Keeping up with the ever change world of supply and demand is vital to running your ecommerce business in the most profitable way. Once you launch your business and begin to start selling your product, you will want to keep an ever-watchful eye on your supplier and vendors to make sure you can continue to get your product for a good price margin and deliver that product to your customers quickly.
Maintaining and building good relationships with your suppliers can also get you access to key information in your market, help you evaluate market trends, give insight into product testing and other extremely valuable information. They may even be willing to give you information about your competitors or new marketing efforts in your niche. To make sure that you are building relationships with the right businesses, there are 3 key things to keep in mind when dealing with new product vendors and suppliers.
What kind of supplier are you dealing with?
To build the most effective relationship with your vendors you need to know what category supplier they are. Manufacturers are the people who make the product and you buy directly from them. This is the most cost effective, but often most competitive vendor contract to obtain. Since there are no middle men, you get the product for true wholesale cost which could be anywhere from 5-75% of its retail value.
Distributors are the people who buy in bulk quantities from the manufacturers to distribute to retailers at a small mark up. Distributors will also sometime drop ship for you. This means that you won’t ever have to have physical inventory on hand which can help with your overhead costs. Make sure that if you are dealing with new vendors, that you understand any fees that may be associated with wholesale accounts or drop shipping.
Independent Craftspeople are individuals that make unique products by hand. These people are usually more of a business partner, especially if you are the exclusive distributor of their product.
Import sources are retailers who buy from foreign sources through a domestic important and then distribute goods at wholesale, or slightly above wholesale, pricing.
What Makes This Vendor a Good Supplier?
As a business owner, your goal should always be to build strong, lasting relationships with your suppliers. This will ensure you get the best return on your investment, but it is hard to know what the characteristics of a good supplier are if this is your first time in the ecommerce industry. Focusing on price may seem like the most logical point to start at, and you do want to work with a company that can give you a great rate, but there are several other factors to look at as well.
You want a vendor that is reliable. You want to be able to trust that what they advertise is in stock, is and that they regularly update their inventory availability. Especially if your vendor is also drop shipping for you, it is important that you can be assured that they are shipping the right product and the right quantity of product. Knowing that they pack their products safely and efficiently will also establish trust between you and them and your customer and you.
Working with a business that has been around for a long time is another key factor to look for. Suppliers and vendors that have been in business for a while have established connections to the manufacturers, and if you are working with the manufacturer directly, the fact that they have been in business for long is a testament to their stability.
You will also want to pay attention to where your vendor’s warehouse is located. If your customer base is largely in the United States, in efforts to cut shipping costs and time, you will want a supplier who is as well. If you can work with a manufacturer that is also based in the country of your customer base or where you are, even better. Sometimes you can even get lucky and work with a vendor that has a warehouse near you and you can work out logistics to pick up shipments yourself to be shipped.
Below are some notable United States domestic suppliers:
There is Room at the Negotiating Table
If you’ve been in business for a long time, and have a steady and reliable customer flow, you hold all the power when dealing with new suppliers. Being able to provide your potential vendor or supplier with proof that you can order a large amount of product through them, will help sway the tables your way when discussing discounts, bulk orders, shipping rates, and establishing a credit line.
If you are just opening your ecommerce store, you may find it a little more difficult to find a good balance when discussing terms with your potential vendor. Sometimes, if you can place a large initial order, suppliers may offer you better terms. Drop shippers are going to make the least amount of profit because the supplier is also acting as their distribution center. Drop shippers usually also handle all returns as well, making your job a lot easier, but this is at a cost. There is usually a fee or increased shipping rate for these services.
Suppliers will always be impressed with someone who is professional with an impeccable business plan. They want to know how much money and business you can generate for them, and by convincing them that you are the one that can grow their profits, you will establish long lasting and stable relationships with perks that will probably get better in time.
Leaving contracts open for negotiation is a great sign of a good vendor as well. As supply and demand flexes, minimum orders and pricing should be able to be renegotiated as well. If you have a very high demand for a product, your vendor should be willing to supply you a large quantity for a lower cost than if you were just ordering 5. This works both ways though and if you stop ordering such large quantities, you can expect your prices to start to creep back up again.
If you consider these three things before you begin working with new vendors or suppliers, you should be able to start putting in place the building blocks to a successful partnership. However, even if you have been with your vendors for a long time, you will want to keep your eye out for any new opportunities that may come up. If there is a better deal for you elsewhere, you can use that as a bartering tool when negotiating new terms with your wholesalers, suppliers, and vendors.