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Questions Explored:
- How has 2020 redefined the sourcing process for the entire world?
- How are we going to overcome the 2020 challenges? As a seller how do I make my supplier network work for me - from negotiating costs with a supplier to shortening the turnaround time it takes to get my goods - with 2020 barriers lingering?
- What does a supplier look for in a good relationship with a seller?
- When I work with a new supplier, I have a lot of anxiety. How can trust be established for both the buyer and a supplier from the very beginning?
- How do I know if I’ve outgrown a supplier?
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Twenty-twenty was a helluva year that forced a lot of companies to bring their sourcing online.
As a buyer, you can no longer travel to China, attend trade shows, visit factories, talk with suppliers - do your due diligence, in-person.
Vetting suppliers has gone virtual - right along with trade shows and pretty much everything else in the world that was traditionally in-person.
More and more companies are upgrading their tools and third-party capabilities to provide online sellers, entrepreneurs, and eCommerce merchants access to verified suppliers - without ever leaving the house
Many Buyers’ Behaviors Have Changed as a Result of 2020
As a result, most buyers’ behaviors have also changed.
With China closing its borders to all foreigners, ports being locked down and shipments being limited, sellers and marketplace merchants have gotten comfortable with sourcing remotely, video-buying and other alternatives.
These new methods of sourcing are made even more possible with the right tools.
More and more, buyers have are realizing they need systems in place for sourcing and receiving goods and a profitable timeframe.
What behavior changes experts are saying online sellers need post 2020:
1. Keep your options open when sourcing.
Traditionally, many eCommerce and marketplace merchants relied on that one supplier they’d built a great relationship with. This left most depending on that supplier for everything. The pandemic has changed that altogether.
It’s always a good idea to have a backup supplier for exploring other options just in case something goes wrong.
When you throw new product searches into this mix, quotes from various suppliers is crucial.
- Compare price points: eliminates surprises in raw material costs
- Don’t just have a single info source: for pricing, for info about supply chain
2. Don’t put all of your eggs into a one basket
Think of it like this - A lot of sellers have one key supplier but what if:
- They’re hit with a raw materials price increase
- Suddenly, they’re bombarded with other orders
- Your supplier gets hit with COVID
Now, more than ever, it’s important to always have a backup plan. But do this strategically as well. Example:
Instead of reaching out to 20 suppliers, consider working with a sourcing agent or other partner to narrow your list down to three to five suppliers. And, even if you just go with one, keep in touch with the others. Often, sourcing agents or similar partners have representatives on the ground in China (and other sourcing countries) to represent your needs.
3. Don’t rely on luck, rely on a system
When sourcing out new suppliers, it’s become more important than ever to rely on your own established system to make sure that you get the desired results you’re looking for in the relationship. Here’s a checklist of what should be incorporated into your system:
- Have a standard for verifying the supplier’s credibility
- Have a standard for verifying the supplier’s legitimacy
- A process for sampling the goods
- Purchase order negotiations
If you aren’t sure how to implement these processes, seek professional assistance to create a solid system. Doing so will alleviate anxiety in the sourcing process and inevitably lead to results.
Keep in mind: If any steps in your system are missing, you’re going to encounter mistakes - which leads to losing money. Once you get a system in place, follow it religiously to produce the results you’re after.
PRO TIP
“It’s always good to have information sources from multiple suppliers. This way you can know you’re getting into a relationship with a sense of information for properly preparing and planning out procurement,” says Brett Ducker, Alibaba’s Key Accounts Director
With Crisis Comes Opportunity
For eCommerce, COVID-19 was like a growth serum was shot into the arm of Amazon. The marketplace experienced years of growth in just months. Amazon quite literally couldn’t keep up.
So the company adapted by installing IPI indexes and restricting inventory to only 200 units - to name a couple major changes they implemented.
Amazon is still feeling the impact of the pandemic today, as are many other marketplaces.
What the experts are saying sellers need to be successful amidst this chaos: Agility is a need for speed.
No matter if you’re a one-man or one-woman show, or a multi-national company with sourcing offices all over the world, a single word comes to mind: Agility
Suddenly, we can all relate to Tom Cruise’s character in TopGun more than ever.
