Why Does PayPal (BAN) Dropshipping Stores & How To Avoid It?

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In the last couple of years, a lot of dropshippers were wronged by PayPal’s strict policies and had their dropshipping businesses completely ruined! So, why does PayPal ban dropshipping stores? This is what I’m about to share with you!

Although PayPal is supportive of dropshipping and dropshippers, there are some factors that might raise red flags in PayPal’s eyes and make them ban dropshipping businesses. Lack of inventory, tracking info, and evidence of identity are just some of the reasons that will put your account at risk of shutting down!

Getting banned on PayPal is something that I have faced in my early beginnings of dropshipping. In this article, I’ll be sharing my own experience with PayPal dropshipping, and how getting banned on PayPal has forced me to shut down my entire business and go look for something else.

Upon chatting with the PayPal team I came to know about their various holds process, how often they hold money, the reason for holds, for how long they hold, etc., and I wanted to share this with you!

So, if you have experienced having your dropshipping getting banned or just want to learn how to avoid it in the future, this quick guide could save you a lot of time and money.

If you find this post inspiring and useful, share it with your friends, please! (Virtual high fives and hugs to all my sharers out there)

Does PayPal Allow Dropshipping?

PayPal is highly supportive of dropshipping, and on their official website, they have a dedicated page that talks about how to use PayPal as a payment gateway that’s built for your dropshipping business. Dropshipping, as a business model, is definitely allowed by PayPal, but activities that might harm users’ experience may raise red flags for PayPal.

Unfortunately, as many drop shippers were affected by PayPal’s strict policies in the past few years, it’s become widely known that PayPal doesn’t allow dropshipping, and the truth is the right opposite!

Does PayPal Hate Dropshipping Stores?

Dropshipping stores account for a huge percentage of eCommerce businesses online, and there’s no reason for PayPal to hate those businesses. PayPal is highly supportive of this business model and the company has positioned itself as the best online payment for this kind of activity, and that’s clearly illustrated on their official website.

PayPal doesn’t hate dropshipping stores or dropshippers, it hates the wrong activities that have the potential to harm people’s online shopping experience because what PayPal is basically aiming for is to create a seamless and secured shopping experience for all people around the world!

Dropshipping is a business partnership but without contracts between parties. In this business, you don’t need to sell your own product, you are basically selling someone else’s product.

Therefore, dropshipping stores usually don’t care much about the products, packaging, and shipment, so they end up having unsatisfied customers.

It all starts with a dispute on PayPal…

7 Reasons Why PayPal Bans Dropshipping Stores

Banning dropshipping stores is a form of risk management that PayPal implements to assure that people’s online shopping journies are safe and secured!

Being said, here are 7 reasons PayPal can ban your dropshipping account:

1. Lack Of Information

When building your dropshipping store, think about it as a brick-and-mortar business and provide all the information that your customers and the financial institution may need!

At the time you register for PayPal, you would only need some basic information about you and your business, but the troubles usually begin when you start getting good traction and activities, especially disputes!

You should always be prepared to provide any legal information or documentation about you or your business such as proof of identity or proof of registration.

You also need to populate your online storefront with the needed pages and policies and make sure to keep them handy and easy to navigate to by customers by placing them in your mega or footer menus.

2. No Tracking Info

What PayPal wants is a secured and healthy shopping experience for everyone, and it for sure, doesn’t want people to buy from fake websites or exposed to any scams online.

Therefore, they pay high attention to order tracking because it speaks a lot about the business. In PayPal, you have the option to add a tracking number to your order, and by doing this, you will authentic in your customers’ eyes as well as PayPal’s!

By providing a tracking number on your PayPal backend, you will reduce the possibility of getting your dropshipping store banned, and that can be achieved by picking a reliable supplier first that uses a trackable shipping method.

The fact of the matter, using premium supplier directories like Spocket will give your business an unfair advantage, as you will rest assured that you are dealing with reliable and trustworthy suppliers who provide tracking information and ship fast.

