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We do a fair amount of drop shipping. Our biggest problems in dealing with this in the past are as follows:
1) Errors. When they make an error (like shipping the item to us instead of the customer or shipping the wrong item out), how do they handle it and how quickly can it be taken care of?
2) Credit limits. For a long time, we had Net 30 terms but only $100k limits from our major lines. This led to a lot of products waiting for us to pay before they shipped, since we regularly make single purchases over $100k. But it was even worse when a few were setting us up with $20k limits. I think they've all bumped us to several times our largest purchases now, but it's taken 10 years of being in business to get to that point.
3) Backorders. How do you know if they run out of something and how quickly do they take care of them?
4) Fees. As yourweb mentioned, fees can add up. Some of our manufacturers offer $5 drop shipping, which isn't so bad, but others take 5%, which can really add up. The good ones offer this service at a select dollar level with no fees associated at all.
I really don't recommend power tools as something you get into, but the drawbacks are sure to be the same regardless of industry.
Brian. |