5 Steps You Must Follow When Selecting Vendors for Your Store
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Vendors or suppliers are one of the most important part of a successful venture be it online or offline. If the products that you are selling through your shop or e-shop are of good quality and procured at the right prices, you have a higher probability of making a profit and creating a loyal customer base than you do otherwise. Delivering this customer delight and earning profits is possible only when you have the right vendor.
I had a first-hand experience of selecting vendors for our recently launched e-shop - it’spleaZure. To ensure that we had the best on-board, we undertook an extensive exercise to shortlist and finally select the vendors.
This entire process made me realize that it’s not a simple process and neither one that should be taken lightly. Choosing the right vendor requires strategic thinking as your choice of vendor influences multiple aspects of your business – return on investment, quality of product or services and reliability.
Here’s the process that we followed while selecting our vendors and hope that others – especially first-time entrepreneurs like me, will benefit from it.
1. Analysing Your Requirements: Before you select a vendor or even start the selection process, take a step back, define and document your technical and business requirements in detail. This business or tech requirements document should also include the deliverables that you want from your vendor, your service needs/frequency, contract duration, min-max rates that you can pay your vendors, service appraisal slabs, etc.
2. Shortlist Vendors: After getting a clear idea of your business needs, you should conduct extensive research to identify potential vendors, and basis this research, shortlist 10 – 20 vendors that meet your requirements. While shortlisting the vendors, try to answers these questions:
- How old is the vendor’s organization/establishment?
- Do they have capacity (man power) to take care of your requirements as business grows? (Assess their capability in terms of your requirements and required delivery timelines)
- Do you know anyone who has availed their services and can provide recommendations for them?
- Are they on any approved supplier lists from trade associations or government? If applicable.
- Do they also work or have worked with your competition or others in the same industry?
If you are trying to find service vendors (courier, warehousing, packaging, data storage, website management, etc.) for a niche sector like the adult products industry, you must try to find out if the people in the vendor’s organization are comfortable with working on these products and services.
If even 1-2 people with whom you or your team needs to interact with on a regular basis are not comfortable with the product or industry, then it will hamper your work and productivity. To ensure smooth functioning, you can even request to meet some of the employees who are going to work on your account.
3. Meeting the Vendors: This is the most critical step and an opportunity to separate the right business fit from the not exactly what we’re looking for candidates. So, when meeting potential vendors, discuss the following points in detail to ensure that they are the right fit for your business.
Quality – The quality of service/product is very important for any business. So, ensure that only those vendors known for quality are being considered. I cannot reiterate enough, the role of quality products from a quality vendor plays in building your brand in the market and creating customer trust. Get a QA conducted for the product or service before you make a decision.
Service – Along with quality products/service, the vendor’s capability to deliver the product or service should also be considered and checked to ensure smooth functioning of your business activities. Before signing on the vendor, you must ensure that he is comfortable with the quantity you require, the frequency of delivery and the timelines.
Price – The cost at which you procure the service/product also impacts your final offer price and the bottom-line of your company. But, when making the decision, along with industry norms, you must keep in mind that while the lowest price may not be the best, at times even a high price does not ensure quality or provide best value for money. So, before setting a price, conduct a cost value analysis for the product or service.
Credit Period – Discuss the credit period that the vendor offers, and find out if they allow any flexibility in the payment terms and conditions. Also check with them on how they require the payments to be made and if any interest or fine is charged on delayed payment, due to unavoidable reasons, of course.
Synergies – You and your vendor must be in agreement on how your brand is/must be viewed in the market. The vendors must be able to adhere to your brand guidelines and support the image that you are building for your brand.
Performance Monitoring – While discussing all the above points with your vendor, you must also decide how, when, and in what frequency their performance will be monitored. This is also the time to discuss and put forth your requirements of reports/updates and the formats that they are to be sent in. Although, micromanagement may not be a good idea for both you or your vendor, you do need to set basic guidelines to ensure smooth functioning.
4. Comparison of Vendors - After you have met and had detailed discussions with potential vendors, do a comparison study of the vendors that you feel will be a good business fit. Compare them on all the discussion points mentioned in the above point — list all the points in order of your priority and assess your shortlisted vendors against this list. This comparison will help you choose and select the vendor most suitable to your business needs.
5. Negotiate Terms and Conditions: Once you’ve zeroed in on the vendor(s) that you’d like to work with, meet with them to negotiate terms and conditions of the contract and to ascertain that you and your vendor are in agreement on all the critical aspects.
A good vendor can help you create a good name for your brand and service in the market, whereas a bad and unreliable vendor can have a negative impact on the brand and its positioning in the market. So, you must conduct through research before signing on the dotted line.