By Agosh Baranwal on 11/19/20 12:59 PM

    How to Source products for your e-commerce business

    You own an e-commerce store or are thinking of starting one. You have already figured out a good niche for your store and if not, no worries because we have a detailed guide for that here. Congratulations on completing the first two steps! Your next efforts now go into figuring out how to source products that you want to sell from your store. In this article, we will look at four ways of obtaining your product stock and try to give you a better understanding of the advantages and disadvantages of each. Also, don’t miss the bonus tips at the end of this guide!

    Now what do sellers like yourself with maybe more experience and an already running business do? There are a variety of methods by which sellers source their products. Most of them use a combination of methods including having manufacturing partners, dropshipping, wholesale, etc. As straightforward as it may sound, remember that how you source products will serve as the foundation for your business and will play a key role in guiding your day-to-day activities.

    Before we start with the list let’s do some math to prepare you for what’s coming. Here is an example, you need to find items on which you can put a mark up (price addition over cost price) of at least 100% to cover all costs and expenses during the sale. Now you might be thinking 100% or more might seem unachievable or unrealistic but here’s the explanation - Let’s assume you chose a wholesaler for all your product sourcing. You went to their website or store and bought 20 different coloured shoes for $400/- with FREE SHIPPING. Now if you sell them piece by piece on your e-commerce store for $39/-, they cost you $20 each, so you make 100% on every shoe. Now let’s assume you are selling some t-shirts, now for a few bucks you can design the garments, so your net cost might be $5 a shirt, but you sell them for $12 each with a print and make 140% or more.

    Now that you have an idea of what math should go on during your decision making process, here are the four basic ways you can source your products. Remember that it is upto you to decide which way suits you best logistically and monetarily. 

    1) Making your own products

    Many successful businesses have grown out of people’s personal hobbies for making things with their own unique twist. For those who love creating things, making your very own products is the ideal way to stock your online store. Whether you make cakes, clothing or candles, you can carry on doing what you have a passion for while supplying your business at the same time.

    Making your own products also enables you to have full control over the quality of your stock and this can be very useful when creating a new brand where attention to detail is what sets you apart from the competition.  It is also a way for you to start small and build your business as demand grows; if you are selling what you make as a hobby, the chances are that you can do it from home with relatively small start-up costs. You may have already acquired much of the equipment you need and have the skills in place to ensure good quality, saleable products. Here are some important things you will have to keep in mind when selling your homemade products-

    • Source materials - Decide where you will get your raw material from.
    • Learn what it will take to ship - Homemade products are often not as durable or well packaged as those that you will get from manufacturers or wholesalers. Figuring out the packaging part is a major step here.
    • Calculate how long your products take to make - Juggling between the product creation, packaging, etc can mess up your on time delivery. Make sure that you have planned things way ahead of time.
    • Consider where you’ll store your inventory
    • Make a plan for communicating timelines.

    2) Get your products manufactured from a third party

    One method used by many online businesses is to have their products manufactured for them. You would be surprised at how many famous brands use another manufacturer to make products on their behalf. It usually makes good business sense – provided you find the right manufacturer.

    Having your products made by another company means you do not need to invest in building your own production operation or have to run that side of the business. On the downside, this can reduce the control you have over the quality of the products as you are putting the manufacturer into the trust of another business. You will need to ensure that the manufacturer can create the products exactly to your quality requirements.

    To connect with the manufacturers directly, you can check business directories and online platforms as well. To ensure the product quality and place of manufacturing, you can request them to visit their factory locations. This will help you rely on their business and can be responsible for building long-term business relations.

    Partnering with manufacturers gives you the freedom to experiment with the products and add varieties in your catalog. The price of the product will vary from the Minimum Order Quantity (MOQ) for products. For bulk orders, you will be able to get discounted rates. Thus, you can add more profit per product.

    3) Purchase your products from a wholesaler

    Without suppliers you have no idea what you will be paying for your products. Consequently you will not know how much profit you can make — or if indeed you can make any profit at all. Proper planning becomes pretty much impossible. Your supplier must be your trusted partner — not a shifty fly-by-night con-artist trying to empty your wallet.

    Traditional wholesale market has been serving the needs of retail businesses since eternity. One of the best ways to add unique product categories at your store is by visiting the warehouse on your own. You can get imported products for your store without actually visiting the places.

    It will be easier for you to explore the variety, range of products, compare the price and place orders.

    4) Use a drop shipper

    So how do you start an online business, if you don’t have enough money to invest heavily in your own dream? You start with less profit. At least that is the promise of drop shipping. However, if you want to go with dropshipping, you can check sites like AliExpress and get your products there. Keep in mind that you don’t get real wholesale prices there and that shipping times are insane and may cause refunds and chargebacks here and there.

    Dropshipping is a great option if you don’t want to spend money on inventory. Test out your idea by placing products on your site that you buy afterwards at another retailer once the sale has been made on your site. Don't forget to communicate a realistic shipping date to the customer.

    Bonus Tips:

    Do Some Online Research

    There are plenty of sites that can help you connect with manufacturers of various products around the world. Be wary of scams or unreliable suppliers – it’s essential that you actually connect with suppliers and ask questions instead of just relying on websites. However, this can help you build a list of potential names that you can narrow down throughout your search.

    Check Out Supplier Events

    Another option for finding potential suppliers is attending trade shows. A lot of people like to check out industry trade shows or markets where you can see a bunch of different vendors in one exhibit hall. Walk around and see what products they have to offer and talk to them face to face so you can ask all those necessary questions.

    Beware of fraudsters

    One of the most common services by fraudsters is to act as a pretend supplier: a company which claims to be a manufacturer or a wholesaler, when in fact it is much further down the food chain — and sometimes at the end of it. Fraudsters will make many claims when in fact they simply cut into the shop owner’s margins — in some cases sell the products to them more expensively than other shop owners sell them to consumers.

    This of course would be impossible, if the prospective store owners had done their homework. By trying to take shortcuts when looking for suppliers, the get-rich-quicksters not only shoot themselves in the foot — sometimes they kill their whole business before it has even started.

    Think beforehand About Scaling

    Ideally, some type of automation option is going to work best for businesses that want to scale. Rather than changing suppliers as your business grows, it may be best to make use of automation early on or at least go with a supplier that offers it as an option.

    In addition to the above-listed ideas, we recommend you to go to the flea markets and offline events targeting your business niche. Visiting these places will surely add thoughts in your bucket and help you connect with the local vendors as well as suppliers/ manufacturers whom you can’t meet offline. Timely you will invent other ideas for products to add to your store.

    Hope this article helped you with your doubts on your issues on sourcing products. Feel free to reach out to us if you have any other queries regarding this.

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    Headings: How to start, Tips