Customisable business insurance
The world of ecommerce is a modern, fast-paced and dynamic sector in which to set up a business. Each year, more and more online retail businesses are established right here in the UK, with 24,000 new ecommerce enterprises set up in 2021 alone.
If you are in the process of establishing your ecommerce business, then finding the right supplier for your products is one of the most important steps in getting your business off the ground.
Let’s explore some of the key things to consider when picking a supplier.
Are suppliers the same as manufacturers?
Often, the term ‘supplier’ is used interchangeably with ‘manufacturer’ when people talk about ecommerce, though in reality there are certain subtle differences. Manufacturers, as the name suggests, manufacture products from scratch, either of their own design, or to your specifications. Suppliers encompass:
- Distributors – an intermediary that works in close conjunction with manufacturers to bring their products to market
- Wholesalers – work closely with retailers to satisfy their demand for products by buying in bulk from manufacturers, often via distributors
In simple terms, from the perspective of an ecommerce business, manufacturers, distributors and wholesalers are all forms of supplier, with each holding an important position in the supply chain.
Domestic vs overseas suppliers
One of the big questions you’ll need to answer as you set up an online retail business is whether or not to source a supplier for your products from the domestic or international market? In short, do you get your stock from your own country or look overseas?
The issue can be quite complex, with many factors to consider, but when boiled down to the most simple analysis, the distinction between domestic and suppliers comes down to a trade-off of price versus reliability.
Domestic UK suppliers
- High levels of payment security and intellectual property protection
- Right of recourse against suppliers in UK courts
- High level of manufacturing quality
- No language barrier to impede communication
- Quicker shipping and less opportunity for unexpected shipping delays
- Access to a smaller range of products than the international market
- Potentially noticeably higher manufacturing costs due to minimum labour costs
- A larger pool of potential suppliers to choose from
- Potentially significantly lower manufacturing costs
- Time zone and language barriers can make communication difficult
- Possibility of lower manufacturing and product quality
- Potential additional costs and delays in clearing UK customs
- Longer shipping time
- Difficulty in securing right of recourse against suppliers outside the UK and EU and often limited IP protection
Ask the right questions
When it comes to engaging potential suppliers in conversation about working together, it’s crucial that you ask the right questions to get the insight you need to make an informed decision, as well as present yourself as knowledgeable and engaged to your potential suppliers.
So what kinds of questions would be right to ask a manufacturer, distributor or wholesaler when you start to talk about business?
Is the product available and how much stock do you have?
This is one of the most fundamental questions to ask of any potential supplier. You need to be reassured that your supplier has the right products for your business in stock, so that you will not be left short of supply. You can also ask how much stock the supplier holds of a particular product, and compare this to your expected level of sales.
What is your minimum order quantity?
Many suppliers, especially wholesalers, will enforce minimum order quantities, meaning you will be bound into purchasing a set amount of a product from the supplier. You should ensure that your projected sales will match or surpass the suppliers minimum order quantity.
As your ecommerce business grows and your relationship with your supplier matures, you will be in a position to negotiate minimum order quantities to more closely align with your expected sales projections. As you negotiate larger minimum order quantities, you can expect to be able to negotiate some form of discount in the wholesale price of the products.
How quickly can you process a purchase order?
This is particularly important for overseas suppliers. You need to know the turnaround time for a purchase order so you can keep your flow of stock at a manageable rate.
Can I speak to someone during business hours in my time zone?
Again, for overseas suppliers, issues such as language barriers and time zone differences can cause issues. You should check that your supplier has staff on hand who can speak your language (if you can’t speak theirs). Especially for suppliers in South East Asia, with significant time zone differences to the UK, you should get some confirmation that their phones will be manned during UK business hours in case you need to make contact.
Get quotes and samples
As you weigh up which supplier or suppliers to choose, it’s standard practice to get a range of quotes to allow you yourself to compare and contrast different options before making a decision. Three to five quotes is a manageable amount and gives you enough of a spread of choice to pick the right option.
Inspecting product samples
Physically inspecting samples of a supplier’s product is vitally important as a step in selecting which businesses to order your stock from. Any reputable supplier, either in the UK or based overseas, should be happy to send you sample products to inspect yourself and determine the quality of the product.
As you inspect the samples, make a quick inspection report and date it so you have a record of when the inspection took place. You should then keep the product as a ‘control sample’, which acts as a record of the quality of the product as it was sent to you, in case you encounter complaints about product quality from customers in the future.
Consider local retailers without an online presence
While many ecommerce businesses source their stock from large overseas wholesalers, you don’t always have to go big when finding your supplier. Consider looking in your local area for retail businesses that do not have an online presence, and engage them in discussions about selling their products via your ecommerce store.
Examples of local businesses you could partner with include:
- Home crafters
- Designers and artists
- Artisanal food producers
- Antiques stores
This kind of relationship between online retailers and local businesses usually works best at a smaller scale, selling small volumes of sought-after, higher quality products.
Always source back-up suppliers
A final consideration for aspiring online retailers concerns how to ensure your supply of stock continues in the event that your wholesaler or manufacturer experiences delays, downtime or goes out of business.
Having a back-up supplier in place is critical to ensuring that you can continue to fulfil back orders during periods of disruption, such as the worldwide supply chain delays caused by the blockage of the Suez Canal by the ship, Ever Given, back in 2021.
During your vetting of potential suppliers, it is wise to have a domestic supplier that you are confident can fulfil your orders, even if you are planning on using a cheaper overseas supplier in the main. That way, if your primary supplier experiences disruption, you can rely on your domestic back-up to continue shipping stock, even if the cost will be higher temporarily.
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This content has been created for general information purposes and should not be taken as formal advice. Read our full disclaimer.
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