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For some businesses, changes over the last year have caused changes in vendors and their inventory availability, and you might now find yourself in the position of having to find new suppliers or vendors for your retail store.
Choosing the right vendors and suppliers is crucial if you run a retail business. Ultimately, an unreliable vendor that disrupts your inventory can negatively impact your business reputation and cause you to disappoint your customers.
Here’s how to choose suppliers and vendors that support smooth retail operations for your business.
Starting your search
The most important first step is to clearly identify your business needs. Define your price limits, preferred payment terms, vendor location, and type of supplier. If your store has been around for a while and has a loyal customer base, there may be specific things customers love about your products, such as the uniqueness or quality of what you offer. You want to maintain those as you find new vendors and suppliers in order to meet demand and protect customer retention.
If your store is new, then take some time to think through your target customers and the type of products they will love. For example, if your customers are interested in social issues, such as sustainability or ethical employment in supply chains, then sourcing from suppliers who explicitly support those initiatives may be a priority.
Also, if you are opening a store to sell very specific or niche products, it’s a good idea to check if you can source those products in a reliable way before even going through the steps of opening.
Understand your sourcing options
You have three broad options when sourcing products for your retail store, and you could use one or a combination of these sources to stock it.
Manufacturers often insist on a minimum order quantity (MOQ), but will usually offer the cheapest unit cost. This means you will need to order hundreds or thousands of units. Depending on the size of your business, you can decide if this is a good option for the quantity of inventory you’re looking to source.
The upside of working with manufacturers is that you can make your own products or create custom orders. But you should be prepared to send detailed specifications and handle a lot of legalese. If that seems like a lot of work, then you should consider other options.
These include importers and exclusive and regional distributors. Wholesalers handle warehousing and importation and communicate directly with manufacturers so you don’t have to.
Depending on the type of products you sell — hand-knit baby clothes, for example — you can also source products from independent makers and artisans. The advantage is that you can source very unique and valuable products, especially if you are in a niche market. The downside, though, is that the supply may be irregular and unpredictable.
Once you’ve decided on your preferred sourcing option(s), the next step is to find suitable suppliers. You can do this in a number of ways.
A Google search is usually the easiest and simplest way to start. Depending on the type of suppliers you are looking for, you should look in the following places:
Online trade magazines and industry publications.
Industry groups on social media sites, including LinkedIn and Facebook.
Word of mouth and recommendations from other business owners in your community or industry can be another option, especially if you’re looking for trusted reviews before working with a vendor. Ask for recommendations directly from experienced retailers who are willing to share their sourcing expertise. Also ask family, friends, and anyone in your network who could know a good supplier. If you put the word out, then you just might find a good lead.
Trade shows are specifically designed to connect manufacturers and suppliers with customers like you, so they are a great place to take your search, especially if you’ll be sourcing directly from manufacturers. You can see samples in person and negotiate deals faster.
Sites like 10times and Trade Fair Dates list popular trade shows by industry. Keep in mind that trade shows are still making a slow comeback following COVID-19, so if your preferred fair isn’t back yet, you have to stick with online sourcing options.
Choosing your vendor
Before you make a final decision about your suppliers, carefully consider the following factors.
When possible, request bids from potential suppliers. Can you make a decent profit on the price they’re offering? Keep in mind that the lowest prices don’t always mean the best deals. Always read the fine print to be sure there are no hidden or additional costs that are not listed up front. You should have an idea of the number of units you’ll need to order and should try to lock in the price ahead of ordering.
Do small trial runs with any suppliers before committing to large volumes or a long-term deal. This will allow you to test their quality assurance and customer support measures. Also confirm compliance with any industry standards or regulations where necessary.
Payment plans/credit period
Find out if the vendor/supplier’s credit period meets your needs. Some vendors may charge a fine for delayed payments, even if the reasons are unavoidable.
The further a vendor is from you, the longer the delivery time. This is particularly important when working with international suppliers or independent craftspeople. Carefully weigh the tradeoffs you’d make by working with domestic versus international suppliers. For example, while you could save money sourcing abroad, you may wait longer to receive products. This means you have to keep accurate stock of inventory so you can reorder products on time without going out of stock.
Managing your vendors
As your business grows, you may have to manage multiple suppliers and vendors. Doing this manually can be challenging and chaotic. Using the right technology can help keep your inventory and supplier information organized at all times. The Square Future of Retail report shows that 74% of retailers plan to use real-time inventory technology to streamline their processes.
Square for Retail has an inbuilt vendor management system that allows you to keep track of all vendor contact information across multiple locations and stores. With the Square vendor management tool, you receive timely stock alerts so you always know how much you have in stock so you can easily reorder when it gets low.
Choosing the right vendors for your retail store requires careful consideration. Whether you’re working with manufacturers, wholesalers, or independent makers, it’s important to set clear expectations and adopt tools that make it easy to manage your inventory and suppliers as your business grows.