New local product vendors can be a dream for local stores, and small suppliers can find it relatively easy to launch an online marketplace for a niche customer base. But when it comes to growth, suppliers in the consumer packaged goods (CPG) market must be able to extend their presence online and reach retail buyers that can propel them onto the national stage.
Those corporate buyers have begun to source their vendors and products online, and it's shifted the way that suppliers have to market themselves to land business. According to RangeMe Director of Product Management Chad Bonner, online platforms give small vendors a broader opportunity to reach buyers, but those buyers also have increasing demands from their supply chains.
Speed, for instance, is key. Faster product lifecycles mean retailers have to accelerate their product discovery initiatives, but traditional procurement methods haven't supported product vendors' ability to keep pace.
“It should be easier,” Bonner reflected during a recent interview with PYMNTS about the modern-day challenges that suppliers face when looking to grow. “I can spend lots of money flying to different countries. I can rely on a broker to represent me to retailers, and represent my brand, and trust them to do a good job with distributors and buyers. But all of these things are imperfect — it should be easier.”
In today's “internet age,” he added, the rise of eCommerce means corporate buyers are relying on digital channels to source products, and vendors have to make the same online shift to land purchase orders. It's an industry shift that Bonner said has led to a “golden age" of bringing new products to market: it is now easier than ever for a one-person vendor to reach a global audience.
The problem, however, is that retail buyers often have demands that need to be met from vendors before any purchase order is submitted — and those one-person operations may struggle to meet those expectations. They can be anything from making sure product suppliers have barcodes on their packaging and providing web-friendly photos, to having product liability insurance.
“What we've learned from partnering with buyers is that business insurance is a really important thing for any new supplier,” Bonner said. “Especially for suppliers that are in their earlier stage. Retailers love taking on new products, but they have to have a way of managing risk that something might happen.”
Research suggests a knowledge gap among small businesses in particular when it comes to the importance of such insurance: small business marketing firm Manta and Insureon recently surveyed small business owners and found that fewer than 30 percent already have basic business insurance that includes general liability insurance.
The issue of supplier risk is particularly large for retailers in the instance of product recalls or lawsuits, for example. Certain categories of the CPG space, like food and beverage or health and beauty, have even greater exposure to risks that can impact a retailer's broader supply chain if something goes wrong at the level of an individual vendor — making products like general product liability insurance a must-have for even the smallest suppliers.
Insurance requirements are symptomatic of the importance of risk mitigation and trust in the buyer-supplier relationship for the CPG market. It's easier than ever for a vendor to create an online presence and hope that a retail buyer discovers them, and innovations in the B2B trade space like drop-shipping and prototyping services enable buyers and suppliers to push out products more quickly than ever. But what online sourcing and procurement has done is make it more difficult for buyers and suppliers to foster a trusting relationship from the start.
Gone are the days when vendors take the trip and meet a potential buyer face-to-face to strike a deal. This is why it's important, said Bonner, for B2B marketplaces to not only connect buyers and suppliers, but to establish a way to verify vendors on their platforms so retail buyers can trust the companies they come across while product sourcing.
For RangeMe, this means introducing a suite of B2B services for CPG vendors, including access to insurance products, packaging solutions and educational resources. Adding in this third side to the B2B procurement and vendor sourcing process adds an extra element of validity to the vendors, Bonner explained, all in the name of fostering a stronger buyer-supplier relationship.
“It's built on trust, and trust is built from working together,” he said. “But the biggest hurdle is the initial discovery and evaluation. Now, more than ever, we live in an exciting time — there are so many great products coming to market.”
Retailers are keen to introduce the newest products to their customer base and link their clients to emerging brands before their competition, but it means these companies are forced to take a risk on suppliers with which they have no past relationship.
“They don't have a history of working together, so the trust of the supplier really hinges on some additional validation,” Bonner said. “We see an opportunity to help build that trust.”