If you’re a retail business owner, you probably know that finding and working with a suitable vendor can be essential to your success. However, before you commit to a partnership, you must ensure that your vendor can align and support your mission and value proposition. Here are five essential questions to guide your search.
What is a retail vendor?
A retail vendor is an individual or a company that offers a service or makes goods available to another company. For example, a Coca-Cola bottler is a vendor to the local grocery store. Likewise, a manufacturer who produces goods to sell to wholesalers is a vendor to retailers.
What is vendor management?
Vendor Management Process (VMP): includes managing communication, goal alignment, delivery timelines, problem-solving, marketing & promotional support, and sharing vendor-related information that affects the retailers directly.
Effective vendor management enables businesses to control costs, minimize potential risks related to vendors, deliver excellent customer service and derive maximum value from vendors over the long-term.
Vendor relationship management (VRM): is a business activity made possible by vendor management software tools that aim to engage vendors while maintaining independent B2B operations. These same tools can also apply to individuals’ relations with other organizations and business relationships.
Five Questions about your vendor that need answers
A well-executed vendor relations strategy will control vendors’ sourcing and researching, obtaining quotes, turnaround times, contracts, relationship management, performance evaluation, and more. However, due to its complexity, an effective vendor management strategy requires time, skills, resources, and experience.
How will the vendor support your mission and customer base?
How do your values and mission align with your B2B partners? Partnerships have to complement each other to be successful. Two companies operating independently, with different value propositions and missions, are bound to encounter problems.
- Take Walmart, for example; the strategy is simple: Sell goods to the customer at the lowest possible cost. Its suppliers understand that Walmart wants as much of the cost taken out of their products as possible.
Vendors must understand your business goals and have a program that aligns their supply process with your value proposition. This needs to be communicated during the vendor onboarding process.
In addition, partners need to streamline online communications, information sharing, timelines, and key performance indicators to know operational status and expectations. Establishing a mutual understanding of each other’s expectations will lead to a more productive and rewarding relationship.
Vendor onboarding process: refers to the process of collecting the data required to approve a company as a vendor and enabling an organization to conduct business, purchase products and services, and make payments to that company.
Note: large organizations such as Walmart require vendor managers, a vendor management team, and a well-developed vendor management framework that consistently improves supply chain management, cost savings, and innovation as part of their overall low-cost strategy.
How do you set formal expectations with a vendor?
Service Level Agreements (SLAs) are the best way to communicate expectations and hold your vendor to account. Vendor performance expectations and service levels should be clearly defined, including key performance indicators (KPIs) and penalties in the contractual language. Clear language enhances vendor relationships through mutual understanding and clarity of purpose.
What is a value proposition?
A business’s value proposition is the statement that identifies the benefits a company provides when delivering its products and services to customers. A well-designed value proposition will differentiate the company and its specific product or service in the marketplace and among a target market or audience.
Know your value proposition & Actively Communicate it
When businesses enter into partnerships, they put enough emphasis on communicating their own value proposition. Lack of understanding of what a B2B partner stands for can lead to missed opportunities and ignored requests that delay progress and growth potential.
When collaborating with partners (managing vendors), engage them with your organization’s value proposition. The attractiveness of your company’s value should demonstrate the potential benefits of working together. For example, a joint partnership in retail could mean vendor performance benefiting from:
- Increased market potential
- Improved customer engagement
- New business capacities
- Access to new technology or human resources
- Improved results
- Opportunities to share retailer and vendor data
Communicating the value proposition to a vendor is essential when negotiating agreements and contract terms. Service level agreements (SLAs), data sharing, and other aspects of the business relationships should be clearly outlined in the SLA and referred to when issues arise.
Key takeaway: take pride in your value proposition and ensure that your partners complement it.
What post-sales support services does the vendor provide?
Post-sales vendor support improves customer retention and loyalty. Find and work with vendors who take ownership of their products and stake in your success. Good collaborators provide advertising, promotional assistance, and point-of-purchase support to ensure retailers engage and convert brick-and-mortar shoppers.
