• Advertise
  • Contact Us
  • About Us
  • Supplier Directory
  • SCB YouTube
  • Login
  • Subscribe
  • Logout
  • My Profile
  • LOGISTICS
    • Air Cargo
    • All Logistics
    • Express/Small Shipments
    • Facility Location Planning
    • Freight Forwarding/Customs Brokerage
    • Global Gateways
    • Global Logistics
    • Last Mile Delivery
    • Logistics Outsourcing
    • LTL/Truckload Services
    • Ocean Transportation
    • Rail & Intermodal
    • Reverse Logistics
    • Service Parts Management
    • Transportation & Distribution
  • TECHNOLOGY
    • All Technology
    • Artificial Intelligence
    • Cloud & On-Demand Systems
    • Data Management (Big Data/IoT/Blockchain)
    • ERP & Enterprise Systems
    • Forecasting & Demand Planning
    • Global Trade Management
    • Inventory Planning/ Optimization
    • Product Lifecycle Management
    • Sales & Operations Planning
    • SC Finance & Revenue Management
    • SC Planning & Optimization
    • Sourcing/Procurement/SRM
    • Supply Chain Visibility
    • Transportation Management
  • GENERAL SCM
    • Business Strategy Alignment
    • Education & Professional Development
    • Global Supply Chain Management
    • Global Trade & Economics
    • HR & Labor Management
    • Quality & Metrics
    • Regulation & Compliance
    • SC Security & Risk Mgmt
    • Supply Chains in Crisis
    • Sustainability & Corporate Social Responsibility
  • WAREHOUSING
    • All Warehouse Services
    • Conveyors & Sortation
    • Lift Trucks & AGVs
    • Order Fulfillment
    • Packaging
    • RFID, Barcode, Mobility & Voice
    • Robotics
    • Warehouse Management Systems
  • INDUSTRIES
    • Aerospace & Defense
    • Apparel
    • Automotive
    • Chemicals & Energy
    • Consumer Packaged Goods
    • E-Commerce/Omni-Channel
    • Food & Beverage
    • Healthcare
    • High-Tech/Electronics
    • Industrial Manufacturing
    • Pharmaceutical/Biotech
    • Retail
  • THINK TANK
  • WEBINARS
    • On-Demand Webinars
    • Upcoming Webinars
    • Webinar Library
  • PODCASTS
  • VIDEOS
  • WHITEPAPERS
Home » Blogs » Think Tank » How to Vet Suppliers for Your E-Commerce Business in Nine Steps

Think Tank
Think Tank RSS FeedRSS

How to Vet Suppliers for Your E-Commerce Business in Nine Steps

The Amazon Shopping app is displayed on a smartphone.
The Amazon Shopping app is displayed on a smartphone. Photo: Sagar Soneji/ Pexels.
March 1, 2022
Othmane Sghir, SupplyChainBrain Contributor

Let’s face it — the supply chain situation is a mess. One thing small e-tailers can do to alleviate stress is to work with trustworthy suppliers. 

Dependable, efficient suppliers have a significant impact on profit. It’s not difficult to find them, but you have to know where to look. Here’s a breakdown of various types of suppliers, their pros and cons, and how to choose the right ones for your business.

There are three major types of retail suppliers: wholesale suppliers, dropship suppliers and manufacturers. 

Wholesalers

A wholesaler typically buys goods from a manufacturer and resells them to a retailer. For the wholesaler to profit, it must provide expertise and services not available to the manufacturer or retail buyer.

Typical wholesalers operate one or more storage facilities where they hold goods purchased from manufacturers. As retail customers need to replenish inventories, the wholesaler ships them either to the retailer's warehouse or directly to stores. They offer several more advantages:

  • Bulk quantity pricing. Buying in bulk can cut costs because you are only paying one middleman rather than going directly to each manufacturer for purchasing.
  • Product variety. Another benefit of using wholesale suppliers is that you can receive a wide range of products from just one source. Locating multiple products from one supplier is helpful when you’re searching for specific products and don't want to go through several manufacturers.

