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Suppliers are crucial for the success of any business.
Whether you are a big-box retailer or an e-commerce merchant, you will have a tough time growing if you don't have a posse of suppliers or vendors to back you up. In fact, your suppliers can do much more than simply offer you products and materials for business.
They can also be a big source of information, helping you assess the potential of new products or identify new opportunities.
In turn, this can help you cut costs, improve product quality and design and free up funds for your next initiative.
So if your growth plan doesn't include selecting good suppliers, you're likely to regret it.
This issue assumes greater importance if you are a managed marketplace in the hypercompetitive online world.
Small businesses set up by first generation entrepreneurs comprise more than 60 per cent of the listings of e-commerce ventures such as Flipkart, Jabong and ShopClues.
It means these e-commerce veterans need to work with a host of small and medium businesses to scale up - or simply to stay in business.
But dealing with this set of merchants can be challenging. Says Surjendu Kuila, co-founder of online product and merchant discovery platform, Reviews42, "Small merchants are more concerned about lead generation than book keeping, supply chain management and product presentation."
Reviews42 has launched Retail Inventory System Enhancement (RISE), a cloud-based tool to enable retailers to reach out to nearby and online consumers easily.
Since many small retailers don't even have basic knowledge of the internet, one cannot expect them to punch in the correct information about product features and other content like product snapshots in an order management system.
Reviews 42 addressed this issue soon after the pilot launch of RISE in November last year. Now all a retailer has to do is select a product and the price.
The tool automatically picks up relevant information about the product and posts the listing on Reviews42 app and other free online classified websites like Olx and Quikr.
Around a thousand merchants in Delhi NCR are currently using RISE at a monthly subscription fee of Rs 1,000.
More than 100 SKUs can be uploaded in a month and merchants can change the price six to seven times in a month.
Through Rise, the company is trying to bridge the gap between online and offline stores providing leads to small merchants and comparative prices to consumers.
This is how it works. If a shopper sitting in a restaurant at Connaught Place in Delhi is looking for the best price of an iPhone 5s, she will not only see prices offered by various online shopping portals but also prices offered by brick and mortar stores located within a certain radius.
This is done with the GPS/WiFi system on the user's phone.
It is not easy for small merchants to deal with big e-commerce players either. First e-commerce players are used to working in a system that gives them a credit window.
Second they have a payment cycle ranging from two days to a week. This can be longer in case of returns. Remember small merchants are more comfortable dealing in cash.
Also, working with online partners can eat into the margins of a small merchant whose volumes are not as high as that of a big distributor.
For instance, while in a low margin category like electronics, a big distributor makes around five per cent margin, a small merchant can take home two to three per cent. This is because the small merchant has to share his margin with both the distributor and the e-commerce platform.
Today e-commerce companies are going that extra mile to simplify the process for small merchants.
It starts right at the time of merchant onboarding. Around 60 per cent of the 800 registered vendors with Jabong comprise small merchants.
The company begins its onboarding process with a basic product assessment scoring in which it rates a merchant on a scale of one to 10.
The company also ensures the small merchant is process-driven. Says founder Arun Chandra Mohan of Jabong,
"We expect our vendors to have a basic inventory tracking system so that Jabong can integrate its order management system with it. This becomes even more important when there is a spurt in the demand of a merchant's product. Problems come when we work with small vendors with no inventory tracking system."
Jabong also does product photo shoots for small vendors at a nominal fee. To ensure availability, Jabong asks small merchants to block the inventory the moment it receives an order.
Last year Snapdeal launched a dashboard called Merchant Panel.
With this, merchants can keep track of inventory, competitive prices, payments, and shipments. Snapdeal allows a "nursery time" of 45 days to ensure that merchants are prepared to do business with it.
Talking about the company's payment cycles, Amit Maheshwari, vice-president, fashion merchandising, Snapdeal, says, "We have realised that small merchants find daily payments complicated.
They are happier receiving consolidated weekly payments for their orders and so we have been following weekly payment cycles."
With 3,000 suppliers listed across 15 cities, Flipkart claims that a large part of its merchant base comprises small single-brand retailers, medium-sized multi-brand retailers and boutique owners.
The company follows a lead evaluation process to understand how serious a merchant is in taking his business online. In fact, Flipkart runs prospective suppliers through its check-list of pre-requisites.
Says Ankit Nagori, vice-president, marketplace, Flipkart, "We expect merchants to come with basic know-how of the internet and willingness to provide dedicated resources to their e-commerce business. Our team is there for hand-holding in the initial stages of a merchant's association with us."
The online retailer evaluates the infrastructure at the merchant's end and offers technology and integration solutions where necessary.
For instance, there are at least six to seven different software used by these small merchants. To make the process smooth Flipkart provides a solution to integrate different merchant platforms with its own.
More than 90 per cent of the 50,000 registered sellers listed on ShopClues come under the small and medium business category.
The company has an android store manager app called Pocket Store, which helps merchants understand concepts like 'cart conversion' and 'click-through rates' as well as manage inventory.
Sanjay Sethi, CEO, ShopClues, says, "To keep things simple for merchants with limited education, the application is low on content and heavy on numbers and icons."
The company has set up ShopCluesUniversity, an online initiative, to educate merchants. This includes sending newsletters to merchants on new trends in the e-commerce space, hosting webinars and organising summits where big and small merchants share their best practices.