Sourcing product oversea or local is a important step of your business.
So, you're the one with the ideas. A visionary who knows how to brand and is ready to storm the heights of ecommerce. The only problem: product sourcing. How do you get what you want to sell and send it to the consumer? Finding a supplier is not a difficult concept to understand. But, execution is a different matter. This guide will walk you through the three most reliable methods of product sourcing ecommerce storefronts. Read on to learn their pros, cons, and how to get started.
In two words, product sourcing is getting stock. However, running any business is about more than just procurement; you must consider whether it will be lucrative to bridge the supply and demand. Therefore, sourcing products for ecommerce is a multi-step process.
First, you need to know what to sell. Just because you are an ideas person who can think up innovative products does not mean they will sell. You must consider market viability. You could use this ecommerce marketing analysis tool to confirm your idea. Also keep the following questions in mind: Is the niche big enough to support new sellers? Moreover, the target audience should have enough disposable income to afford what you're selling. Finally, how will you compete with established businesses in the niche?
Product viability is another concern. Provided that there is an established market for your product, there must be enough demand. Furthermore, there needs to be a sizeable margin on the product to make competitive pricing worthwhile. Once you establish that your idea is viable in your target market, you can look for vendors.
To find a good supplier, start by defining your needs. Price, quality, customer service, delivery time, and production capacity all have a role to play in your business. Which of these do you value most? Do those priorities match your customers’? Use your needs to set up selection criteria. You will use these as a sort of checklist when comparing different vendors.
When compiling a list of possible suppliers, do your homework. Find as many references as possible and look at reporting agencies such as BBB. Once you have your list, apply the selection criteria to see which vendors are the best fit. As an alternative, you could use a digital product sourcing service to handle the process for you.
You need to get the best prices possible to keep your margins high. Your list of suppliers should be smaller after a vendor analysis, but you still may have several businesses on it with very different prices, procedures, and requirements. Find the one closest to the price you want that still fulfills your other needs.
Sometimes the negotiation will be quick and easy; other times, it can be nerve-wracking. Regardless, you will need to make sure that the supplier is willing and able to provide what you need in terms of price, service, speed, and capacity. Depending on the type of supplier, you may have different responsibilities in the partnership. Once you've reached an agreement, it's time to make a profit!
While there are many ways to source products for ecommerce storefronts, three have proven to be the most reliable. Other methods still work. However, our preferred choices offer a balance of options for new businesses and established ecommerce empires. In addition, they are easily replicable and do not require highly specialized skills (though those can come in handy!).
Dropshipping is a method that offers both procurement and fulfillment for ecommerce businesses. The arrangement is simple and effective. First, you create an ecommerce storefront, then link products provided by your dropshipping supplier directly to it. Then, when a customer buys something, you alert the supplier of all relevant data, pay them, and they ship the item straight to the customer on your behalf. One of the most attractive things about this method is that you can automate a significant part of it, freeing up time to spend on other sources of revenue.
How to Start Dropshipping
First, you need to seek a supplier that carries the products you want to sell. If you do not have a clear idea of these products yet, you can go onto online marketplaces like AliExpress to browse items in your target niche. Whether you want to offer something fully customized and branded or generic, you should spend time studying the B2B market in your vertical.
Most of the suppliers you are likely to find are wholesalers (see below) that offer dropshipping services. After a vendor analysis, ecommerce business owners will usually connect with dropshipping suppliers in two ways. First, more traditionally, they will negotiate a process for managing orders and payments. Direct communication is an excellent approach for limited numbers of niche products but can be challenging to operate as a business scales.
The fresher alternative is to use apps that connect your ecommerce store directly to marketplaces like Aliexpress and allow you to list items quickly and automate the payment process. For example, Oberlo is a popular platform that integrates with Shopify and streamlines a dropshipping arrangement's setup and payment logistics. Other product sourcing services and data analysis tools can also help you find the best dropshipping suppliers.
· Lowest startup cost. You only need to pay for your digital storefront.
· No minimum order quantity (MOQ). Your customer orders, and the supplier sends the product directly to them.
· No inventory. This is huge. Dropshipping eliminates both the cost and liability of maintaining an inventory. Furthermore, most new businesses have no storage.
· Low margins. You pay the dropshipping supplier to procure, store, and ship the products. You can look at the arrangement as a type of overhead; you pay for convenience with a heft part of your profit.
· Very competitive. With a low barrier to entry, dropshipping is open to everyone. However, it may be challenging to break into a saturated market.
· Generic products. It is tough to brand a dropshipping business, and most of them sell generic, mass-produced products. However, some suppliers offer print-on-demand branding, which can be a great asset.
