So following on the e commerce theme, another tweet which popped up into my. News feed the other day was from a guy called Jay Bason Tha Raja. I may have murdered that name. Apologies I have. And he tweets some really interesting stuff about e-commerce as well, as well as the previous guy. Jeff Riley says, often worth poking in and seeing what he’s getting up to. But he’s got a really great thread on there about the relationship between e-commerce and. Stores and their suppliers. The relationship between those two entities, and it’s a good long thread, but it’s the sort of the main point of the thread is he says, I often see e-commerce businesses having only a transactional relationship with their suppliers. This is the wrong approach. You need to start treating your suppliers like they’re your investors, straight business partners. If you succeed, they succeed. And he illustrates the point in that thread with the example of Phil Knight, who’s the guy who started Nike shoes. And back in the 70s, it was a relatively small operation. And he went out and there was a big at the time there was a big sneaker manufacturer or training shoe manufacturer in Asia called a Tiger Shoes. And he went out and basically negotiated the sole U.S. rights to these line of Tiger sneakers or training shoes. And the way he did it, this was without having any sales of Chinese shoes or sneakers whatsoever in the US. But the way he did it is by going and pitching them on the relationship and how, you know, he he he and Nike would build the Tiger brand and tiger sales in the US where they didn’t have any exposure at that point in time. And Jay goes on to suggest. When you’re actually approaching supplies, even if you don’t, the main leverage you have as an e-commerce store with your supplies is the amount of volume that you do. But even if you don’t have much volume, you can still approach these people. And the way that you should be sort of trying to have a conversation with them is by saying things like pitching them like you would an investor and you effectively you want to go to them with a sort of pitch deck that says, okay, this is where and how we’re going to, you know, sell your stuff. This is how we’re going to put it into the market. This is how we’re going to grow your volume and our volume, as well as a win win kind of situation and get them to buy into your vision in terms of how it is you’re going to sell it and how you’re going to grow it. And the figures and the growth model that you’re suggesting, because if you have the suppliers on board and if you can paint them a picture of, OK, here’s here’s where we are now. But here’s the rosy future over here. And this is where we want to get to. And they’re on board on that sort of win kind of thing. Okay. You’re not gonna do much volume now, but, you know, the volume down the line is gonna be great. You can then often sort of approach them for terms that you otherwise wouldn’t be able to achieve with them. So, for example, you know, you could get sort of better repayment terms. If you get 60 day repayment terms rather than 30 day repayment terms, then that allows you to sell a product into the market, get the money in from selling those things, and then pay off your supplier, which basically means that you have you know, you need less CapEx. You need you know, you don’t necessarily need to go out and get loans or investment from elsewhere. You can get your supplier to invest in your supply chain. And, you know, I’d be a partner in sort of growing your your business. I felt this was an interesting approach, not not one that people won’t have thought of necessarily, but just like doubling down on that partnership aspect with suppliers I thought was quite interesting and the sort of approaches that he was suggesting, taking the final example he gives them. That’s right. Which is slightly controversial. He’s saying about Mexican drug cartels. So basically, they’ve gotten a knife approach to all of their downstream suppliers and they suppliers and they treat them really, really well. And they have great net terms with all the people who are sort of growing and making all of this cocaine of various sort of stuff. And obviously, they’ve got the carrot and stick approach in that, you know, we want decent terms and you can either give that to us or you might want to or we’re going to kill you or something. But we’re not suggesting you do that, but. Yes. Rethinking your approach away from being purely transactional, as in here somewhere over here. I just give them some money. I get some product. I then go and sell it to. So that partnership approaches is quite interesting. And I think that’s not just in e-commerce. Right. Any supply you’re got in any business is worth trying to engage and bring that relationship on so that it feels, you know, you’re both pushing in the right same direction together. What are your thoughts?
Yeah. On goods. On business. When do so good scrub down services. Your suppliers are critical. And it’s not only because of the quality of the product, but also because of your product, your distribution as well. Ours. How fast can they produce them? How cheaply can they produce them? But you know, the quality and materials and then is there and then you cover the shipping as well, the turnaround. So especially it’s especially important nowadays or it will be for some industries. You know, globalisation, it’s upside down now. So probably it’s not on trend. Countries are becoming more protectionist. They don’t want to depend from other countries. And if they are lay travel restrictions, would they make or whatever or or for a trade tariffs, sort of like a trade war. So if you have supplier sales where now it’s probably safer to have them within your own country or economic area, you know, countries that are partners or whatever. So there is certainly a shift between that and the relationships that will stand are those that are strong. So. So you in.
Yeah. So that’s why it becomes even more important. And if if you cannot keep for did you know if it’s not economic, only a Bible to keep a relationship with your suppliers and those countries and you will need to find new suppliers, then you will need to again reapproach before it was a commodity. Maybe you can just outsource to Asia. Yeah, just go for volume and and more transactional. But now there is no other way. So it’s such a. Apart from their business and it’s under threat for many reasons, the travel restrictions, tariffs, protectionism in general, like like privacy. To those that are so on tech components, for example. So then then you have all these human rights or working rights as well. So you have costs changing as well. Production costs on each country. So then it’s a highly complex environment. So you so you need to think about your suppliers very thoroughly and uncertainly, build relationships because you can have a hit otherwise or. Yeah. Or would be out of business within that product category at least. So you, um, you want to have a great relationship, but as well I have like a process with them brainstorming like a partnership as well. Whereas. So if you both are under threat, how can you overcome that or those adversities. Maybe I can start selling together in other countries or you can move production to another country because they have the know how on you. You have the local facilities so you can combine skills to get around it. But you need to do that. You would need to have a great relationship. And I look forward to to grow with them, rather done from them. So you agree it’s really important, especially nowadays for e-commerce.
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