Drop Shipping is a scam

Beware of scams: How one shop seller ripped off at least 128 dealers

Dozens of shops are sold every year via the shopangebote.de shop. As a rule, these sales are satisfactory for both sides, the parties come to a fair agreement, and the shop and sales price change hands in a legally correct manner. However, the online retailer Daniel S. * recently reported to us that things can go very differently if one of the two parties acts with fraudulent intent. And what he had to say there will make the hair of every respectable dealer stand on end.

Around two years ago, a certain Michael W. posted a sales offer on various sales platforms, including our shop exchange. A drop shopping project was offered with “exclusive supplier lists” under the domain bluzz.de, which had an annual turnover of 983,000 euros with 600,000 products in its range - with a profit of 141,000 euros.

Daniel S. read the offer and contacted the seller. He was personable and courteous, presented the prospective customer with comprehensive business documents, presented receipts about the trademark registration and even Amazon payment receipts, and gave access to the supplier list. He even promised a guaranteed turnover of 300,000 euros for the first half of the financial year - if that were not achieved, he would repay the purchase price, according to the guarantee.

And of course an "exclusive agreement" was part of the package, with which the seller undertook to hand over the project to only one buyer. Several personal meetings went well, in March S. agreed to buy the project for almost 60,000 euros and was looking forward to the new task with which he wanted to supplement his work in his own online shop.

128 defrauded dealers, 2-3 million euros loot

At this stage he never had any suspicion of confronting a fraudster. Today he knows: since 2014, his business partner has sold the same shop, including its registered brand, to at least 128 entrepreneurs within three years, each for amounts between 3,000 and 60,000 euros. The fraudster stole between 2 and 3 million euros - and displayed astonishing criminal energy in order to avoid detection.

The complex business documents were all forged, the supposedly “exclusive, self-developed” dropshipping interface was a disguised standard system from JTL. The bright, serious-looking company building in which W. received his buyers was only rented. And the "exclusive agreement"? Not worth the paper it was printed on.

"Shortly after the purchase was completed, the seller contacted me and advised me to start my business under a new name," recalls S. "That seemed a bit strange to me, but W. was very convincing." The fraudster also used the same trick to persuade all other buyers to register new brands for their new business - initially nobody noticed that their supposedly “exclusive” drop-shipping project had long since been mass-produced.

Daniel S. only realized this when he uploaded his first products to Amazon. "It was immediately noticeable that a lot of retailers were offering exactly the same products at exactly the same prices as I did," said the retailer. He became suspicious and began to research.

In dealer groups, he met other affected parties and exchanged notes and supplier lists, and finally he had the interface examined by a specialist. It soon became clear to him: “Ultimately, the shop was worth maybe 500 euros, but certainly not 60,000 euros”. In June 2016, S. finally filed charges of “fraudulent misrepresentation” and “multiple serious fraud”.

The mills of the German judiciary are known to grind slowly; But meanwhile Michael W. is in prison because of an acute risk of escape, the criminal trial begins on March 22nd in Oldenburg. The civil lawsuit is already through, W. has been sentenced to repay the purchase price including interest. Daniel S. will not see his money again anytime soon, if at all: His fraudulent business partner and his wife, in whose name the couple's company ran until October 2017, allegedly no longer have a trouser button and have filed for personal bankruptcy.

S., on the other hand, not only had to cope with the loss of the purchase price, but also had to pay legal and court costs - another almost 20,000 euros. Fortunately, his own online shop is running quite successfully. “Nevertheless, I had to squeeze almost a year from the failures in the business,” he recalls.

Addendum on April 25, 2018:The fraudster has now been sentenced to four and a half years in prison, his wife got off lightly and received two and a half years probation.

Question: Who protects against the perfect fraud? Answer: none

In retrospect, however, the dealer cannot quite say what he could have done differently to avoid the fraudster. “Afterwards you are always smarter,” says S. “Perhaps I should have been more suspicious of the bad values ​​in the Creditreform data that I had given me - but the seller explained that they were related to building a house. And I should have checked that the trademark is really registered. But in the end the guy just presented himself perfectly. There was no reason for mistrust. "

What makes S. even more angry than his own good faith is the lack of support from the other bodies involved. “When I noticed that there was something wrong with the offer, I called all the shop sales exchanges and warned them about the offer. shopoffer.de immediately marked the offer as no longer available and removed the contact details, but it remained for a long time on other exchanges, ”says p.

“Many of the affected retailers called JTL and warned them that their system was being used as a mess - but they just washed their hands in innocence and said: 'We can't do anything for that'. And even the public prosecutor's office had known about the fraudster's machinations since 2014, but let him continue to collect evidence - and that is why many more dealers have hit the net. And that's really a mess. "

But what can you do to prevent it from getting that far in the first place?

Our M&A partner Andreas Lux, managing director of Marcedo Shopservice, not only handles shop sales very successfully, but also supports the purchase of established online shops. We wanted to know from him what the injured party could have done to prevent it from happening in the first place.

Interestingly, at the time, Lux itself had advised the client on this project several times - also in writing - against making a purchase. However, since the general conditions of the project seemed too tempting, his clearly expressed concerns were ignored and bought. With this, however, the client only joined the long line of injured parties.

Andreas, have you ever experienced something like this?

No, I have never come across that in my many years of consulting work. But I think the deceitful thing about it wasn't internet specific in and of itself. It could have happened offline just like online in any industry. In my opinion, it was important for the fraudulent seller that most of the interested parties were certainly very inexperienced in online trading. In addition, there was the glittering prospect of earning a lot with little money and effort.

How should one approach offers to buy so as not to fall for a scam?

Be sure to take off your pink glasses and

  • question all assurances and promises carefully.
  • Research and inquire about the seller.
  • Only use numbers and documents in written and confirmed form (tax consultants, auditors) for assessment and check them intensively for plausibility and completeness.
  • Put aside personal sympathies (if any).

In addition, it is important to use common sense as well

  • be suspicious of any offer that is too good to be true.
  • ask yourself whether you are sufficiently familiar with the subject to be able to make a judgment.
  • if you have the slightest doubt, ask someone with the necessary skills who are familiar with such things, e.g. e-commerce specialists, M&A consultants, management consultants or the local Chamber of Industry and Commerce.

Editor's note: We know the name of the injured party mentioned. We also had access to relevant documents.

Image source: © bigstock.com/ twinsterphoto

Category: MarketplaceTags: Sales Exchange