Learn more about Spocket to find thousands of reliable suppliers in USA, EU, & CA.

To sum things up, a tracking number gives PayPal a proof of shipment, and is insanely helpful for winning disputes!

3. No Inventory

In dropshipping, you are basically selling other people’s products based on images and descriptions. The thing that makes it a cost-effective business model for people who are just tapping into eCommerce as they don’t need to hold any inventory.

However, when using PayPal as a payment gateway for your store, PayPal by default assumes that you operate a real business and ship from your own warehouses.

Although dropshipping is supported by PayPal, it’s still sometimes seen as a risky business model since you won’t be shipping your own products from your own warehouses, and some sellers may receive a reply of “the type of business you’re in is risky,” and you cannot use PayPal!

To avoid any troubles, you can always reach out directly to PayPal and be fully transparant about your business before you choose to make it your store’s primary payment gateway.

4. No Valid Address

PayPal assumes that it deals with real humans, and usually, humans have addresses! Don’t we?

Unfortunately, some dropshippers choose to use fake addresses and not show their real address… This will put their PayPal accounts at risk especially that PayPal insists of this at some point, for tax-related purposes.

So, failure to provide a proof of your location will have your account banned, and using P.O.BOX is not even counted as an option by PayPal.

5. No Evidence Of Identity

No matter whether you’re dropshipping or running any other business model online, PayPal cares to be dealing with sellers who are serious enough about their businesses and customers.

By clearly identifying your identity, not hiding behind the walls, and be there whenever they ask for a certain document or verification, you would look authentic in PayPal’s eyes and not give them a chance to ban your account.

6. Bad Customer Support

Customer support is key in online businesses, and the faster you respond to your customers’ inquiries, the less likely they will dispute the validity of their purchase.

Over 90% of the time, customers will refer to the customer service desk before requesting a refund or dispute their orders. So, you have a great chance to avoid any potential disputes.

Remember that people buy from people they know and trust! By offering a quick and knowledgeable customer support, you will reduce the chance of receiving any disputes, as well as getting banned on PayPal.

7. Disputes

Where there are purchases, there are payment disputes. As with any transaction, there’s always a risk that your customer will dispute the validity of their purchase.

There are many different reasons why people dispute their orders. Some are:

• Low-quality product
• Wrong product
• Wrong variant (size or color)
• Long shipping periods
• Broken items
• No tracking information
• No responses to live chat or email

But, what if I told you that there are some ways you can avoid disputes? Here are some tips for that:

• Offer an extra ordinary customer support service.
• Deal with trustworthy suppliers only.
• Use suppliers that ship from warehouses near your target audience.
• Pick a shipping method that provides tracking information.
• Make sure to dropship high-quality products ONLY.
• Offer unhappy customers a low-ticket item on the house.

How To Avoid A PayPal Business Account Ban When Dropshipping?

There are several reasons why PayPal can ban dropshipping stores and the bad part is, no preventive measures can be done and you can’t prepare for it!

However, there are some activities and practicies that can set you apart from your competition and always make you good in PayPal’s eyes!

Noting that, these practices that I’m about to share with you are not only good for not getting banned on PayPal, but for your business’s customer lifetime value as well!

If, for example, a customer feels secure ordering from your store, they are more likely to come back and spend on your store again. The same applies if they were able to track their orders properly, if they are satisfied with the shipping period, and if the quality of the product has met their expectations!

With that being said, here are some tips, practices, or activities that you can follow and implement in order to get your customers’ satisfaction and avoid getting banned on PayPal at the same time:

1. Create a Business PayPal Account (Not Personal)

Are you looking forward to getting banned on PayPal fast? Use a personal account for dropshipping, haha!

Kid you not, there’s definitely a reason behind having two types of accounts on PayPal; personal and business. Although a business account can reduce the chance of getting your dropshipping store banned, it’s not a guarantee to not get banned and you should do your due diligence to avoid that!

If you are planning to sell online or even receive money more frequently, you should set up a business PayPal account to clearly tell them that you are operating a business and that those transactions are not for personal purposes.

