E-commerce platforms and websites can be used by vendors as an effective channel for obtaining profitable transactions. It is critical for vendors to develop a convenient strategy for working on such platforms, considering all details of working on such platforms and the costs carried by suppliers.
One of the key advantages of commercial electronic trading platforms for suppliers is the ability to participate in the procurement activities of multiple customers. At the same time, the potentially high cost of entry and participation in procurement activities increases the risk of unjustified costs. In some cases, suppliers may be obligated to pay a subscription fee. For example, on some platforms, the supplier has to pay a few hundred dollars per quarter for an opportunity to participate in an unlimited number of reverse auctions and RFQs conducted by one customer. At the same time, the suppliers who work with an unlimited number of customers constantly pay a few thousand dollars per quarter as the subscription fee.
Therefore, special offers may become attractive for suppliers. For example, the suppliers may appreciate the opportunity to participate in the reverse auctions and RFx events of certain companies for free.
Another great example of a highly-valued proposal that suppliers may appreciate is the ability to organize their own sourcing events. The suppliers should be able to work on the platform not only as a participant but also as organizers of the auction. Suppliers of unique complex goods and services should be able to provide their proposals through a public offer or a forward auction.
Participation in the auctions or RFx events conducted in the public sector on state electronic trading platforms has some specifics for suppliers. The advantage of such public procurement platforms, maybe the absence of transaction fees. We are talking about a commission of a fixed percentage of the conducted transaction. At the same time, it should be taken into account that the purchasers from the public sector are obliged to require each potential supplier according to the law to ensure participation in the reverse auction or RFx events, and then to ensure the execution of the contract.
When participating in purchasing activities in the public sector, the supplier must be confident in its ability to fulfill all obligations under a potential contract. If the contract is initiated, and the supplier fails to fulfill its obligations, then the supplier may be included in the register of unreliable suppliers and banned from further participation in public sector procurement.
After evaluating the number of resources required for participation the supplier will have to interact with potential customers on electronic trading platforms.
An approximate strategy for participation on such platforms includes the following steps:
- Registration on the platform
- Exploring the user interface
- Participation in multiple reverse auctions or RFPs
- Analysis of the platform’s effectiveness
Prequalification can be significantly affected by the presence (or absence) of potential customers on the platform in whom the supplier would be interested. The supplier should evaluate comprehensively potential customers who organize the RFPs or reverse auctions on the platform. To do this, the supplier may examine the history of this customer, analyzing the results of the tenders held on his initiative, the procurement activities practiced, the evaluation criteria used within these events, and the practice of ensuring the execution of contracts. In addition, it is advisable to familiarize yourself with the procurement regulations of the customer, his procurement plan, and the history of litigation (if any). All this will help the supplier evaluate the prospects for further cooperation.
If there are three suppliers among the permanent awardees who win in turn, then the supplier should consider whether it is possible to compete with them on an equal footing and become the fourth. If there is usually only one supplier among the winners, then the chances are obviously minimal. When the range of suppliers is wide, the supplier can participate in the event without not falling much in price.
Analyzing the effectiveness
The analysis of the effectiveness of work on the platform is carried out by taking into account the following indicators:
- Number of sales
- Price fall level
- Cost per client
- Loyal customers that were obtained (if any)
Thus, the supplier will be able to create a pool of convenient electronic trading platforms that will become the most effective sales channels for him, that is, not only compensating the supplier for the costs of participating in the reverse auction or RFP but also allowing him to attain high profits. For example, a convenient E-Procurement platform with a user-friendly interface can reduce labor costs for both suppliers and purchasers due to the automation of routine operations performed by users.
The suppliers can count on luck when working on such e-commerce platforms. But it would be more appropriate to conduct proper preparation by examining all the details of utilizing the platform, evaluating the quality of the reverse auctions and RFx events conducted there, and evaluating potential customers and the capabilities of other suppliers.