Direct-to-consumer (D2C) brands are all the rage in e-commerce these days. Finding quality manufacturers and suppliers are not only an essential part of building a successful business, but a critical one, particularly in an era where every customer complaint, comment, or problem is amplified online through the echo chamber of social media. As we say in the product business, you are only as good as your last order.
Savvy manufacturers are increasingly taking the D2C route to building direct sales channels, rather than through online marketplaces, wholesalers and other traditional distribution channels. Moreover, the barriers to entry are so low these days, that it is hardly surprising that manufacturers have joined existing FMCG and other consumer brands selling online using a host of low-cost tools that make it increasingly easy for new brands to enter the marketplace.
Finding a manufacturer is one of the biggest challenges any company faces. We are often asked how a company develops a D2C-specific procurement strategy to identify and choose world-class manufacturers or suppliers, as we explain below.
Savvy manufacturers are increasingly taking the D2C route to build direct sales channels, rather than through online marketplaces, wholesalers and other traditional distribution channels. Moreover, the barriers to entry are so low these days, that it is hardly surprising that manufacturers have joined existing FMCG and other consumer brands selling online using a host of low-cost tools that make it increasingly easy for new brands to enter the marketplace.
Finding a manufacturer is one of the biggest challenges any company faces. We are often asked how a company develops a D2C-specific procurement strategy to identify and choose world-class manufacturers or suppliers, as we explain below.
Do your homework
When finding a new manufacturer to produce your own product, work on a detailed product specification sheet which outlines all the critical components of your product—everything from materials, colour, size, and weight to the packaging artwork. If you have good quality photos, make sure to include them—or at the very least links to similar products online. It also helps to furnish samples of your product; nothing works better than a physical sample in communicating your needs to a factory.
Compliance Counts
Does your product need specific testing to sell in your market? Make sure you list out the testing certification you require. Selling in places like California or certain EU markets may require specific labelling and/or testing requirements to ensure compliance with local laws. We always advise buyers to work with 3rd party accredited laboratories, like SGS and Intertek, when sourcing products to find out what testing, if any, is needed.
Sustainability
If your company has a sustainability policy, share that with your supplier to ensure they can comply. Often times products that are made from recycled or other sustainable materials require vigorous testing and traceability standards to ensure their legitimacy.
Identify the best suppliers for your D2C product category
One of the easiest ways to find a good supplier is to start by looking at who your competition buys from. There are a number of websites out there that can help you track suppliers of brands and retailers in the market. (For instance: Panjiva) These category manufacturers can also be important sources of information, help evaluate the potential of new product features and over the long term help you keep track of your competitors. You would ideally want to turn one or two of these suppliers into partners and work with them to cut costs while improving your product’s features.
Find an Expert
If these manufacturers are based overseas, your best bet would be to find a local sourcing expert with experience in the relevant product category who can help you identify, choose and start working with the ideal manufacturer. One classic mistake that companies make is using a company with no prior experience in their product category which can be problematic, so try to find sourcing partners or experts with the relevant experience.
Also read: Robust warehousing solutions driving the Indian D2C market
Selecting the Right Supplier
Selecting the right supplier for your D2C brand depends on a lot of factors and prices and minimum order quantities are just the starting point. For example, you would want to evaluate their capabilities for making new and complementary products to enable you to grow your brand later (if your D2C brand is starting with men’s shirts and trousers, would your supplier be able to make women’s dresses too?) You would also want to thoroughly evaluate quality including certifications and adherence to standards. We’d also recommend paying close attention to reliability, which can be established by asking for client testimonials or references. Does their corporate culture match yours? This is another factor to consider since some factories may have business practices that are in opposition to your own. What customers do they work with? A factory’s existing customer base is usually an important reflection of its capabilities.
Working with a local sourcing expert can make this job easier as they can help you shortlist the best suppliers for your D2C brand expeditiously. Or better yet, you may find an expert who has previously worked with these suppliers and can attest to their reliability.
Invest time in claim verification
Unscrupulous suppliers are known to not only make outrageous claims, many also pay advertising fees on popular online marketplaces to improve their ranking in the search results. This creates an obvious problem, namely that a high listing in search results does not necessarily mean they are a good or reliable supplier. Furthermore, most marketplaces themselves do not vet or audit their suppliers.
In fact, if your product category is regulated by government-enforced standards, verifying and ensuring that you are working with a trusted supplier can be the difference between running a business vs defending yourself in court. It may be totally worth the effort and resources to fly down to the supplier’s factories and spend time auditing or verifying their claims yourself. If they are based abroad, a local sourcing expert from platforms like BuyHive can help you with this audit.
Start building a relationship
Once the supplier is selected, you need to undertake three important actions.
First is to agree on quality and service levels, including delivery timelines, before you start. You may also want to negotiate terms and conditions to deal with quality or delay issues. Establishing clear quality standards is super important, especially when working with a vendor for the first time. We encourage buyers to contract with a third-party inspection company to ensure you have an added layer of inspection to your goods.
Secondly, monitor the performance if your supplier and see how they perfrom. Was their delivery on time? Did they have any quality problems? Did they fail to deliver on a promise? If you have a poor partner, we encourage you to look for backups and contingencies.
Thirdly, you need to immediately start nurturing a long-term partnership. This is key, particularly in Asia, so the stronger your relationship, the better. We also encourage as much face-to-face discussions via Zoom or MS Teams to ensure you’re nurturing your relationship properly.
Plan ahead for disruptions
The Covid-19 pandemic and now the Russia-Ukraine conflict have revealed some of the risks of managing an international supply chain. An effective D2C procurement strategy must account for supply chain disruptions and provide you with an alternate plan of action to deal with a supplier or logistical issues. That being said, many companies are starting to set up contingency manufacturing bases in smaller markets like Vietnam and India to mitigate the risk of geopolitical problems which may impact supply chains in larger manufacturing markets like China.
To conclude…
Sourcing the best suppliers for a D2C brand is a daunting task and requires ongoing care and management. When you partner with the wrong supplier, the consequences can be catastrophic; likewise, the right supplier can help propel your company to the next level.
Focusing on the key elements: relevant experience, compatible corporate cultures, price, quality, reliability, and the strength of your relationship are all crucial elements to consider when building your supply chain. Finding a good supplier is the first step towards success for any product-based company.
This article is authored by Minesh Pore, co-founder of BuyHive, a global tech-enabled sourcing platform.