Looking forward to learning the difference between personal and business PayPal accounts and how to set up your business account correctly? This official guide by PayPal could be of great help to you!

2. Fully Verify Your PayPal Account

Verifying your PayPal account eliminates the chance of getting banned and make you look serious about doing business online.

This can be done by creating your account with your legal name, your full address, and by linking a bank account or a credit card.

If you are running a real company, make sure to be prepared for submitting more documentation regarding your business, such as proof of address and company registration, especially if you receive any disputes.

Otherwise, you will get your account banned if you fail to provide such documents, or get a withheld on your funds for up to 180 days!

3. Have a Shipping & Delivery Policy In Place

By clearly stating your shipping and delivery policies, customers would be comfortable purchasing from you and know exactly when to expect receiving their orders.

If, for example, they are aware that it takes up to 10 days to receive their items, they won’t be panic after a week of ordering and end up disputing their purchases!

Having a straightforward and clear shipping policy is not only beneficial for reducing the dispute rate on your store, but also for your customer lifetime value, and the quicker your delivery is, the less likely they would issue a refund!

In other words, it all centers around picking the right supplier and dropshipping the right product with the highest perceived value and quality possible! Click to find top-rated suppliers for your dropshipping business, such as Nike, Addidas, Canon, Levis, Lego, Gap, Samsung, and more!

Pro Tip: After making up your mind of what you want to sell and on the supplier, go ahead and set a shipping policy accordingly. It’s advisable to always go with one vendor when you’re starting because shipping rates and periods vary from one supplier to another.

4. Provide An Outstanding Customer Support Service

Recently while I was reading about how customer support affects sales, I’ve stumbled across an article on FM outsource that has summed it all!

In short, the article mentioned that happy customers buy more. Retaining loyal customers leads to repeat purchases and keeping your customer satisfaction high is great for getting referrals.

By offering premium customer support service on your store, you will:

• Fulfill potential buyers’ queries right away
• Offer your customers customized vouchers or coupon codes
• Reduce cancellations and disputes
• Have more loyal customers

You can integrate a live chat support system to make it easy for your customers to contact you. One of the best customer support software available is called LiveChat, and it’s a tool that’s used by Ikea, LG, Lexus, Virgin, and more!

When you’re starting out, you can handle this role by yourself and as your business grows and starts generating stable income, you can hire a virtual assistant from Fiverr or Online Jobs Filipino at cheap rates.

5. Dropship High-Quality Products From Trustworthy Suppliers Only

The dropshipping is all centered around selling a product you’ve never owned or seen. You take full responsibility for the truth of the photography and the quality of the products you choose to sell in your store, although none of which you have any control over!

In other words, suppliers can either take you up or ruin your entire business, because a bad supplier can destroy your whole reputation and force you to stop your operations.

To avoid all of that, win your customers’ satisfaction, and eliminate the chance of getting banned on PayPal, always make sure to dropship high-quality products from trustworthy suppliers only.

Some of the advantages of dealing with reliable suppleirs:

• High-quality goods
• Fast & reliable shipping
• 24/7 customer support
• Lower dispute rates
• Less returns & cancellations
• More happy & loyal customers

When it comes to finding trustworthy and reliable suppliers, Salehoo and Spocket tend to be the most two premium supplier marketplaces out there that come with an affordable monthly/yearly subscription fee.

Related: Can I Sell Branded Products On Shopify? Top Beginners’ Guide

6. Provide Tracking Info

By allowing customers to track their packages and keep them in the loop of their shipment, they are less likely to feel insecure and dispute their purchases!

You dont need to wait for them to check their packages, and you can always be a step ahead by giving them the kind of information that double confirm their buying decision.

Put yourself in the shoes of your customer, how would it sound if you keep receiving notifications and emails about your shipment? Wouldn’t you think that people behind that business care about you as a customer?

And odds are, you would be less likely to dispute your purchase even if it took too long to receive your order!