Wholesalers are a middleman between manufacturers and retail outlets. They generally source products from several manufacturers and sell them in bulk to digital and brick & mortar retailers. In addition, wholesalers will sell to bulk consumers such as large offices, schools, and government agencies. Although the wholesaler method is more hands-on and less convenient than dropshipping, it affords more flexibility and discretion.
Starting an ecommerce business based on the wholesaler model is like starting with dropshipping, at least at the beginning. First, find a viable product by looking at the marketplace and seeing what sells and what doesn’t. There are a lot of data points to consider, so a wholesale product sourcing program can help analyze product trends and let you know what’s hot and what’s not.
Your vendor analysis of wholesale suppliers can take you far afield. You could start with local businesses or artisans who can directly supply a new ecommerce store. Companies that are not online yet or have only made B2B sales are good options. There are many foreign wholesale suppliers on platforms like eBay and Alibaba, although the quality of their products is sometimes a concern. Finally, wholesale directories are a great place to look and offer access to the broadest array of suppliers.
After you have done your vendor analysis and vetted several options, order samples of the products to ensure you are satisfied with the quality and shipping time. Remember that you must consider all your needs when choosing a supplier. Just as with dropshipping, money is not the only concern! Once you have selected a wholesaler and arranged your ordering and payment procedures, you can get started turning a profit.
· Bulk discounts. Depending on your product and market, you will find higher margins with wholesalers than dropshippers, anywhere from 20% to 60%.
· A small number of accounts. Wholesalers source from many different manufacturers and usually carry many products. Their extensive catalog may allow you to carry as many things as possible without setting up a relationship with another wholesaler.
· Easily scalable. Because wholesalers carry so much, you will find it easier to increase your offerings. Branching out can grow your impact within a small niche, or it could diversify your business by tapping into another vertical.
· High startup costs. You will need to order in bulk before you ever make a sale. This is a difficult proposition for people who have never opened a retail store before. Some wholesalers have a high MOQ which requires you to buy dozens or hundreds of units in each order. It isn't easy to get started with most wholesalers without upfront capital.
· Inventory. Not only do you need the space and capital to keep an inventory, but it is also a potential liability.
· Fulfillment. Unlike the dropshipper method, you will oversee fulfillment, from packing to labeling to mailing and returns. Many ecommerce business owners would rather have a smaller margin than a larger headache.
Manufacturers make the things you sell. Since they have complete control over production, they are capable of customization, branding, or selling standard models. Finding a manufacturing supplier can be difficult, but it gives you a high degree of control over the actual product. On the other hand, they can be challenging to manage and slow to implement.
As with any other method, you need to find something to sell. However, since you will partner with a manufacturer, you can design the product yourself if you have the skills. You could also sell the manufacturer's standard models. Once you think the product and market are viable, get started with your vendor analysis.
The vendor analysis of manufacturers is like finding a wholesaler. The main difference is that manufacturers tend only to sell to other businesses, so you should focus your search on B2B marketplaces. An additional part of the process is prototyping. If you submit your own design or collaborate to alter an existing item, you need to examine each manufacturer's prototype for quality and cost.
Product sourcing ecommerce businesses through a manufacturer can be complex, so using a service that helps you trace successful products back to their source can be very helpful. As with the previous methods on this list, you’ll need to set up your payment and delivery procedures. Then, it’s time for the grand opening!
· No middlemen. Sourcing direct from the manufacturer yields the lowest cost per unit. Therefore, you can expect more significant margins with the manufacturer method than the other sources on our list.
· Customization. The manufacturer can change existing designs to create new ones. They can also apply whatever branding you want to whatever they produce, so you have complete control over quality and appearance.
· Direct-to-customer (DTC). A growing number of manufacturers will ship products directly to customers. The manufacturer must have the ability to store an inventory or produce items on demand. This service is like dropshipping, but no intermediary is taking a chunk of your profits.
· High Startup Costs. Manufacturers often sell to wholesalers who have the capital and inventory space to buy in bulk. As a result, most manufacturers will have a high MOQ, which means you better be confident the product will sell.
· Long-term implementation. It can take months to develop and prototype a new product. Foreign shipping and clearing customs can also slow things down. You can mitigate these problems by finding a local manufacturer or selling standard models, but that will prevent you from enjoying the freedom inherent in the manufacturer model.
· Logistics. You are responsible for all logistics unless you find a DTC manufacturer. This is like the wholesale model, except you also have a hand in production if you are a designer or collaborate with the supplier on a new product.
Product sourcing ecommerce stores is straightforward in principle but can be tricky in execution. Luckily, many aspiring entrepreneurs have already explored the many options open to you. Anyone can start a business with dropshipping, wholesale suppliers, and manufacturing partnerships using reliable methods that do not require special training. And with so many product sourcing services available to help you connect with the best suppliers, now is the time to start or scale your ecommerce business!