The Secret To Multi-Vendor Commerce Sustainability: Don’t Charge Your Suppliers

By Jager Robinson | June 10, 2024

Logicbroker believes in three simple tenants. First and foremost, we are here for our customers. Every new product and feature is designed with direct input from our customers. Second, Logicbroker exists on the fundamental truth that speed-to-market is everything. From our On-Demand Onboarding to the Connected Commerce Network® (CCN), our tools get our customers to market as quickly as possible. Thirdly, and perhaps most important to the longevity of our retail customer’s success, Logicbroker does not and will not charge suppliers to connect to our client’s multi-vendor commerce programs. 

Unfortunately, these tenants are not always the case in this industry. More and more, due to rising input costs for retailers, multi-vendor commerce platforms are charging suppliers. Everything from a simple connection for doing business to accessing their retail partner’s portal is now charged. And, quite frankly, these charges are fairly appalling. Problematic providers now charge suppliers a percentage of GMV for each sale or a flat rate per order. 

At Logicbroker, not only do we believe this is inherently unproductive, but it’s also just bad business for retailers leading to four key issues: supplier participation, onboarding speed, market dynamics, and feature support.

Limiting Supplier Participation 

A standing truth in eCommerce is that a retailer cannot sell if their suppliers cannot join their multi-vendor commerce program. Seems simple right? The good news is that it is simple. Suppliers prefer to work with retailers that allow them to effortlessly connect to their network. The bad news is that platforms that focus solely on charging suppliers for the effort drastically limit the new and emerging brands that will participate in a retailer’s program. 

Every new supplier looking to work with Retailer X will require a cost-benefit analysis. For larger retailers, this may not be a problem, as most suppliers will want to sell on Amazon, Walmart, or TikTok. For retailers looking to expand their dropship or marketplace program who don’t have the historical sales in new expansion categories to back up the cost, suppliers will instead flock to the platforms that don’t charge them an arm and a leg to participate

Slowing Down the Onboarding Process

Retailers already spend a significant amount of time and effort working through dropshipping contracts. Between the initial contact, redlines, agreements, legal checkups, and signing, a majority of onboarding time can be spent working through the initial deal. The last thing either party wants is to wait for another lengthy contract cycle once the supplier starts negotiating with a retailer’s platform. 

Even worse is when a supplier you’re actively trying to onboard can’t come to terms with your provider leading to an entire lost contract cycle. 

Starting the supplier onboarding process should take hours, not weeks. Once you start calculating the cost of two separate negotiation periods, supplier onboarding for these providers starts being measured in months. When the typical “fad” lasts less than a season, onboarding suppliers to quickly meet market demand is paramount. 

Losing Control Over Your Own Program

Control is a fundamental aspect of every dropship or marketplace program. Retailers need to control both the products they feature and the margins they operate on to ensure a healthy operating experience. 

As a small organization, the lure of a platform that reduces or even eliminates fees seems appealing, but the reality is that you’ll still pay those costs in margins received from the supplier and as a small organization in today’s market, the most important thing to your organization is profitability. 

Supplier costs aren’t isolated to just the fulfillment process. While a retailer may enjoy the reduced fees from a legacy provider’s “supplier-first” contracting, the reality is that those costs you would normally incur simply come back in the form of margin negotiations with suppliers that are looking to cover the cost of the platform connection. 

This brings retailers down a rabbit hole of initially enjoying the reduced costs, realizing continued weaker margin positions than their competitors in their dropship or marketplace program, and then inevitably switching off of that platform provider due to the negatives associated with charging suppliers in the first place. Fortunately, this cycle is avoidable. 

Ultimately, it Comes Down to Support

For these problematic providers, support is reserved for those who pay. If the platform you choose is structured solely on charging the suppliers associated with your program, there is little to no incentive for that platform to help you grow, differentiate, scale, or move beyond your current stagnant environment. The difference at Logicbroker is that our White-Glove Support system isn’t reserved for anybody. We think that just makes sense, but the reality is other providers have begun eliminating retailer support as a way to make up for lost fees. 

These platforms focus solely on recruiting and curating established sales channels to further incentivize supplier participation. Not in your program, but in the other retailers on their platform. 

Let’s say Retailer X signs Suppliers Y and Z to their program on this platform. Once onboarded, this platform’s entire goal is to further market to Suppliers Y and Z. Retailer X’s part is done. These platforms earn money based on percentages or order fees. Their goal is to market those same suppliers to retailer X’s competitors further driving up the cost to work within their platform.  

The reality is. these platforms look to sell the retailers “tools” to manage their program, but not the support needed for that program to thrive like white-glove service designed around automated onboarding support, supplier scorecards, dedicated support reps, and more. 

This leaves retailers in a tricky spot. Sure, they aren’t paying for their program, but they are truly “paying” for their program’s lack of onboarding and technical support in the backend. Teams of workers will need to handle the integrations, legal support, delays, and more to simply exist on these platforms. 

That seems like a nightmare before you’re even putting your head down to sleep. 

Figuring Out True ROI

These four key points essentially boil down to understanding ROI. It’s not a simple task, we know. Logicbroker has spent thousands of hours calculating the ROI potential for our customers, and we encourage each retailer or brand looking to capitalize on the dropship or marketplace program to sit down with their provider. 

While we would encourage you to reach out to our solutions engineering team for this, we, at the minimum, would highly encourage you to figure out what your current ROI looks like from your existing provider. Understanding what your returns actually look like beyond the initial investment is paramount to understanding if your “free” solution is actually worthwhile. 

About Logicbroker

Logicbroker is a premier multi-vendor commerce platform that seamlessly connects trading partners regardless of integration types. Our modern solutions empower retailers and brands to take control of their customer experience by harnessing and analyzing vital first-party data, reducing inventory risk, and curating their expanded assortment. By improving the visibility into our client’s commerce programs, Logicbroker can better position retailers and brands for transformative growth.

As business needs and demand shift, Logicbroker provides the ability to quickly switch suppliers and product fulfillment between 3P to 1P and responsibly find new sources of inventory that uphold your brand integrity and meet your delivery promise. ​We work with mid-market and Enterprise manufacturers and retailers across a number of verticals including Health & Wellness, Home Improvement, Consumer Electronics, Toys & Babies, and Consumer Packaged Goods and service brands such as Samsung, Victoria’s Secret, The Vitamin Shoppe, Walgreens, Ace Hardware, and BBQGuys.

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