most importantly, the drop shipper does not need to buy or store any of the products they are selling.

Drop shipping has become a popular source of income for both public-facing Instagram creators monetising their virality as well as private marketers looking for discreet revenue streams. What’s more, with AI automating many customer services and harvesting business insights, drop shipping feels like something that almost anyone with an internet connection can try out.

In addition to promoting products and setting up online storefronts, drop shippers may also buy/sell courses that reveal current market trends, customer interests, trusted wholesalers, and useful AI tools, in order to generate further profits.

Drop shipping might look illogical at first, but is in vogue for a number of reasons.

Buyers trying to independently source foreign products from a wholesaler might be forced to order more than they need, or contend with complicated customs regulations and fees. They also may not know if the original seller is legitimate, or might be unable to communicate with them due to a language barrier.

However, placing orders through a vetted drop shipper with a user-friendly web page eases some of these worries. What’s more, legitimate drop shippers regularly carry out quality assurance tests of their own, and should ideally become a customer support layer of sorts in order to resolve any complaints.

Is drop shipping legal?

Drop shipping is legal in most jurisdictions, as long as the participants involved ensure transparency and comply with their regions’ tax laws. Instagram’s commerce eligibility requirements state that the users’ Facebook Pages or Instagram professional accounts must contain product listings that are available for direct purchase from the user’s website. In case buyers are being directed to another website, the user must provide the domain through which they sell, and their channels must represent the shop associated with the domain.

But now that it is possible to create entire shopfronts and e-commerce websites in minutes with just some cheap domains and a few AI coding prompts, Instagram drop shippers can easily present themselves as original sellers and offload customer orders to other sellers. Videos of workers sorting through wrapped packages, or Reels of founders happily holding up stacks of paper that they claim are customer orders, can mislead social media shoppers into thinking they are dealing directly with a trusted seller.

Ultimately, the line separating influencers, marketers, and sellers can blur quickly on social media. Some drop shippers also ask customers to contact them via WhatsApp, to take their communication off the app. Buyers may not know where their products are actually coming from or how their data privacy rights are being eroded. And as supply chain transparency is lost, drop shipping operations can quickly slide into a legal grey area or end up in criminal violations.

Some risks include scams targeting customers, as well as scams targeting drop shippers. Original sellers and drop shippers may both inflate product prices.

Drop shippers might also work with wholesalers sending out defective/rejected products. Furthermore, drop shippers may unknowingly promote pirated/counterfeit products. Hyper-realistic AI product images can mislead both customers and casual drop shippers.

Meanwhile, delivery timelines can be long — if the product even arrives at all. The drop shipper may not be required to take responsible for any safety or hygiene standards that have to be maintained while shipping the products.

Adding to this, multiple drop shipping layers in different countries can inadvertently lead to sanctions violations. In case of complaints, cancellations, or refund requests, customers may have no choice except to cut their losses and move on.

Other dangers include pyramid schemes to recruit more drop shippers, or even cyber-crimes via phishing and hacks, as the customers’ payment information is shared with multiple parties without their informed consent.

So, the next time you spot a book influencer on Instagram promoting a handy new reading light, or stumble across an excited founder surrounded by sacks of customer orders, take a few minutes to do your research and find out who is really selling you the product.