Adding tracking numbers and information to PayPal could get a time-consuming job, especially when your business starts to grow and getting tons of daily orders.

Fortunately, you can use an app to auto-update tracking numbers on PayPal, but you need to be careful since most apps hire individuals to upload tracking numbers manually, which means strangers will get authorization to access your PayPal account!

If you do want to use an app like this, the most popular ones are Proveway and Simple Seller Protection. These apps use the Shopify and PayPal secured API environment, which means they can automatically source the tracking code from Shopify and upload it to PayPal.

If you agree with the idea of providing a huge perceived value to your customers and send them updates about their shipments without them asking for it, a great app to consider using is Aftership.

The Aftership app allows you to design your own branded tracking page and send your customers updates about their shipments.

If you are not sure what delivery updates you should send to your customers, here is a template for it by DoDropshipping.com!

Sign up for Aftership to set up your first similar email sequence for your dropshipping store.

7. Handle Your Disputes Smartly

Every now and then something will go wrong with an order, which is normal. Whether it’s human error or misunderstanding, the important thing is to focus on the solution and prevent it from happening again.

In fact, disputes ruin your business’s reputation, and if you are using Shopify to host your dropshipping business, the more disputes, chargebacks, and returns you receive, the higher fees Shopify will be charging you!

Related: Does Shopify Host Websites? A Detailed Guide with Pricing

We need to face it… Dealing with difficult customers is an avoidable part of the process and in some cases, no matter how many concessions you’re willing to make to certain unhappy customers, they simply won’t be satisfied!

While on the other hand, simple correspondence is more than sufficient to placate an unhappy buyer. So, you need to be strategic with dealing with disputes.

First off, the smartest thing that you can do when handling unhappy customers is to respond as fast as possible to avoid the dispute.

Personally, the way that I was handling disputes when I was dropshipping women’s apparel was innovative… It helped turn unhappy ladies into human marketing machines.

If by chance a customer didn’t like the product, the color, or the size, instead of asking them to return it, I used to give it to them for free and send them another order of their new desired variant, be it color, size, or whatever.

Even if they didn’t want any other product, I would still let them keep the first item and issue them a full refund. You may be wondering, why would I do something like this…

Well, at that time, the average cost per good was $5-$10, and luckily, the percentage of this type of customer had accounted for no more than 2% of total orders.

Beind said, my simple strategy had allowed me to:

• Enhance the bond with my customers.
• Create an efficient and fast online shopping experience.
• Reduce returns, chargebacks, disputes, and cancellations.
• Turn my customers into loyal ones.
• Achieve the word-of-mouth effect on my business.

PayPal Dropshipping Frequently Asked Questions

Next, we are going to be answering some of the PayPal-related frequently asked questions. If you have other questions that are not covered in this article, feel free to reach out to me, I would be more than happy to help you out!

If I Dropship On Shopify, Will PayPal Hold My Funds?

Not necessarily, but in case it happens, it happens for security reasons! PayPal aims to help its customers avoid being scammed by any fake online store. Therefore, once you update the tracking link on PayPal, it verifies that the transactions are genuine and orders are being shipped out to customers, it removes the hold instantaneously.

Do You Need A New PayPal Account For Every Dropshipping Store?

No, you don’t, especially that you’re only allowed to have one business account under your name. In order to use PayPal for multiple stores, you only need to change the order number prefix/suffix so you know which store the orders are coming from. Luckily, this is can be easily achieved with platforms like Shopify.

PayPal Business Account Ban! What To Do Next?

The only thing that can be done if you’ve recently had a hold placed on one of your payments is to contact PayPal to request a hold removal. This can be done by either a phone call or via email!

There are several reasons that might make PayPal elect to place a hold on your funds. Some of those reasons if they believe payments were made with stolen credit cards or bank account information. In other scenarios, unhappy customers can place a hold on payments if they feel they’ve been treated unfairly.

How To Deal With A Dropshipping PayPal Hold?