There are downsides to working with wholesalers, too. Price of entry is the primary disadvantage. You may need to purchase thousands or tens of thousands of products at a time. Another disadvantage is the storage costs. You’ll need to pay for warehouse space, insurance and frequent inventory management to keep your products organized. 

Dropshippers

Dropship suppliers are similar to wholesale companies in how they operate. But instead of having the middleman role, you list their products on an e-commerce platform like Amazon.com, and they ship directly from their own storage facility. You don’t have to manage the inventory, which is a perk. Other advantages include:

  • No storage cost. Dropship suppliers do not require you to spend any of your budget on storage or warehousing costs. You simply receive orders online, and your supplier ships directly from their warehouse to your customers. Not paying storage and warehousing costs can be a great advantage for small businesses that don't have the resources to store large inventory quantities.
  • No inventory on hand. Another advantage of dropship suppliers is that you don't have to keep any inventory on hand. Not needing inventory space can be a great way to reduce your costs but also save you from the logistical nightmare of shipping.
  • Product variety. Since you sell products that the supplier has on hand, you have access to many products and can source them from several suppliers. You never have to put a deposit on a box of items and sell them individually.

There are a few negatives of using dropship suppliers. Mainly, the process involves an intermediary and you have no control over out-of-stock merchandise. In general, you have no control over out-of-stock merchandise. Additionally, dropship suppliers typically charge more for each product than if you were to buy in bulk.

Manufacturers

Manufacturing companies sell products directly to retailers or other resellers, who then distribute those products in store or online. They generally work with established brands over individual sellers, and provide a more personalized customer service experience.

Although buying directly from a manufacturer is probably the most expensive option, there are several reasons why working with one is a wise decision:

  • Bulk pricing. The advantage to working with manufacturers is that they give you the lowest prices on bulk quantities of products because there are no middlemen involved. Thus, you can save money to meet the high initial order fulfillment quantity.
  • Customized products. Manufacturers can provide customized or personalized products. Knowing a supplier that can build customized products is excellent for businesses that focus on unique selling propositions.

Manufacturers are incredibly selective about who they sell to and don’t work with new buyers often. They have large scale order requirements and want large brands who can buy in bulk. Additionally, you will have to invest more money upfront before your business starts making sales. 

Four Criteria for Sourcing 

To start, you will want to dialog with your supplier before purchasing to ensure that you’re working with a trustworthy source.

  • Seek flexibility. You will want to work with suppliers who are able and willing to source new items when needed, so you'll always have a large variety of products to choose from.

The supplier should quickly source new items so your business can grow and have the right inventory at the right time — especially when selling on a fast-moving platform like Amazon.

  • Minimize cost of goods sold. The supplier should give you great prices for bulk quantities of goods. By locating a supplier with fair prices, your business can grow without spending more money on inventory than necessary.

Your goal is to create a profitable retail business at the end of the day. Therefore, your cost of goods should remain low so that you have the opportunity to make more profit.

  • Evaluate quality. Next, you need to vet the supplier and make sure they have a good reputation within their industry.

Ask how long they've been in business and how many orders they typically fulfill on an annual basis. More established suppliers will handle larger order quantities.

  • Stay local. In the current crisis, it’s becoming crucial to find domestic suppliers that can scale with your company as it grows.

Five Questions to Ask

  • How fast are shipments?

Some distributors can take up to two weeks or even a month to ship your product. Long delivery times are not ideal if you are selling on Amazon and need a continuous inventory flow. Make sure that the distributor offers quick shipment times.

  • What’s your shipping process?

Ensure that their packaging system can protect your products during transit and pass through all customs checkpoints without any issues. Also, the tracking number should be available for every shipment so that you can track its journey.

  • How do you handle missing inventory?

In addition to costs, lost packages affect the speed of delivery to your customers. Some distributors only allow for one free loss per order, while others may charge you or may not have any insurance at all. Make sure you are fully aware of the distributor’s policies before signing up with them.

  • What’s your return policy?

Return policy is also important to consider when choosing a distributor. Returns can be a headache if the return policy is less than fair. Ensure that you can get your money back for returned products within 30 to 60 days maximum and that you do not have to pay any additional charges or restocking fees.

  • Can you provide references?

