Barbara Racz

Barbara Racz

Senior Marketing and Content Manager at Syncee

Long-term or short-term supplier relationships?

If you are a retail business owner you probably want to be successful in the long run. Here you can get to know details about supplier relationships.

When you establish your retail business and start to work with the drop shipping method, there’s a lot of things you have to make decisions about. It’s important to do drop shipping in the best and most beneficial way. After you find out what products you want to sell in your online Shopify store you have further steps to take. Find the suppliers that you will contact with – we have some advice for you to find them – and you also need to know the ways how you can get the certain products’ data from suppliers. About putting this data into Shopify, we have published a post what is our point of view and we will also talk about the best practices for product pricing in general and with Syncee. If you do everything right, you can run your retail business successfully for a long time putting just a small amount of money in it. And that’s what you want, aren’t you? Here below you can read facts about long-term and short-term supplier relationships. You can choose which is the best for you.

About supplier relationships in general

We can discuss what the right length of time for a supplier relationship is. Some say short-term is okay. Because e.g. you can renew your store from time to time or you can follow recent trends. Others say a long-term relationship is the best – e.g. because you can feel yourself safe as you work with well-tried suppliers. You may have to find the right balance between short-term and long-term contracts. Everything depends on what products you sell. If it’s trendy, if it’s a shortage on market, if it’s unique, if it’s an everyday need or if it’s a critical item. You have to have tactics and strategy while getting into your business and start this process. Don’t forget: the supplier is a major player in the sales process.

What makes a good supplier? These qualities are organization and efficiency, technological investment, dedicated support representatives, expert staff, and industry focus, being centrally located, ability to take orders over e-mail or online systems, stability. You can read more about these in one of our other articles.

There are two types of suppliers you can contact:

  • marketplaces (so other virtual retailers)
  • real wholesalers

In the following, we will talk about short-term supplier relationship as contact with marketplaces (and its small virtual retailers) and about long-term supplier relationship as contact with real wholesalers.

Short-term supplier relationship

You can build a short-term relationship with normal real wholesalers. In this case, there are more reasons why you do this. One of these reasons can be that you always want to get newer and newer products and you don’t settle for just one client. Another reason can be that you weren’t satisfied with what you got. And another can be for one of the drop shipping methods. You (as a retailer) want to work with retail marketplaces (as suppliers). So as you can see, this way you can import products from other virtual retailers which have their shop on big retail marketplaces. These marketplaces are for example AliExpress, eBay or Amazon.

If you want to get products from these retail marketplaces what you can do is to choose products one by one from the marketplaces. Those are the ones that you are going to sell on your own Shopify web store. If we are here anyway, let us mention that in drop shipping you don’t have real stock holdings. Actually, if you work with these retail marketplaces, the products your customers’ order from your store will get delivered at their house directly. One of drop shipping’s biggest advantage is that there’s no need to invest too much money into your business. Furthermore, you can have a wide ranged selection.

Disadvantages of short-term supplier relationship and doing drop shipping with retail marketplaces:
  • long delivery time: customers often wait a month or more until the product they ordered get delivered, and nobody likes this
  • higher prices: the owner of the Shopify web store sets the margin for the prices of items from the suppliers/retail marketplaces for monetization purposes. But who wants to buy products at a higher price when they are available for less money on the original stores (for example on AliExpress)?
  • customs duty and VAT: if the customers order goods by reaching a certain money limit they have to search for ordering documents and manage VAT and customs duty matters, and pay more
  • unknown quality: as Shopify web stores don’t have warehouses, they can’t even see and check the products they sell
  • lost package: it’s not a new problem in the world of ordering goods from abroad, and it can cause inconvenience for both the web store and the customer
  • problems with guarantee: web stores have to send back the packages to the other side of the globe, the product can be lost again, and the biggest problem is when the retailer disappears and there’s no place to send back the products that would need guarantee service, there’s no chance to get money back or to get a new product
  • reliability at issue: you don’t know anything about the retailers from the marketplace, you are not able to know if they are reliable or no
  • banks moving apart: because of the problems with reliability bank card companies don’t like to manage with money from classical drop shipping businesses
  • items arrive from different places: if customers order things that are from different retailers (from the marketplaces), they won’t get the packages in one main box, they will get that number of parcels as many orders they made. There’s no place where the products can wait for each other.
  • one in a million: if you cooperate with retail marketplaces you are probably going to sell products that everyone else does, you don’t have unique items and it will be hard to get customers even if you have a good marketing. One of its reasons is probably the one that you can also read above. The fact that nobody wants to buy products at a higher price if they can buy those cheaper from another place. If you want to be successful you need to find a niche.