There is a major need for speed.
Ecommerce is still booming, but all these other factors are still happening. These obstacles are coming at online sellers and eCommerce merchants all at once.
PRO TIP
“The faster you can react to raw materials costs, logistical problems like shipping, price increases, warehousing, working with 3PL, the more likely you are to succeed,” say 80/20 sourcing and 7-Figure Seller Summit founder, Gary Wang.
Negotiating with Suppliers
Building relationships with your suppliers includes a combination of hard numbers and soft skills.
While costs and logistics play a major factor, so does culture and ultimately, cultural differences.
The Chinese, for example, have a concept referred to as gwenshi. Gwenshi is about relationships made up of time, trust, trustworthiness, and the concept of face - building and losing face.
Don’t do This
No-nos: don’t just ask what’s you moq, what’s the lowest price - that’s a turnoff. Suppliers are being bombarded with dozens if not hundreds of requests every day. This will help you stand out
Something else that will help you build a relationship:
Paying on time. Don’t be late with the payment. If you promised to pay them by x date DON’T BE LATE WITH THE PAYMENT
If you don’t pay them, that’s the biggest nightmare because:
- They’re not getting their money
- They can’t pay their raw materials supplier
- They can’t pay their workers
Instead, do This
Strike when the iron is hot
Sellers tend to take a long time to decide. Experts say that if you really want to form a good relationship with your suppliers - strike when the iron is hot. Especially if you’ve initiated the conversation/request - make decisions as fast as possible and you’ll get the maximum benefit.
Be flexible
Instead of trying to negotiate the best price, consider the entire picture when it comes to procurement costs. Consider packing and turnaround time also. Quality makes a huge difference.
When you negotiate with a supplier do not try to squeeze the last cent. Leave some room. Instead of asking solely about price, know and ask about what else you’re getting: packaging and delivery time
Respect Each Other
Suppliers and buyers are almost always culturally different. They understand things differently. From a supplier’s perspective, understanding certain things can really make the entire buyer/supplier relationship so much better. Keep your temper in check, and learn to accommodate the cultural differences.
Be smart. Utilize those cultural differences to your advantage. In Chinese culture, friendship and long term relationships - especially during hardships - are highly revered.
Share Information About Yourself
Let your suppliers know more about your business to make a meaningful connection. Discuss what you’re doing with your product in the US market and what category your company covers so they can’t paint a picture of you as a human, a brand, a business owner.
It also doesn hurt to provide suppliers with order forecasts. For example, an annual forecast of X is anticipated after initial sample, evaluation and trial is completed. Don’t just talk about the MLQ.
The overall best tip when working with and negotiating with suppliers? Look at the big picture:
PRO TIP
“Freight, duties and GST are also a part of sourcing. Remember, there is more to sourcing than product costs. Approach suppliers with a plan, but be open to their feedback and rely on multiple sources of information,” says Lindy Chen, Founder of China Direct Sourcing.
Conclusion
This is a good starting place for sourcing post 2020 with the obstacles and changes that have landed in sellers’ and eCommerce merchants’ laps, as well as the eCommerce industry as a whole after the initial impacts of COVID-19.
Come back to these tips for innovation and approach to sourcing, and use this parting checklist to gauge how you’re doing:
- Explore the market
- Use an RFQ tool to compare up to 10 suppliers’ information
- Always compare prices
- But also compare capabilities
- Gauge how the sales rep responds and works with you
Most people focus just on the price to compare suppliers - but beyond that, you want to work with someone that you can have a relationship with.
Be good to your suppliers. It doesn’t get you anywhere to demand things of them. Be a good buyer to them, and they’ll be a good supplier to you.
If you’re focused on cost only, you might get stuck with a supplier that you don’t like talking to or working with. It’s important to balance all of the factors when looking for a supplier
Be fair.
Be professional.
Be consistent.
The relationship can and should be mutually beneficial
Pro Tip:
“View your supplier relationship as a partnership. ONce you change this perspective, the results will be amazing,” says Lindy Whoever of China Direct Sourcing.