Well, I can relate to how frustrating it is when PayPal holds money for no reason and especially in times when we have limited cash flow. Being said, below are the 3 simple steps that you can do if PayPal hold any of your payments:

1. Visit PayPal official site, log in to your account, and head to the contact us tab.
2. Contact the PayPal Customer Support by clicking “Call Us”, request a hold removal, and detail why you think the hold was placed unfairly
3. For further confirmation, reach out to them via email, compose your correspondence, and you should hear back from them within 24 hours.

Can I Still Dropship Without A PayPal Account?

Dropshipping without PayPal is definitely approachable, and there are a bunch of alternative payment providers for PayPal! Shopify Payments, for instance, is the simplest way to accept payments if you choose to use Shopify for selling your products online.

It eliminates the hassle of setting up a third-party payment provider or merchant account and allows you to collect payments from your customers seamlessly.

From my experience, if you are just starting out with dropshipping as a beginner, you are most likely to be going with Aliexpress. If your target audience is in the United States, that means that it may take an eternity for your customers to receive their orders!

So, it’s advisable to avoid using PayPal until you start dropshipping quality products from trustworthy vendors and suppliers! Aliexpress dropshipping center allows you to find good suppliers, but unfortunately, you can still find untrusted ones that sell cheap and low-quality products!

It makes better sense to find US suppliers if you are considering selling to US citizens. Besides the higher quality of products, customers would receive their shipments faster, which will eliminate the chance of raising a dispute or canceling the order!

34 Best PayPal Alternatives For Dropshipping

Can You Still Make Money Dropshipping In 2021?

Dropshipping is sure a rewarding business model, but people nowadays are taking advantage of a way more flexible business model that requires less capital and has the potential to generate passive income, which most people dream of!

It’s called affiliate marketing…

Affiliate marketing is performance-based marketing in which you (the affiliate) get paid for referring traffic to businesses, brands, and companies, and if someone ends up purchasing through your unique tracking link, you will get compensated, at no additional cost to them!

Below are some reasons why affiliate marketing is better than dropshipping, for beginners and experts alike:

• Less active work required – Both businesses require real active work, but the average work required for a dropshipping business is relatively higher.

• Less capital required – Dropshipping is not the cheapest venture to start. On average your initial dropshipping cost could be something between $50-$100, split between the Shopify subscription, apps, and some test orders. On the other side, to get started with affiliate marketing you only need a sales funnel and an email sequence.

• Potential of passive income – Affiliate marketing allows you to do the work once and keep getting paid for months, or even years to come. The reason is, high paying affiliate programs with a proven ecosystem pay recurring revenue.

• No selling is required – With affiliate marketing, you are not selling anything. You are just referring people to certain products through a unique tracking URL, and if they end up purchasing or registering, you will get paid. Simple!

• No customer support is needed – Affiliates are not responsible for handling any customer support for the products they are recommending. This is something that is handled by the vendors or companies. The thing that makes affiliate marketing more flexible.

• The possibility of leveraging other people’s success – What if you could start a whole online business that generates real passive income, from scratch? Replace your sucky job and just live the life you’ve ever wanted…

Luckily, you don’t need to re-invent the wheel or start from complete scratch… Instead, you can utilize other people’s systems to tap into a multi-billion dollar industry without hassle!

If this is something you’d like to learn, my friend Anthony is hosting a free presentation that I highly suggest you check out while it’s live.

Click here to watch video now

Conclusion

When dropshipping, you are selling other people’s products based on images and discriptions, and you take full responsibility for the accuracy of information and the truth of photography you choose to put on your site!

The quality of the goods, the security of the packaging, and the promtness of the shipping… None of which you have any control over, which is a big drawback to dropshipping.

If for any reason, customers have problems with their orders, they know you, and only you, and you are the one who they would blame.

This article has discussed exactly why does PayPal ban dropshipping stores along with some helpful tips on how to avoid getting your account shut down!

I hope that this post has added something to your knowledge! If so, share it with your friends, and claim your seat in our free Shopify dropshipping mini-course below.

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Cheers,
Odeh Ahwal