Vendors should search for strategies to enable sales by creating content and tools that assist buyers in making purchase decisions and utilizing (supply chain) data to indicate where to direct those efforts.
- Case studies: showcasing customer success and relevant proof points; are one of the most effective marketing tools available.
- Co-marketing campaigns are a solid way vendors can support your value proposition and enhance the b2b relationship.
What business accreditations does your vendor have?
Accreditation organizations evaluate members based on a variety of industry-relevant criteria. The accreditation process is typically stringent and ensures that new and existing suppliers or vendors of an organization comply with the minimum criteria, standards, and organizational requirements to be registered, eligible, and approved as an accredited member. And to maintain accredited status, the organization continues to meet the prescribed standards.
Examples of items accreditation agencies measure for include:
- Insurance details have been verified
- Safety history has been reviewed
- Quality history has been reviewed
- Staff performance evaluated
- Payment details collected and confirmed
- Authorized contacts known and approved
- Support details confirmed
- Service history reviewed
- Safety performance is known
- Risk assessment, evaluated
Note: Accreditation agencies provide a forum to register complaints about businesses that do not meet accreditation standards. Accreditations support vendor risk management and mitigation.
What are the benefits of vendor Accreditation?
Reduces regulatory compliance risk: Accreditation confirms compliance with the laws, regulations, and standards that apply to your business. If your vendor is in another country or you sell to another country, check those countries’ legal requirements.
Ensures quality standards: B2B partners must use sound management practices, methods, systems, HR processes, and environmental standards established by government and industry. Accreditation demonstrates that vendors and suppliers have a respectable track record in managing their operations.
Decreases information security risk: Protecting your company’s performance, employees, sales, and financial data are critical to the security of your operations. The accreditation process ensures organizations respect your company’s information and have the capacity to protect it.
Examples of Retail Accreditation organizations:
- National Retail Federation (NFR)
- LEED certification for retail
- Better Business Bureau (BBB)
- Federation of International Retail Associations (FIRA)
Note: Ensure that your b2b partners’ memberships are up to date and that they continue to respect the standard set by accreditation organizations. These accreditations help to manage vendor-related risks.
What other successful companies do your vendors serve?
Business owners looking for a vendor should begin by searching for companies that they have done business with in the past. For example, if a vendor has supplied products successfully to Costco, Walmart, or Home Depot, this provides evidence of success. Once you confirm that, you get enough credibility to move forward with them.
Is this vendor reliable and trustworthy to supply your business?
Here are a few tips to help with your vendor selection tips to consider:
Seek out References: Every company will present in person or on their website why they are the best. Therefore, it is essential to back up vendor or supplier claims with referrals. Gather referrals from sources you know and trust.
Social media Searches: The internet and social media are cost-effective information resources. LinkedIn has established itself as a place to communicate and network with potential business partners. Further, it is also a place to gain valuable information about vendors. Yelp, Linkedin, Google Business Profile, TripAdvisor, Facebook, etc., are good primary sources of information.
Start Small and Allow Trust to build: Trust with a vendor is earned through communication and time. Start the business relationship by giving them small tasks to complete and increasing their responsibilities when they have proven themselves. A vendor’s reliability is demonstrated over time through clear communication, good problem-solving skills, and consistent & predictable behavior. Small tasks provide opportunities to track vendor performance and manage vendor risks.
Evaluate how they communicate: Communication is essential to any relationship with vendors. A Vendor manager that is difficult to reach during the introductory stages of the B2B endeavor can’t be trusted to communicate when things get busy. You should not wait 24 hours for an email response or returned phone call.
Assess Overall Stability: Search for vendors who have been in business a long time. Stability is essential, especially if you are entering a long-term arrangement with a supplier business. Also, checking your business partner’s credit history is a quick way of assessing financial stability.
Retailers are always looking for new and innovative ways to increase sales. However, it’s important to remember that partnerships with the right vendors can be essential to your success. By asking these five fundamental questions, you’ll be able to find a suitable vendor who shares your values and supports your mission. So, what are you waiting for? Start searching for the perfect partner today!
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