Episode 5: Stair Step from Basic Vendors to Higher End Vendors

Episode Transcript:

Hello. Welcome to the Business of eCommerce. I’m your host Charles Palleschi. This is episode five. On today’s episode, we’re going to cover steer stepping vendors. What this is is, on today’s episode, steer stepping vendors is going from more beginner level type vendors, intermediate, to advanced. This episode is targeted more towards retailers who are apparent to you as just starting off, or intermediate, and looking for extra vendors, looking at how to add some more products that are a little more unique to that store. This is really targeted more towards you, if you’re that sort of retailer.

When we steer stepping vendors, what this is is there are vendors out there who it’s very broad in the range. They go from they are vendors who are willing to accept brand new retailers. You apply, show them basic, some sort of proof that you’re in business, maybe you don’t even need a site, but eventually they’ll start selling you products. They want with very little hoops to jump through. Very easy to get started with these guys, and they’re great for starting off. Then, all the way on the other side of the scale, there are some vendors who it’s much different. Working with them, you have to fill out credit applications, you need to show them your site, proof that you’re in business X number of years. They all require something different.

The deal when choosing a vendor is when you’re just starting off, you can only really work with the vendors who basically are allowing newer retailers. It’s a lot how to get your foot in the door with these vendors, the bigger ones. The benefit of working with the bigger ones is they have products that tend not to be found online as much, just because they don’t let every new retailer in the door. You’re not competing with tons, and tons, and tons of folks, you’re competing with a much smaller subset of retailers. The goal, in a lot of cases, is to find vendors that are more exclusive because they typically are better doing business with. Better products, better experience they usually offer credit terms.

There’s all sorts of different things, but usually, when you’re just starting off, it’s hard to get your foot in the door with these vendors. What I’ve done and what I recommend other retailers do is when you first are starting off, always begin with these intro vendors, beginner vendors, ones that basically just let you get your foot in the door, as long as they have the type of products that are in your niche. Let’s say you decide you’re going to sell a particular type of product in the sports good niche. You then find vendors in that niche that have some sort of products in that category, something you’re interested in selling. Maybe it’s not exactly the products you want, but it’s at least in your niche, it’s in your field, it’s things that fit with what you’re looking to do.

Get started with those vendors, get your site up and running, get some products on your site. It doesn’t have to be perfect from day one, but at least now you have some products, you’re in business, you can start going out there, you’re going to make some ad words, getting some traffic on the site, some orders, some interest. Start building news letter, Facebook audience, things like that. Basically, start promoting the site and getting business. Once you do that, other vendors in that industry, it’s a lot easier, then, approaching the next vendor. Maybe day one that’s someone that wouldn’t talk to you, but now that you have that, it’s a lot easier to approach the next vendor and say, “Hey look, I have this site, XYZ. Here’s the URL, check it out. Here’s the type of products we sell. We’re interested in bringing on these products, these also sporting good products from you. I’d like to get started.”

It’s a much easier sell showing them you’ve already been in business, you have the site running, you kind of know the drill. You’re not going to be asking them very basic questions and they’re essentially going to be helping you, using the vendor to kind of educate you on the field. They know you’re someone who’s been doing this. From day one, you already have an audience. All you have to do is list the products and, most likely, you’ll be getting sales. For the retailers …

For the vendors, rather, they’re approached every day by different retailers. For the ones that are more kind of beginner level, they have a process. Come in, fill out an application, generate an account for you. Here’s how you purchase from us. It’s pretty basic. We start moving kind of up-chain to kind of the … Then, you step up to some of these higher end vendors. The difference is they start giving you an account manager. Maybe you fill out a credit application. Where then, the benefit is because you’ve been working with those other vendors, you might have generated credit with them now. You’re able to use vendors two, three, and four. List vendors one and two on those credit applications.

It starts showing you have a track record, you have some trust with these other vendors. That makes the next vendor trust you. It allows you to basically point to something and say, “Look, here’s my site. Here’s what I do. I’m someone who’s in business and can be taken seriously.” The benefit once you kind of start moving up these vendors, they have products done, like I was saying before, that can’t just be found everywhere. These intro-vendors, what happens is everyone initially signs off all of them, takes all their products, takes their entire catalog, dumps it on their site, dumps it on Amazon, dumps it on eBay.

What happens is the market just flooded with all the exact same products. If you start looking … I won’t mention the names of these vendors, but a lot of these vendors to begin with, you start looking at their products. Look at listings on Amazon and everyone’s fighting, essentially a loss, competing for the exact same listings. They’re all selling the same products, exactly the same, and just competing a loss. Those guys you’re really not going to make much money. Even if you list them on your own site and are able to drive traffic there, the issue there is then people can just check on Amazon and realize, “Oh, there’s people it for significantly cheaper there.” The reason being they’re selling at a loss. It just, when folks are new, it kind of … A lot of people just coming in the door and they will sell at prices that don’t make sense, they’ll do things that don’t make sense. You’re trying to compete with the masses.

What your goal is is to first come in, and everyone has to start somewhere. If you’re a beginner, you’re probably starting there, competing with the masses. As you kind of start moving up market, and kind of have a track record, and you’ve been in business for a while, that then gives you opportunity to start working with more advanced vendors. You’ll notice once you get there, kind of pricing their terms, you’ll start looking at those other stores, Amazon, eBay, the different marketplaces. You’ll see those products be at lot less retailers. All of a sudden, going from on Amazon seeing 30 people selling the same product, you’ll see three, four, five maybe. Then, once you get to more and more, you might be competing with two to three people on a listing.

Then, it’s really a question of you can actually start to really offer something unique and you’re not just everyone’s blasting out there the lowest price and trying to be 20% cheaper. You’re really able to go in there and start marketing products and really provide some sort of value. People see, “Oh, you have these unique products. I can’t get them just anywhere.” That usually involves moving deeper inside a niche. Beginning in that sporting goods analogy, you’re probably selling the most basic products, very wide net you’re casting. Once you start going deeper into a niche, you start working with vendors very specific in that niche, usually a little higher end. They focus on that niche, so it makes sense you as a retailer also focusing on that niche. It really kind of works hand in hand.

First, when you’re just starting, you’re probably casting a relatively wide net, so it’s hard to really niche down to very specific vendors. But it is a goal, it’s one of those things you want to keep in mind, that moving to these other vendors allows you to niche down and really start concentrating your efforts and making more money, and offering something that isn’t just offered by every retailer on the internet. It allows you to really start standing out from your competition.

I hope that helps. It’s another tactic that I personally employed. I’ve seen other retailers use it. It’s just something that when you’re starting, you go to a lot of vendors and you see no, no, no. Basically, they’re not willing to work with new retailers. As you kind of move up, it really does change as you’ve been in business for a while, as you have a site, as you have products listed on that, as you have point to your track record, your history. Once you start having those things in place, it’s a lot easier to approach vendors and be taken seriously.

Hope that helps. Just know, if you’re just starting off, don’t get discouraged. You will hear ‘no’ a lot, but it does get better, I promise. As you keep moving, keep just following down that path and it does really get better. If you have any questions, comments, you can reach us at BusinessofeCommerce.FM. My email is Charles@BusinessofeCommerce.FM. Also, you can reach me on Twitter @CharlesPal, Charles P-A-L. I’m happy to hear any feedback. Til next time, talk to you soon. Have a good one.

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