Are you ready to build supplier relationships so that you can obtain the products you want to sell through your online store?
By now, you should have already read Step 1: Choosing a Product Niche and Step 2: Choosing a Fulfillment Strategy. If you haven’t, be sure to check them out to understand those key steps in building your eCommerce business. Once you’ve read both, you’ll be in a position where you know your product niche and have decided on a fulfillment strategy.
Building a thriving eCommerce business is a tedious task and requires a lot of hard work in the first 6 to 12 months as it gains traction and you get all of the systems and processes in place. In this column, we’re going to discuss the types of suppliers you may choose to work with. Then, we’ll discuss how you can research, select, and contact suppliers with efficiency resulting in authorized resell agreements.
I have been building supplier relationships with reputable brands for over 6 years and I want to share my best practices so you don’t have to endure the struggles that I did with my first eCommerce company. So, let’s get into it.
Who Are the Suppliers?
In any retail chain, there are two main types of suppliers that you may work with as an eCommerce business owner.
A manufacturer is a business that actually makes the product and brand that is being sold to the public through their own set of retailers. Manufacturers have their own facilities specialized for making the product and storing it before it is shipped out to their network of retailers. Manufacturers specialize in designing the product and bringing it to fruition so that retailers can market it to consumers around the world.
Here are some examples of manufacturers…Fisher Price, Hamilton Beach, Hasbro, Nike, Under Armour, Nalgene, Dell, Audio Technica. The list can go on forever. Just look around your house at miscellaneous items and you’ll see the brand/manufacturer somewhere on it. These are the people making the products.
There are thousands of manufacturers located around the world that produce their own goods, create brands for their products, and then sell directly to retailers who will market the product to the end consumer.
In particular situations, manufacturers and their brands become so popular with consumers that they begin to only accept large opening orders called a minimum purchase order. The minimum purchase order varies dependent upon the size of the manufacturer, but some of the largest may have minimums as high as $100,000.
Once manufacturers reach this level of popularity, they tend to begin working with the 2nd type of supplier: distributors.
The distributor is a middle-man between manufacturers and retailers. Distributors don’t make their own products nor do they sell directly to the end consumer. Distributors identify top-selling products and brands that they want to sell to their network of retailers then they purchase the products in bulk directly from the manufacturer. The distributor stores the inventory at their own warehouse and then sells it to retailers at a price point marked above the wholesale price they originally bought it for from the manufacturer.
Distributors can serve as a means for smaller retailers to gain access to larger, more popular brands without having the need to place a large opening order. The downside is that you won’t be getting the best pricing for the products which then lowers your potential gross profit margin.
In some cases, manufacturers will work exclusively with distributors to get their products to retailers so that they do not have to deal with that purchasing process.
How to Get In Touch with Suppliers
When I first helped start my first eCommerce business, Portlight, we were selling on the Amazon Marketplace. I knew a minimal amount about the supplier chain and how a product went all the way from manufacturing to the end consumer. It was in the first few years that we performed extensive research into the best practices to contact and for authorized reseller relationships with manufacturers and distributors.
As entrepreneurs do, we tested different ideas that we had about getting in touch with these suppliers. We saw some succeed, some fail, and after each one, we jotted down what worked and what didn’t. Over time, we developed a formula for creating supplier relationships that we were able to teach to our employees that pushed the business forward while we focused on other areas of growth.
At the peak of Portlight’s performance, we were working with over 1,000 suppliers located with the United States and Canada and we had access to sell over 1,000,000 products through our Amazon store. It took us around two and a half years to get to that pinnacle of a supplier network. Below are the steps that we took to form authorized relationships with the brands that we wanted on our store.
Step 1: Research and identify the brands that you want to sell in your online store
Let’s look at an example. You are starting an eCommerce business that specializes in selling eclectic lighting pieces. You have an idea of the types of lights that you want in your store and you can identify them easily by searching on different retailer websites. You to go Amazon, Wayfair, Bed Bath & Beyond, and Home Depot and you pull together a list of 50 lighting pieces that you know would sell well to your target customer.
Open a new Excel file or Google sheet and add those 50 products each with their own row. This will serve as the start to your supplier research and contacting system.
Step 2: Research and record the brand’s website
Similarly, search the brand name on Google and find the correct website URL for the brand. Copy and paste the URL into a new column next to the brand name/product link in your Excel file or Google sheet.
Step 3: Browse the website looking for contact information for the wholesale department
Open the URL and browse the website (header, footer, menu locations, etc.) searching for keywords like:
- “partner with us”
- “contact us”
Click on these links and search about until you find:
- a wholesale application
- a contact phone number for the wholesale department
- a contact email for the wholesale department
Jot this information down in a new column in your Excel file or Google sheet. Your goal is to have a clear path to contact the wholesale department of the supplier that you are seeking to work with. The wholesale department is the team that is responsible for selling the brand’s products to manufacturers and forming new authorized resell relationships.
If you can’t find a specific contact for the wholesale department, contact the general information or customer service email asking them to put you in touch with the wholesale department. Almost every manufacturer will have a wholesale department.
Step 4: Contact the supplier explaining what you want to do
Here is a mock email that you may send to the wholesale department. You want to keep it simple and to the point. If the wholesale department hears that you want to purchase their products, they will quickly send you their custom application to get the ball rolling. If your email is too long or doesn’t make clear sense, you could easily get moved to the trash folder.
“Hey. My name is Connor Gillivan and I own an eCommerce business called We Light the World. We specialize in eclectic lighting pieces for our community and I am interested in developing a wholesale relationship to purchase a selection of your products.
Please call or email me with the next steps.
Simple and to the point is best with suppliers. They have a lot going on at all times and do not have time to decipher what you are trying to say. They want to hear that you are interested in buying their company’s product.
Step 5: Provide the requested information
Most suppliers will have a questionnaire along with a distribution agreement that you must fill out in order to form the resell relationship. Some suppliers are picky with who they allow to sell their products and others are very lenient. As you go through the process multiple times, you will understand where your desired brands fall on the spectrum. From my experience, you can always form the relationship…you just need to be persistent and show growth in your business.
The most important information that you’ll need to fill out the supplier questionnaire is:
- Resale certificate –> this is obtained through your state government. It gives you the ability resell products without paying sales tax when purchasing them.
- EIN –> this is the government identification number of your registered business.
- Trade references –> most suppliers want to see that you’ve worked with other similar suppliers in the industry. If you are new and don’t have supplier trade references yet, at least include another business partner that you have worked with in the past.
- Bank references –> most suppliers will also want a representative from your bank on file to make sure there are never any issues with payments. Simply ask your local bank rep for their contact information and permission to be included on the applications.
Step 6: Follow up to solidify the relationship
If you don’t hear back, give them a call to follow-up and move your application through the machine. The best way to get your application through the process is to get a representative’s name, number, and email when you first speak with the wholesale department. Having a direct line to someone on the team will make it much simpler to move the application through the pile.
Bringing It All Together
If you aren’t manufacturing your own products, your supplier relationships will be a key part of running your eCommerce business. It will take some time to build your reputation and work with the top brands, but it is absolutely possible with the steps that I’ve outlined above.
As you reach out to potential suppliers, make sure that they are reliable and won’t cause issues with your business. Having poorly organized suppliers can make your life as an eCommerce business owner much, much more strenuous.