Finally, always ask for references from past customers. Ask them about product quality, speed of delivery and the quality of their customer service team. Having this information will give you a much better idea about distributor reliability.

If you take the time to vet each supplier and ask them the right questions, the selection process will be much more manageable. By following these tips, you'll be on your way to finding quality and trustworthy suppliers for your e-commerce business.

Othmane Sghir is co-founder and CEO of DataHawk.

Sourcing/Procurement/SRM E-Commerce/Omni-Channel Retail

RELATED CONTENT

RELATED VIDEOS

Subscribe to our Daily Newsletter!

Timely, incisive articles delivered directly to your inbox.

Popular Stories

  • A HAND TURNS A LARGE, LIGHTED DIAL WITH THE WORD RISK ON IT iStock-NicoElNino-1364371014.jpg

    Measuring KPIs and KRIs for Comprehensive Supplier Performance Management

    Technology
  • A COMPLEX SERIES OF ROADWAYS AND RAMPS, SEEN FROM HIGH ABOVE, IS PARTLY SHROUDED BY CLOUD

    Supply Chain Visibility Isn’t Just a Catchphrase; It’s an Imperative

    Logistics
  • A WOMAN IN HER LIVING ROOM GESTURES IN DISMAY ON THE PHONE OVER AN OPEN SHIPPING BOX

    Retailers – Quit Bellyaching and Differentiate Yourself on Returns

    Reverse Logistics
  • A Mid Adult Male Truck Driver Doing Exercises Before Road Trip by the side of a truck

    Podcast | Yoga for Truck Drivers? It’s a Mother Trucker!

    LTL/Truckload Services
  • A STORE WINDOW DISPLAYS AN ARRAY OF DESIGNER PURSES

    Can AI Turn the Tide Against Product Counterfeiters?

    Sourcing/Procurement/SRM

Digital Edition

Scb q1 2023 cover

2023 Supply Chain Management Resource Guide: Packing for a Difficult Year

VIEW THE LATEST ISSUE

Case Studies

  • New Revenue for Cloud-Based TMS that Embeds Orderful’s Modern EDI Platform

  • Convenience Store Client Maximizes Profit and Improves Customer Service

  • A Digitally Native Footwear Brand Finds Rapid Fulfillment

  • Expanding Apparel Brand Scales Seamlessly with E-Commerce Technology

  • How a Global LSP Scaled its Security Program and Won More Business

Visit Our Sponsors

Orderful Yang Ming Alithya
Barcoding Blue Yonder BNSF Logistics
CoEnterprise Data Capture Deposco
E2open GAINSystems Generix
Geodis GEP GreyOrange
Here Honeywell Intelligrated IFM
Infor Inmar Keelvar
Kinaxis Korber Lean Solutions Group 2H
Liberty SBF Locus Robotics Logility
LogistiVIEW Lucas Systems MCA Connect
MPO Nvidia Old Dominion
OpenText ORTEC Overhaul
Parsyl PMMI QIMA
Redwood Logistics Ryder E-commerce by Whiplash Saddle Creek Logistics
Schneider Dedicated Setlog Holding AG Ship4WD
Shipwell Tecsys TGW Systems
Thomson Reuters Tive Trailer Bridge
Vecna Robotics Verity
Verusen
  • More From SCB
    • Featured Content
    • Video Library
    • Think Tank Blog
    • SupplyChainBrain Podcast
    • Whitepapers
    • On-Demand Webinars
    • Upcoming Webinars
  • Digital Offerings
    • Digital Issue
    • Subscribe
    • Manage Your Subscription
    • Newsletters
  • Resources
    • Events Calendar
    • SCB's Great Supply Chain Partners
    • Supplier Directory
    • Case Study Showcase
    • Supply Chain Innovation Awards
    • 100 Great Partners Form
  • SCB Corporate
    • Advertise on SCB.COM
    • About Us
    • Privacy Policy
    • Contact Us
    • Data Sharing Opt-Out

All content copyright ©2023 Keller International Publishing Corp All rights reserved. No reproduction, transmission or display is permitted without the written permissions of Keller International Publishing Corp

Design, CMS, Hosting & Web Development :: ePublishing