The Supplier View: Ten Tips to Consider Before Participating in Networks and Marketplaces

Based on interviews with multiple suppliers and our own experience working with many of the supplier network and marketplace providers in the past decade (not to mention our own role as a supplier in the media and advisory ecosystems), we've come up with a list of the top ten tips vendors should consider if they're even remotely considering participating in supplier networks such as Ariba Discovery that promise to help match suppliers with buyers (not to mention paying something to do so):

  1. Be selective -- find the right marketplaces where you know there is a track record of historic volume in the specific areas you compete in. Don't take generic descriptions of categories that are up for bid as a signal that common opportunities are in your wheelhouse. Dig into the details and be selective.
  2. Don't assume that just because "Fortune 500" customers are using a supplier discovery network/marketplace that it's the right fit for you, even in categories in which you can provide materials or services. Claims of actual company awards and usage to new suppliers should be validated and simple automatic inclusion in RFPs because of a network embedded in a tool are unlikely to result in any real opportunities at an early enough stage in the sourcing process when a new supplier has a realistic opportunity.
  3. Be wary of claims about what specific buying organizations are using a marketplace for. Find out the percentage (on a category by category basis) of business awarded to new suppliers competing for business.
  4. Understand the economics of participation up front, and unless you're sold on the idea of writing a check without hesitation (and without a convincing sales job), don't do it. Participate in a more limited fashion at first and then work up to a longer-term agreement if it makes sense and you're earning business from the site.
  5. Look for models (their aren't any large ones left, unfortunately) that align supplier-paid fees with awarded business vs. requiring upfront monetary commitments.
  6. Separate out any decision to participate in a network that is for transactional purposes (e.g., submitting an invoice, requesting early payment for a discount) from participation for business development objectives.
  7. Don't be a guinea pig without incentives -- if there are not other supplier accounts that can be contacted for reference in your specific area of expertise or supply that can site hard dollar returns from using a site, then either: A) look elsewhere for network participation; or B) work out a creative fee structure arrangement given that you'll be paying for something unproven. Then, if you're successful, the network or marketplace will benefit from using you as a use case.
  8. If you're a global supplier (especially in China or India) be wary of any claims of thousands or millions of Western buyers using a site or the fact a network or marketplace is on "millions of desktops."
  9. Consider the total costs of doing business through supplier networks and marketplaces, including the need to hire full-time sales and channel managers to effectively use resources. Don't assume you can personally handle the inbounds efficiently without dedicated resources.
  10. Do you own due diligence around any site, network or marketplace just as you would do customer due diligence before starting to sell to a new large account. Ask around your industry how others have fared. Ultimate network size, the number of buyers, the size of buyers and the quantity of business up-for-bid means nothing if it's not awarded to those you know in your ecosystem. Validate before trusting any claims, or, as the saying goes, "show me the money!"

- Jason Busch

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