Long-term supplier relationship

Probably the only way you can get into a long-term relationship with a supplier is to contact a real wholesaler. If you want to be successful and have advantages, you need to work in this kind of drop shipping. The benefits of long-term supplier relationships are, for example, reduced costs, you can feel safe, you can get to know the supplier better and “be friends” with him, and mitigate volatility (volatility means the price’s changeability and mobility). These are just some of the benefits of cooperating with real wholesalers, you can read more of it below.

What is this real wholesaler-cooperation? So, you as a retailer associated with real wholesalers who will be your suppliers. You will put their items in your online store, so customers will buy these. You choose your suppliers based on what kind of shop you would like to have, and what you want to sell. Then, you contract with those suppliers. So it will be a long-term and reliable cooperation and business for both of you. Customers will order from you, you will summarize these, then send it to the supplier. The supplier will deliver the parcels to you, and you need to forward it to the customers.

The advantage of this is that you can make sure about what you are selling. Also, about what is the quality of the items, if they are damaged or not. You don’t even have to worry about renting a warehouse because you can place the packages well. In your own living room, garage or kitchen for that short time. The wholesaler will give you a price list in which you will see what items you can buy and sell and for what price. You will get databases and with a good Shopify application, you can work with any file formats. With those that your supplier will send his data in. You won’t have problems with structures and so on.

Advantages of long-term supplier relationship and doing drop shipping with real wholesalers:
  • responsibility: you make a contract with the supplier. It’s the first sign you are going to work together in the long run. You can contact them with any problems, and they won’t disappear without trace
  • quality: you choose who do you want to work with, you know what kind of products it distributes, you can make sure about the quality, so nothing will surprise you
  • lower purchase and sales price: you can get the products at a lower price from wholesalers than retailers, and even if you set the margin for prices it’s going to be a good bargain for the customers
  • guarantee: the handling of warranty problems are not cumbersome because you are close to the wholesaler and you regularly communicate with them.
  • fast shipping: if you order from a cross-border supplier you get the products in 3-7 days. If you order from a supplier who is in your country, you and the customers can get the products in 1-2 days. Or on the day of ordering
  • you don’t have to keep your money in products: you work with virtual stock by using the constantly updating database of the supplier. So you don’t have high investment costs
  • help in marketing: if you work with a real wholesaler you will get help in marketing matters also from this client
  • profit improvement: if you are in a good relationship with your supplier you will have profit improvement soon
  • improvement in general: you can improve continually together with your supplier in your common business
  • unified image: with long-term supplier relationship you can build a more unified image for your business
  • safety: if you work with someone for a long time, you can feel safe, you don’t have to risk much
  • reduced costs: you can have reduced costs by making your business like this
  • being always updated: if you use the appropriate Shopify application you can keep your online shop’s data always updated automatically. You won’t have problems with customers that a certain item is missing.

How can you improve your relationship with long-term suppliers?

The most important thing in improving your relationship with anyone is to be reliable. This is also the best you can do here. You need to make your suppliers sure that you will do the right things in this drop shipping business, and it’s also important to behave well with customers because this is what anyone else can see from the outside. A factor that is also essential to note is if you are in a bad relationship with your supplier it can cause you monetary problems, like losing profit.

So if you want to improve the relationship with long-term suppliers:
  • you need to be always updated,
  • you need to ensure a channel where you can keep in touch,
  • always keep in touch with them, communicate,
  • do not forget that you are not the only one,
  • provide appropriate technical conditions,
  • make sure the contract you have made includes everything important and do what you two agreed on,
  • if there’s a misunderstanding or a small mistake be cooperative and don’t let the good atmosphere go away,
  • but next to the previous one, be strong-minded and don’t let go your own rights, wills, and purpose,
  • understand the other’s point of view, be fair
  • trust the others,
  • review the products from the supplier to make sure everything is okay,
  • be reliable,
  • do not hesitate to ask,
  • you and the supplier also have to recognize risks,
  • act well with money, pay on time,
  • be professional,
  • if everything is good with your own business inside, other things going to be well too.

As you have seen above, the only suppliers you can probably work in a long-term are real wholesalers. With those, who put their business affairs on marketplaces are not the ones you are going to get in touch with. You won’t know anything about each other. They are always going to be different retailers who you will meet with on these places.

If you want to know how you can make contact with new suppliers who can be your new short-term or long-term clients, click here and read more about it.

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