Getting Reliable suppliers for your e-commerce venture

Gargi Banerjee

E-commerce is a sunrise sector for entrepreneurship in India, and with good reason. Internet and mobile penetration and usage is growing, and more and more Indians, especially younger Indians, are viewing the Web as the preferred marketplace.

But if you’re planning to launch a venture in the e-commerce space, there’s something you need to know right away – that finding the right supplier could make or break your business. Here are some useful tips.

Recognise the right supplier

You need to recognise the dynamics of the product category you are in and where you feature in the supply chain. Some product categories allow you to directly purchase from the manufacturer while for others, it is best to depend on a national or regional wholesaler or distributor. Broadly, suppliers can be divided in four categories.

Manufacturer: As an entrepreneur, you’re always looking for the person who can offer you the best deal. If you’re buying directly from the manufacturer of the product, prices will be the lowest unless shipping is exorbitant.

Wholesaler: This is the guy who is in touch with several manufacturers and buys their products in bulk. Although his prices may be a little higher than those of the manufacturer, he might be the best bet for a retailer as he is equipped to supply retailers small quantities of products from a variety of manufacturers.

Independent creators: When you’re products require careful selection and a touch of creativity, such as apparel or jewellery, visit trade shows and network with them at fashion industry events. This is a good way to get them on board. Unique creations by these independent craftspeople are appreciated by customers.

The import source: If your product category is not available in India, you have to forge ties with international vendors.  This may not be possible in the very beginning but you can begin by tying up with a supplier who is familiar with the overseas market, travels abroad frequently, and who can supply you your product at good prices.

But, as mentioned earlier, you have to first figure out where you feature in the value chain. Let’s face it, as a start-up, you cannot expect that all suppliers will be prepared to work with you from day one. While some may ask for a deposit, others may not even entertain you! Instead of getting disappointed, find a plausible solution. K Vaitheeswaran, CEO and founder of www.indiaplaza.com, who is often referred to as the ‘father of e-commerce in India’, suggests that you start small at the very end of the value chain.

He offers an example of a product category when Indiaplaza.com made its debut in 1999. When the portal started offering books, they began by buying books from retailers at no credit. As the business grew, they began purchasing books from distributors first, with some credit and then took it a notch higher.

Over time, as Indiaplaza became a brand, they were in a position to buy books directly from publishers. Vaitheeswaran, however, has one bit of advice to budding entrepreneurs, “Don’t negotiate on costs; negotiate on service levels.” You simply cannot have a supplier who does not deliver the promised number of goods on time and in good shape because that will affect your customer experience. You simply cannot afford to make compromises in this area.

Monitor quality control

Most entrepreneurs focus only on the price factor when they are looking for suppliers, but that is not the only factor you should take into account. Entrepreneurs who are making a mark in e-commerce stress that market research is of utmost importance when you’re scouting for suppliers. Having a database of wholesalers is not enough. Carrying out due diligence is a must. Stability of a supplier is key to the success of your venture.

Rashi Choudhary, co-founder of www.localbanya.com, a Mumbai-based online grocery mart, says, “Before finalising on our suppliers, we check their track record and consistency in supplying goods. We need to make sure their facilities are up to the mark.”  Choudhary also states that technology has become a great enabler in the e-commerce business and is the driving force behind effective supply management.

Handle erratic suppliers

Despite checks and balances, there are always times when supply management doesn’t go as planned in the e-commerce business. For instance, what would you do if a reliable supplier suddenly increases costs or is erratic? The answer is simple: do not allow that to happen in the first place. The way to do that is splitting your orders among two smaller suppliers. Choudhary explains, “We avoid becoming too reliant on a single vendor/supplier. So we have multiple vendors for most of our products. Being a consumer-driven business, our decisions, when it comes to supplier demands, are also taken keeping in mind the importance of the products to our customers.”

You may not enjoy the confidence of regional- or national-level suppliers right away, but if you are a large customer of a small supplier, he will make sure you get the best service. Finally, bear in mind that business dynamics change and there is no rule that says you have to be stuck with the same suppliers forever. If your supplier starts shipping incomplete orders, damaged items or simply keeps slipping up on timelines, you know it is time to sever ties with him. Similarly, on the cost front, if you find that rival suppliers are offering better deals on similar products, you need to have a chat with your own supplier. If he cannot justify his pricing, you know it’s time to move on.

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