In 2016, an investigative article published by Entrepreneur magazine introduced business owners and Amazon sellers to the grim reality of dropshipping. The article told the story of the Ripple Rug, an invention that is essentially a piece of rug made from recycled plastic materials.
The Ripple Rug proved to be a brilliant cat toy equally loved by felines and their owners, and it became part of a business success story as the inventors built a brand by becoming independent manufacturers and Amazon sellers. For Fred and Natasha Ruckel, Amazon was the platform that made their American business dreams come true, at least until they discovered brand-new Ripple Rugs sold on eBay at a markup of $20.
While there is nothing wrong with someone purchasing products from Amazon for the purpose of making a few dollars on eBay, Fred Ruckel noticed that something was amiss. He decided to purchase one of his own Ripple Rugs listed on eBay and was shocked to see it arrive packaged inside the very same box that his Amazon fulfillment service used. In fact, Mr. Ruckel later found out that quite a few of the returned Ripple Rugs he processed came from unhappy buyers who had purchased from eBay but later learned about the cheaper price on Amazon.
The Dark World of Dropshipping
The Ripple Rug inventors were crudely introduced to the world of dropshipping, a murky practice of retail arbitrage that seeks to take advantage of perceived weaknesses in the Amazon retail ecosystem of product catalogs and fulfillment centers. In the case of Mr. Ruckel, dropshippers who locked onto his product noticed the popularity of the cat toy and took note of the Amazon Standard Identification Number (ASIN). Armed with this code, they copied his online marketing materials and applied some unethical eCommerce techniques to make themselves appear as authorized sellers.
Not only were dropshippers surreptitiously profiting from the Ripple Rug but also saddling Mr. Ruckel with $10,000 worth of returns in a single month. The dropshipping of Ripple Rugs ended up diluting sales and tarnishing the brand image that Mr. Ruckel worked hard to build on Amazon.
Preventing Unauthorized Sales on Amazon
One of the strongest promises of eCommerce is that it was supposed to level the retail playing field, which means reducing the role of middlemen for the purpose of empowering entrepreneurs and small business owners.
In some cases, middlemen have been effectively eliminated; we can purchase tennis shoes directly from the Nike.com online store, and we no longer have to deal with travel agents to book our flights. Ecommerce, however, is far from perfect. Aside from the aforementioned dropshippers, Amazon sellers must also contend with counterfeiters and other unscrupulous merchants looking to make a quick buck.
The Take-Away
The lesson learned by the Ripple Rug manufacturers is that doing business on Amazon these days requires a protective stance. Tech giants such as Apple happen to be very protective of their brand image, products, pricing, and distribution; naturally, these are companies that can spend substantial amounts of cash to exert this control.
For Amazon sellers like the creators of the Ripple Rug, technology services such as Brandlox are their first line of protection against dropshippers, unauthorized sellers and counterfeiters. A Brandlox subscription can be configured to monitor up to 2,000 ASINs while identifying illegitimate sellers, setting up test purchases to confirm suspicious retail activity, and even issue cease-and-desist letters to discourage dropshippers.
The reasonable Brandlox subscription fees will certainly pay off for Amazon sellers who handle 10 or more ASINs; dropshippers tend to look for sellers who manage multiple items in the hopes that they do not have a monitoring solution.
In the end, merchant protection solutions such as Brandlox are becoming a necessity for modern Amazon sellers. As the e-commerce marketplace continues to grow, dropshippers and other tricksters will certainly be paying attention.Contact us online or call us at 866-882-8484. You can also email us today!
