Companies can consider themselves lucky to have such mutually beneficial exchanges, but even expediency can't overcome price as the deciding factor in choosing a supplier. Negotiations are a tricky process of parry and thrust that only informed entrepreneurs can win.
Consider trade shows. Many exhibitors won't be appropriate trading partners because minimum order requirements are too high. Once you find suppliers who will sell at low volumes, work begins at setting a fair price. "Ask those vendors what their best price is, don't commit to it, then compare it to four or five others," says Bundy. "Then you'll know what the market price is." Submit a bid at that level, or test your luck and low-ball it. You can always sweeten the offer by paying 5 to 10 percent upfront and the rest c.o.d.
Most suppliers expect to haggle over price, but you should resist the urge to bargain down to the last nickel. A supplier who walks away feeling cheated probably won't be eager for more of your business. "I would not try to play the price war," says Sprong. "You're probably going to lose, and if you don't, it will be a one-time transaction."
When you're ready to buy, order as much as you can afford to warehouse if you're not using a drop-shipper. Suppliers are volume-driven, and they offer a better price when more goods are moving. Try to order 10 percent more than your last order.
In some cases, paying less can be an advantage. "Sometimes I pay too much for something and too little for others," says Carson. Such flexibility helps build trust and positions the business relationship for the long term.
Points also go to companies that avoid burdening a contract with terms such as returns of unsold goods. "That's almost consignment sales," says Bundy. "Suppliers are not looking to take your risk."
Negotiating price with a supplier presents a Catch-22. Suppliers offer their best price to vendors who can make products move, while vendors say they can move more products when they get products cheaper. New companies also face the challenge of reassuring suppliers of their staying power. Stack recommends starting with local suppliers who can judge the legitimacy of your business firsthand, and starting with less pricey items that don't represent a huge risk to the wholesaler. The point is to create a track record. "Today, I have manufacturers approaching me to push their lines who had historically refused to sell to me," Stack says.
Demonstrating the advantage of selling on eBay adds to a company's negotiating strength. "You need to educate suppliers about the power of eBay," says Eric Crawford, a partner and co-founder of Essex Technology Group (eBay User ID: buyessex). "We explain that you can sell anything here."
This Nashville, Tennessee, company has its own way of reassuring suppliers. The company specializes in customer returns, overstock and discounted electronics and sells them on eBay on consignment, which means suppliers don't get paid until the items sell. Essex's proprietary tracking software lets suppliers track the status of each item from the time it leaves the warehouse to the moment the product is sold. "Most companies would be scared to send a truckload of product to any Tom, Dick or Harry," Crawford, 30, says. This way, suppliers can keep a close watch on their goods as well as their buyers.
The more reassurance a company provides, the better the business's long-term health. "Confidence," Crawford says, "is the hardest part of sourcing."
What's Your Worth?
You know your business on eBay is a sourcing success when you have Med1Online's problem. The company's inventory had grown so much, customers needed an easier way to find what they wanted.
Many items in the company's stock of sophisticated medical equipment have the same function, but individual features may vary from unit to unit. And those are the features that Med1Online's savvy customers wanted. Scrolling through a few choices is one thing, but when the options fall into the hundreds, says Scott Carson, president of Med1Online in Arvada, Colorado, "it's a whole 'nother enchilada." Med1Online helps customers navigate this complexity with a listing tool that lets buyers search by individual product features, a utility that adds value to the shopping process and gets customers on and off the site quickly. That, in turn, gets products out the door faster.
Adding value comes down to making things easier for customers. It can be as simple as making sure eBay listings are spelled correctly and pictures are professional looking and large enough for eyes older than 40 to see. Med1Online adds value by fine-tuning the shopping experience. But attention to the process can be applied at any stage, either in the way a business leverages its products or in the quality of service and support after the sale.
Leverage at A City Discount means offering customers a one-stop shop. "We have a broad product line that covers different subcategories of restaurant equipment so customers can outfit a complete restaurant from us," says John Stack, CEO of Peach Trader, the Atlanta company that owns A City Discount. The company also lets customers bundle multiple orders so they pay one shipping rate-a small but still appreciated savings.
Integrity also adds value when buying used equipment. Essex Technology Group-which handles, among other things, auction management, asset recovery and product testing for clients-tests each item to see what works and what doesn't, then shares the findings with buyers online. "We tell customers exactly what is wrong," says Eric Crawford, a partner and co-founder of the Nashville, Tennessee-based company. Even then, faulty products usually find a buyer, because "people will try and fix them themselves," Crawford says, proving the adage that anything can sell on eBay.
Where to Buy
- Closeout dealer directories
- Drop-ship service directories
- Family, friends and colleagues
- Government auctions
- Industry trade shows
- Manufacturer's representatives
- Newspaper and magazine classifieds
- Odd-lot traders
- Online wholesale product directories
- Specialized classified ad newspapers
- Wholesale gift catalogs
Julie Monahan is a writer in Seattle whose articles on small business and emerging technology have appeared in numerous consumer and trade magazines.