The Dark Side of Shopify: Fraud, Scams & Fake Stores.

Have you seen these headlines? Like “Fraudsters Using Shopify to Scam People and Critics Say The Company Isn’t Doing Enough to Stop Them” (source). It’s time to talk about the dark side of Shopify, starting with the data.

Fake Shopify Stores: Studies & Statistics

Did you know that one in five Shopify stores are allegedly fraudulent or dangerous? (source) According to a FakeSpot analysis out of just over 124,000 stores analyzed over 2,500 stores were flagged with issues. 38.6% were found to be counterfeit or have brand infringements, and 16.6% had received consumer reports of fraud (source).

FakeSpot made a statement on Twitter saying that “not all drop shippers are unreliable, but most are get rich quick schemes that search Alibaba and similar sites for cheap products that can be pumped with social media ads” and send people to a Shopify storefront.

We’ll explain what  drop shipping is a little later on.

Capterra vs TrustPilot: Glowing vs Terrible Shopify Reviews

I wanted to know more, so I decided to look at reviews to get  more insights from Shopify users. So I went to the  Shopify Facebook page, but it doesn’t seem to have any reviews activated. Capterra however has glowing Shopify reviews with 4.5 stars for over 3,500 reviews (source).

But then when you go to Trustpilot (source), you can see that 85% of the Shopify reviews are “Bad” and it’s practically the same thing on the UK version of the site (source).

Now I don’t understand how users on both platforms can have complete opposite  perspectives. One does have more reviews than the  other, but the difference between Captera and Trustpilot is not the point of this article, so I’ll  let you draw your own conclusions.

But I decided to further analyze the reviews left by people on Trustpilot because I honestly wanted to understand  why people are leaving such negative reviews for Shopify. I looked at all of the “Bad” reviews that were available in English and there was about 700 of them.

I only considered the ones that are  classifiable, so they had to be a little bit  more than just “Shopify sucks.” Now I don’t endorse these reviews. I don’t know if they’re real or if  they’re all true, but here is a statistical summary  of what people publicly said about the platform. 

  • 71.5% of the Shopify Trustpilot bad reviews were about alleged fraud or scam sites using Shopify.
  • 15% were about low quality customer support from the Shopify team.

Why Is Shopify Being Used for These Alleged Scams & Frauds?

In general the FTC has noticed an increase in scams started on social media since the beginning of the pandemic in early 2020, and e-commerce is no exception (source). Shopify is one of the most popular eCommerce platforms in the world and grew exponentially in March 2020 (source).

Shopify makes it easy to get started selling online especially, with drop shipping. Here’s how it works. A client goes  to an online store makes a purchase. And that store is connected to a drop shipper who automatically fulfills the order for them. So the store owner doesn’t really have to do anything except connect the client to the drop shipper. It’s a business model being heavily promoted by Shopify affiliates on YouTube, and it’s usually presented as a way to “make easy money fast.”

Far too many people don’t understand that dropshipping is a business model. The key word being, business.

A more precise illustration of this would be the client is scrolling through social media, sees an ad purchases from the store, usually a cheap product from China, and then the drop shipper directly fulfills the sale.

Most often, sellers are selling low-cost products from China for high returns, and they’re often sourced from Aliexpress or Oberlo. And what people do is pay for Facebook and Instagram ads to drive people to the store and make impulse purchases. Social media ads are a very important part of the equation.

So Who is Dropshipping With Shopify?

Well, there are legitimate businesses drop shipping on Shopify, using it as an actual business model. You also have  “drop shipping gurus”, young aspiring entrepreneurs with outlandish financial expectations, and people with the intention to scam other people.

Shopify “Dropshipping Gurus”

Let’s start with the gurus, not to be confused with Shopify support agents which also call themselves “gurus.” (I don’t know about you, but that makes me cringe and would annoy me as a business using Shopify.)

Just think about the last time you saw a YouTube ad for Shopify drop shipping, or just do a YouTube search. Drop shipping is presented as a “business opportunity”, a “way to make a ton of money!” You can be a “complete beginner, no need for experience.”

They tell you that you can make “thousands of dollars a month, quickly and easily,” and live the “Lambo life.” Flaunting cars, cash, expensive homes and  helicopters. Even though half the time they’re rented – but they don’t tell you that.

In reality,  a lot of these gurus are selling courses to anybody looking to make money, especially teenagers and young adults who don’t want to live the 9 to 5 or go to college.

Some of these gurus are doing shady things like sell copies of Shopify stores! I honestly don’t understand why anyone would think it’s okay to buy or sell a copy of an online store. 

  • It’s duplicate content, which Google does not rank very well.
  • There’s no added value for the customer. 
  • There’s high chances that the owner will wind up in a price war because there is no other added value proposition.
  • Not to mention potential legal implications of this.

