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September 8, 2020
5 min read
A supplier is a person or organization that provides a company with products or services that it needs. Suppliers can be used by a variety of businesses as a resource for products or services to help them function.
But suppliers are most commonly found in the retail industry. Retailers purchase goods from suppliers which they intend to sell on to customers.
Unsurprisingly, given the scale and variety of the retail industry, suppliers come in different shapes and sizes.
You might hear the word ‘vendor’ being used interchangeably with the word ‘supplier’. It makes sense: both provide goods at a cost.
But there is a distinction to be made between vendors and suppliers.
A vendor provides goods to individual customers. They can be any size – anything from a small shopkeeper to a giant marketplace is considered a vendor.
Meanwhile, a supplier provides goods to vendors. They sell items that will then be sold on.
Depending on the scale of a retail business, they could need anything from one to several hundred suppliers.
When a retailer is established, suppliers will often reach out and ask for business. If you’re just starting out, though, you’ll have to build your own supply chain.
Suppliers can be found at trade fairs, by word of mouth, or through online research.
Here are the types of suppliers you’re likely to come across when running your eCommerce business.
Retailers will often purchase goods directly from factories. They’ll be guaranteed low, negotiable prices and exclusivity or raw material customizability.
Manufacturers will be represented by salespeople within their organization, or by agents who are often acting for a handful of local factories.
Also known as distributors, this type of supplier will buy large quantities of goods from manufacturers and sell the goods on to retailers.
A wholesale supplier may add a markup to the products they sell, so they aren’t generally the cheapest option. Retailers may benefit from this option if they’re keen to purchase smaller quantities.
It’s always exciting to be able to sell something that’s been handmade and is exclusive to your business. Retailers can use artisans and craftspeople as suppliers if it fits their business needs.
Artisans often work to very small quantities, so you might struggle to define supplier terms and negotiate prices. But using this source is a great way of adding context to your product offer.
Much like a wholesaler, this kind of supplier will obtain goods from a manufacturer, but they’ll have a more complex business operation.
Here, the supplier will pay to either export their goods to another country or buy goods overseas and import them into their country.
A company should be discerning about who to add to their supply chain. A bad supplier will end up costing your business money in more ways than one.
As part of your supply chain management, you should internally review suppliers one or two times a year to ensure you’re still working with the right people.
There’s a lot you can expect from your suppliers.
It sounds obvious, but in reality, the relationship with a supplier may become strained. Good supplier relationship management is vital.
Depending on the size of a retailer, suppliers could have several different touchpoints within the business, from buyers to technicians, planners, and designers.
Suppliers, therefore, need to be versatile and open to probing questions. After all, a supplier is responsible for a lot.
Supplier relationships can go sour if you struggle to negotiate terms, pricing, or services. You should both have each other’s company interests at heart.
It’s helpful to know a selection of different suppliers for the same type of product.
Unless your organization is huge, you’ll probably only need to engage one or two at a time. But it pays to be able to shop around for the best prices.
Retailers will usually ask a few different suppliers to provide cost prices or quotes for new products that they are planning to buy. You’ll want to make cost savings, after all.
A supplier should always be willing to help the company by adjusting prices, volumes, terms, and raw materials in order to finalize the product selection.
Now for the serious stuff.
Every country has different laws and regulations, and your suppliers must be able to comply with those relevant to where your business is located.
Depending on raw materials, end products, and target customers, a supplier needs to ensure their goods meet all of the testing requirements.
As a retailer, you’ll be responsible for providing customers with safe, well-made products – sometimes that takes more work than it looks.
If a supplier isn’t willing to work with a retailer on ensuring compliance, they are definitely not worth working with.
You want to ensure you’re working with suppliers who share your values.
While it may not seem likely, it is completely possible to source products from ethical factories who treat their workers well and pay them fairly too.
Retailers should have a set of guidelines for their supply base to agree to. Most suppliers will expect this – if you’re working with artisans, you don’t need to make it complicated.
Larger businesses will usually have a corporate social responsibility manager whose job is to inspect factories.
If you are a smaller retailer purchasing from a manufacturer, chances are you can check a larger retailer’s test report to make sure you’re happy with the standards.