A healthy roster of high-quality vendors is integral for any successful multi-vendor marketplace.
This is true no matter what industry a marketplace operates within. After all, buyers often flock to multi-vendor marketplaces because of the choice they provide. Marketplaces that have a solid array of suppliers all in one place have a strong competitive edge.
However, building and maintaining a roster of vendors requires careful management. Failure to dedicate the necessary resources to vendor management can lead to unpleasant complications — and potential revenue losses. Over three years, 87% of organizations had a “disruptive incident” with a third-party vendor, according to one survey. In more extreme cases, marketplaces have been sued as sellers even though the alleged issue stemmed from the third-party vendor that fulfilled the order.
Effective vendor management reduces the risks of these incidents and is therefore one of the most important marketplace features. In this article, we’ll explain what vendor management is and share seven vendor management best practices.
Vendor or supplier management is a term that describes the process of how a marketplace manages its relationships with third-party sellers. The vendor management process has four main stages:
Knowing the four stages of vendor management isn’t enough to ensure your marketplace’s success. You’ll also want to follow these vendor management best practices.
First, decide which kinds of products or services you want to offer on your marketplace. Next, hone your pitch for vendors who can provide the desired catalogs.
An effective pitch is one of the main ways to attract vendors to your marketplace. Scope out the competition. You’ll want to develop a value proposition that lays out what separates your marketplace from others. Think about:
Your marketplace’s reputation depends on the legitimacy of your vendors. Make sure vendors are high-quality and legally allowed to operate within your marketplace.
Vendor onboarding encompasses all of the procedures involved with getting a third-party vendor ready to sell on your marketplace. Marketplace operators should ensure the onboarding process is thorough enough to avert potential legal issues and security risks but not so complicated it scares away potential vendors.
Consider the following vendor management best practices for vendor onboarding:
To help vendors onboard smoothly, below is a sample onboarding checklist.
A vendor agreement is a business contract between the marketplace operator and the vendor that outlines each party’s obligations.
As such, these documents lay the foundation for effective vendor management. Store these documents in an easily accessible, centralized location. This is one of the top vendor management best practices for multiple reasons:
A vendor dashboard gives an overview of a vendor’s store and its performance on your marketplace platform. These dashboards should be customizable, as different vendors may want access to different metrics on the fly. Here’s why vendors need access to flexible dashboards:
Frictionless selling doesn’t mean no oversight. Keep close tabs on your vendors and establish performance standards. To make sure standards are met, consistently track key marketplace metrics for vendor performance, for example:
Don’t wait for problems to arise. By then, your marketplace may already have suffered reputational damage or faced legal consequences. Last year, for instance, a marketplace app was sued for negligence related to the alleged criminal activity taking place on its platform. One way to get ahead of compliance issues is to clearly outline what happens if vendors don’t meet contractual commitments:
In terms of vendor management best practices, remember to take every opportunity you can to educate and assist your vendors. Reliable support encourages vendors to stick with your marketplace. Resources can also help solve potential problems before they arise. Some examples of resources to provide to vendors:
Their success is your success. Think of them less like customers and more as partners.
A vendor management system (VMS) is a platform that centralizes the many moving parts of vendor management. It can help you automate many workflows necessary for vendor management and make it easier to implement some of the vendor management best practices outlined in this article.
When shopping around for the right VMS for your marketplace, look for ones that include:
Many businesses don't realize how important seamless vendor management is until after they launch their marketplace.
According to a recent study Nautical commissioned with Forrester Consulting, 59% of respondents found the ability to integrate with seller's systems was more important than initially anticipated. The same was true of many functions related to managing sellers, like the ability to collaborate, customize their experiences and manage product information and data.
To set yourself up for success, ensure you're thinking about vendor management from the start.
Vendor management is critical to the ongoing success of a marketplace.
From acquisition to maintenance, there are essential considerations to support marketplace suppliers and operators. Following the best practices outlined in this article will help ensure continued success when it comes to managing your business relationship with vendors. A vendor management system is also a crucial piece of the puzzle, supporting the ability to streamline and automate these best practices so nothing falls through the cracks.
🔵 Learn more about Nautical’s vendor management capabilities.🔵