In my personal opinion it’s a waste of time that would be much better spent on  making an actual business.

A lot of drop shipping gurus are making a ton of money selling courses to these impressionable audiences, and make high affiliate commissions referring Shopify via their affiliate links. And these Shopify gurus are the ones who in my opinion are  hyping up the next group we’re going to talk about.

Young “Entrepreneurs” With Outlandish Financial Expectations

A number of people are making these stores to get rich and make millions. “37% of young Americans started a side hustle during the pandemic, most of them are doing it on Shopify.” This was said by a source in the CNBC report that’s available in the source below. 

Since some of them are not building a business are not focusing on their customer and are only looking at financial gain, they are making tons of mistakes, like never actually seeing the product, not offering customer support, not accepting returns because of their drop shipper.

And some are doing even worse: saying that their store is permanently closing – but it’s not, using fake reviews, buying ratings and up votes, or even using celebrity endorsements or paid actors without disclosing it. Overall they’re offering terrible customer experience.

I agree with this quote from the CNBC report:

“A lot of people just get into the business model and they’re lazy. They’re not looking at it like a business. They’re looking at it like a cash grab, like a get-rich-quick idea where we can sell this product using Facebook ads and make a lot of money.”

Nick Peron, to CNBC

They just aren’t treating their drop shipping like a business to provide people value. There are lots of people succeeding at drop shipping, but it’s just like any other business, it’s hard work to make money. And drop shipping requires a lot of skills, especially very good digital marketing skills. 

And it really frustrates me that nobody talks about how expensive drop shipping can actually be, especially with regards to transaction and platform fees! Most gurus are flaunting their sales, not their profit. You can sell for a million dollars in sales in one year, and that’s awesome. But from that one million dollars, you can make just one dollar in actual profit.

If you’d like to learn more I have a full free drop shipping course on my channel where I provide a very different  perspective from most gurus.

Dropshipping Scammers

And then there are people with the intention of actually scamming other people via their online stores. ManyPixels  has a great list that details these types of scams (source). What happens often is that people don’t receive the product that they ordered, they receive an inferior or defective product, they may even receive an empty box.

And sometimes the goal of the scammer is just to steal their personal and credit card information. But all of this puts legitimate business reputations at stake.

Detrimental to Legitimate Businesses & Consumers

Examples of business struggling with this include Overland Sheepskin, Gymshark, Canada Goose and (source). They are dealing with issues like copycat sellers, trademark  infringements, and fake products.

And in the end, some of the biggest victims of this are the buyers. But they aren’t being careful or carrying out their own due diligence before purchasing online. They often fall into the trap of impulse purchases via social media ads, losing a bunch of money in the process.

I made a video to help people know if an online store is legitimate before purchasing from it, definitely check it out.

Shopify has definitely made it super easy to create an online store lowering the barriers to entry for new entrepreneurs, and scammers alike. All the while putting legitimate business reputations at stake. So what is Shopify doing to resolve these issues? 

What is Shopify Doing to Resolve These Issues?

Shopify is putting measures in place to try to counter these kinds of problems. In a statement in a CNBC report they said that they “have multiple teams who handle potential violations of their acceptable use policy that clearly outlines the activities that are not permitted within their platform including copyright infringement,” and they “don’t hesitate to take action on stores when found in violation” (source).

But according to people on TrustPilot, and Shopify users within their own community, this is still a pressing issue (source). Shopify does have a page where you can report an issue with the merchant (here), and they will hopefully continue to improve their processes over time.

Social media platforms like Facebook and Instagram also have a role to play in taking down the fraudulent ads that are driving traffic  to these fake sites. Amazon is also confronted with these kinds of issues and is putting  processes into place to curb similar problems (source). Other platforms are dealing with the problem even before it happens.

Ecwid eCommerce is my favorite solution for small and medium sized businesses (affiliate), and they have 82% Excellent reviews on TrustPilot. Ecwid has a complex workflow to locate fraudsters and eliminate them. They are less known and in my opinion have a more powerful low-cost solution made for SMBs.

What Can Consumers Do to Avoid Shopify Scams?

So for consumers definitely beware, be cautious:

  • Report any fake stores to Shopify (here)
  • Report any fraudulent ads to the platforms on which you see them
  • I haven’t tested it, out but FakeSpot can help you spot fake reviews and fake online stores
  • You could also watch shows about consumer protection. I really like CBC marketplace for people in Canada.

My YouTube channel and blog is made for serious small and medium sized businesses who want their eCommerce independence. Check it out to learn how to create an amazing online store, on your own, and for a low cost.

Ecwid eCommerce expert with almost 15 years eCommerce experience. I create Ecwid tutorial videos on YouTube with insider tips and techniques to help you get online quickly, easily and for a low cost. Subscribe to my YouTube channel to get notified of new content.

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