E-commerce platforms can be used by suppliers as an effective channel for obtaining profitable deals. It is important to choose an appropriate strategy, taking into account the costs that a supplier cannot bury while working on such platforms.
There exist hundreds of electronic trading platforms, whether it is corporate platforms that are designed for a single company, where the organizer of the event is the only purchaser, or public platforms where procurement activities can be carried out by different companies or organizations.
Cost classification
The costs of suppliers for working on e-commerce platforms generally depend on the volume and quality of procurement activities, as well as the terms of use of these systems and the organizers of the events. These costs include:
Costs of entry
The entry cost is the resources that a supplier needs to invest in order to start interacting with potential purchasers of their products (goods or services). Such costs can be:
- registration on the platform
- accreditation costs
- preparation of a documents package
- labor costs for preparing proposals
- connection fee (if applicable)
Cost of participation:
- labor costs for learning the system and how to work there
- labor costs for obtaining information from the system
- labor costs for posting information on the platform
- subscription fee (if any)
- commission fees (if any)
Package of documents
As the entry fee for the supplier should include the registration or accreditation procedure, in which suppliers perform a sequence of actions that are pretty same on all electronic commerce platforms. In particular, when registering a new user, the organizers may require a supplier to provide a certain package of documents. Depending on the policy, the content of the document package may differ.
As an example, here is a list of documents required from a legal entity (the potential bidder) when registering on one of the e-commerce websites:
- a copy of a bank statement issued no earlier than six months
- copy of constituent documents
- copies of documents confirming the eligibility of the supplier to participate in accreditation. If another entity (e.g. agency) submits an application for accreditation on behalf of the supplier, a valid power of attorney from the management should be provided in accordance with the current legislation
- a power of attorney to act on behalf of the supplier on a platform (if applicable), that is provided in accordance with the legislation
- copies of documents confirming the authority of the leader
- a decision to approve or conclude transactions based on the results of electronic auctions on behalf of a procurement participant
The cost of entry, as well as the cost of participation in the events, is also determined by the convenience of using the platform including the quality of the user interface. The user interface represents the set of mechanisms by which the user interacts with the system. For example, a convenient E-Sourcing platform with a user-friendly interface can significantly reduce labor costs for processing information in the system and placing information due to automation of routine operations usually performed by the user. The principle works the more convenient the system is to use, the less time, and hence the resources will be spent by both the supplier and the manager.
Effective sales channel
Thus, online trading platforms become an effective sales channel for suppliers, that is, they not only compensate the supplier for the costs of participating in the purchasing activities but also allow them to achieve high results.
Of course, a supplier can count on luck and avoid utilizing trading platforms, and yet, wanting to get a guaranteed result, it is better to consider working on such platforms, evaluating the volume and quality of trading, identifying the right customers, taking into account the positions of competing suppliers, conducting a comprehensive assessment of efficiency.
