Choosing the Right Supplier
Having the right supplier is a critical facet in the diamond that is your e-commerce business. For all intents and purposes, think of a supplier as your business partner. In effect, they are and having the right, or wrong, one can make or break your business. You've probably given some thought to whether or not you need a supplier of any kind and found that yeah, you do. Honestly, it makes things a lot easier when you have someone to help. Or maybe you already have supplier and you're not entirely sure that they're the right supplier for you. There's a big difference between finding a supplier and finding the right supplier. If you choose a supplier because they're convenient but they have little rapport and are unreliable, then you're sailing your business up the creek without a paddle.
At this point you may be wondering how you would choose the right supplier. Clearly, research needs to be done, but in the meantime, I'll give you some ways of choosing the right supplier.
What kind of supplier?
In case you weren't aware, there are a few different types of suppliers to choose from. Determining what kind you need is going to depend on varying factors and will take into consideration your current business model. You'll simply need to determine which one works best for you. The most common types of suppliers are manufacturers, dropshippers, private labeling, and wholesalers.
This is probably the most common supplier that businesses utilize. Generally, with this option, you may need the capital to buy product up front and you would need storage for the items. Purchasing from a wholesaler means that you buy multiple stock from the supplier, they ship it to your address and you store and ship it on your own. Buying items at wholesale leaves room for negotiation which could potentially increase your profits. For most wholesalers, the more product you buy from them (buying in bulk), the better the price will be for you. If you add potential negotiations to this, you could get a lot of products for a steal. This is why you would need capital to buy up front and for storage. You won't be able to purchase from the wholesale supplier unless you have the capital to do so.
You would also need to work out the logistics of how and where to store the products. Additionally, you would need to coordinate shipping to the customer because, naturally, if the wholesaler isn't storing the product, then they aren't going to be shipping it for you either. They will ship all of your products to whichever address you provide them, though, and it's usually to some type of storage. That is the extent of their involvement. You would need to coordinate fulfillment on your own, which can be a little tricky. This is generally why many store owners will incorporate the help of an outside party.
Like choosing a wholesale supplier, this method will require upfront capital. The costs associated with this are a little higher. Buying from a manufacturer means essentially buying from the source. This is where the products are made and where you can get them at the lowest price. You will, however, have to buy more at a time. With a wholesaler, there's no obligation to purchase a large quantity, it's simply in your best interest to do so financially. It's in the suppliers best interest as well.
With manufacturers, there's no wiggle room on this. You will have to buy a large quantity, and it may not be what you were expecting. Depending on the market and the manufacturer, you might have to purchase several hundreds or maybe even thousands of a given product. Also, because you would have to buy significantly more stock with this method, you would absolutely need to have storage space and probably a lot of it. This method is probably best reserved for the veteran store owners because of everything required to make this method a success, but it does yield the highest profit margin.
This method is less common because it's geared towards the companies trying to build a brand rather than just selling other generic items. This model is almost the same as the standard manufacturing method. It is particularly good for those who have created their own product and need to be able to have it made and marketed as their own. A company who created their own types of sodas would need a private labeling manufacturer to create and label the sodas, so they would likely use this method.
This model isn't necessarily reserved for those who have created their own product, it's just more beneficial and necessary to them. Someone who simply wants to create a brand while selling a product they didn't create can use this method too. It does, however, require a little more capital up front. It's very similar to what is needed for a standard manufacturer with the exception of one thing: you'll have to pay a little more to have the manufacturer put your label on the product.
This is another common method employed by retail store owners, specifically new ones. The reason this one is utilized by new owners so much is because it requires very little capital up front, unlike the choosing of wholesale suppliers or manufacturers. Dropshipping means that a customer purchases a product from you, you then go and purchase that product from a supplier, the supplier then ships the product to the customer. For obvious reasons, it is the most popular with newbies because 1: they don't have to have the capital for everything up front. They can purchase on an as needed basis. 2: They don't have to worry about shipping costs or storage fees. Seems like a match made in heaven, right? Actually, there are several cons to this method.
The downside to using dropshipping is that there are many things left to chance, including the price you'll pay. You may not get the best bang for your buck with this option. You also have no control over the shipping of the product. In fact, it never passes through your hands a single time during this process. Some might not see this as a negative, but it can be one. You never get to examine the product unless you physically visit the suppliers facility. Granted, you should want to visit the facility of any of your potential suppliers and view the products, but the products you view may not necessarily be the ones getting shipped out to your customers at a given time so how would you know if it meets the standards of your business? It's still a representation of you, yet you have to rely on the reputation of the supplier.
Another caveat is that you never manage the inventory, so there's always the chance that the item will be out of stock by the time you try to purchase it. Finally, there's the shipping time to consider as well. You're meant to hope that the supplier will get everything in a timely manner, but again, it's out of your hands at this point. You're at the mercy of the supplier in so many ways that it can seem like it's not even your business. That's why the supplier is effectively your business partner. It is important to choose wisely.
What to look for
Once you have chosen the right type of supplier for your business needs, there are a few things you're going to want to look for in said supplier. Actually, there are a great many things to look for, but these are probably the biggest as they are going to help continue the good quality and rapport of your company or, at the very least, it'll help establish it.
1. Quality of items
2. Quality of support
3. Notable reputation
You're going to want to make sure the supplier's products are up to par with what your business represents. Even though you may not be able to label it as your brand unless you choose the private labeling method, the products are still a representation of you. If a customer is getting poor merchandise from your company, word will spread and you could lose business fast.
Additionally, if the company has a bad reputation and very little support to provide in terms of helping you or the customer, then you do not want to do business with them. If all of your research points to the fact that they are late or unreliable, you don't want to waste your time with them. You want a supplier who can provide all three of these basic tenants of good customer service.
What to avoid
As with what to look for in a company, there are several things to avoid in order to ensure that your company continues to be successful and you don't get scammed.
1. No phone number
2. No address
3. Doesn't accept credit cards or checks
In this day and age, a company who cannot provide you with a reliable way to contact them is not one to be trusted. If they only provide an email, then do not even bother. Who knows if the email inbox is monitored or if it's even real? Regardless of whether or not they have a valid email address, you would still need to contact them in the event of an emergency and you would still probably want to visit their location to view their products and practices first hand. If they bar or deter you from doing any of these things, they probably have something to hide.
Very few suppliers in this industry will prohibit checks or credit cards. Usually, the ones that do are trying to take your money and not provide you with an easy or traceable means of getting it back. You can stop a payment on a check and you can do a charge back on a credit card. Once cash is gone, that's it. Also, checks require identification in order to cash them. It's possible the company wants to avoid this step altogether for various reasons. Any of these signs are a red flag and you'll want to be wary if ever you see a supplier who engages in any of these practices.
There are other factors to work on and consider, such as pricing and shipping, and you'll definitely want to do your research on this one. This is probably one of the biggest decisions you'll make for your company. Take your time and do not rush because the supplier you choose is going to have a huge part to play in the succes, or lack thereof, of your company. It can be daunting and tedious, but the payoff is wotrth it.