Product sourcing is one of the key aspects of running an eCommerce store. With over 2.6 million people shopping online, owning an eCommerce business is a profitable idea. But even if you already know what you will sell, you may wonder how to get those products.
That’s what product sourcing is all about, and it’s more complex than you think.
Below, we delve into the fine points of product sourcing for eCommerce and why it’s important. We will also list the steps to sourcing products and recommend where to find quality items.
What is Product Sourcing?
Product sourcing is when businesses buy and resell items from a third party. There are several ways to source products, but some methods may work better for different business models. In addition, you’ll want to pay attention to other aspects, such as logistics.
The average product sourcing process includes these steps:
- Market research
- Vendor and wholesaler analysis
- Price comparisons
- Negotiations
We’ll cover these steps in more detail below. But first, do you know why you need an excellent product-sourcing process?
Why is Great Product Sourcing Important?
When you have an effective product sourcing process, you’ll always stock your inventory with high-quality products.
Creating the best product sourcing strategy requires market research and negotiating with third-party sellers. Still, this process always starts with finding a trustworthy partner to supply your inventory.
The best product-sourcing companies offer consistency and reasonable prices, so your store will have a regular revenue stream.
Popular Product Sourcing Methods
There are many product-sourcing websites and businesses, but getting lost in all your options can be easy. We recommend wholesalers, dropshipping, and manufacturers.
Understand, however, that there’s no correct place to source products, and there are more options than these. It’s important to consider your ideal eCommerce business structure and which product-sourcing company will work best for you.
Buy from a Wholesale Business
A wholesale business makes products in bulk and sells them to various retailers. All wholesalers are different–you can buy directly from them or partner with a third party who will direct you to wholesalers.
There are many reasons to choose wholesale sourcing. For starters, they make various products, and most are designed to fit market trends.
Since wholesale businesses specialize in making bulk items for different outlets, they’re often one of the cheapest options. This also means profit margins are some of the best–retailers usually make between 20%-50% when selling wholesale products.
Wholesalers are also a good option for businesses that need consistency. They send items frequently and offer fast shipping options, so you can keep your stock full.
But don’t forget that there are still some downsides to using a wholesaler. For instance, many wholesalers are located overseas, and shipping times may be longer. Luckily, most wholesalers offer expedited shipping options.
Since your competitors may also be going this route, it can be difficult to stand out. You’ll need an effective pricing and branding strategy to attract more buyers. New sellers must look out for certain factors, such as private labeling and custom orders.
Use a Dropshipping Supplier
As a dropshipper, you’ll go through a third party to source, store, and ship your products. This is a popular model for new online sellers, since you can focus on your business’s branding, marketing/advertising, and customer service.
As a dropshipper, you’ll source your products from the supplier. This supplier will hold and ship the products for you, and you’ll serve as the customer-facing business.
There are pros and cons to dropshipping. One of the biggest benefits is that starting a dropshipping e-commerce business is easy. Plus, there’s no middleman; you connect to the supplier who will set you up with your inventory.
You can still build a unique brand for your shop, create the listings, and handle all marketing and advertising. You also don’t have to worry about storage and shipping. Since dropshipping is a global business, you can find suppliers in your country for quick shipping options.
However, there are definite cons to dropshipping. You have little control over your products, which is challenging for businesses selling niche products. Besides, you’ll still be responsible for processing payments and managing orders.
Partner with Manufacturers
Manufacturers produce finished goods. Their business structure is more versatile than the others; they can act as wholesalers and product sourcing services, but some may also sell directly to consumers.
While manufacturers can create white-label items, this is one of the best options for private label and custom orders. That’s why working with a manufacturer is a great option for online retailers that sell niche items, need custom products, or have other complex requirements.
Choosing a manufacturer is also the best option if you’re specific about product quality. You have more control over your order and what you’re selling, which can result in higher profit margins if you have a solid plan.
There are still downsides to working with a manufacturer, though. If you place a custom order, you must conduct market research to ensure you can profit.
Manufacturers are usually more expensive than other options. Most have Minimum Order Quantity (MOQ) requirements, which can get pricey. Since you’ll need an upfront investment for your order, you’ll need to procure enough capital or already have a consistent revenue stream.
It also takes longer to receive your order from a manufacturer. Almost every business has a process that includes sampling, prototyping, production, and refinement. If you order from global product-sourcing companies in a different country, it may take months to receive your items.
How to Source Products
Are you ready to source products for your eCommerce business? There are some steps you’ll follow before you have your products listed on your website.
Know the Market
Product market research entails gathering information about your consumers and competitors and analyzing this data to plan the products you should sell. Market research also benefits your marketing and advertising strategies to target your audience better.
Market research has three parts:
- Consumer needs
- Industry trends
- Legislative updates (if applicable)
How do you conduct market research? Most eCommerce businesses use a combination of these tactics:
- Focus groups
- Surveys
- Magazines and blogs
- Customer interviews
- Industry reports
- Government reports
- Trade publications
You should have all this information before finding a supplier. This way, you can source the best products immediately, test these items, and find solutions to any problems.
Understand that market research isn’t a one-time task. Most consumer markets always change with trends and new demands. It’s best to conduct market research at least once every few months to fulfill your target audience’s wants.
Evaluate the Supplier
Don’t choose the first vendor you find. Always evaluate their business, pricing, shipping policies, and reviews before partnering with any supplier.
If you don’t see this information on their website, see if they offer a free consultation and ask these questions:
- How long does the product sourcing process take?
- What will be the total cost of production and shipping?
- Do you offer expedited shipping? What can you offer in terms of international shipping?
- Can I see the contracts and terms before signing?
- Do you have MOQs?
- Who do I contact for support? Will I need to work with a third party for communication purposes?
Get Samples
Once you find a reputable vendor, it’s a good idea to ask for samples before giving them any money.
Understand that this step depends on your business model. For example, some dropshipping suppliers may not offer samples, though most do.
When you receive your sample, check the quality and if the product looks the same in photos. Plus, you can use the sample for product photography and your marketing/advertising efforts.
Ordering samples is also important since you’re gauging the vendor’s competency. You’ll better understand their process, communication, packaging, and shipping. Plus, offering a sample proves they’re serious about product quality and maintaining good relationships with retailers.
There are some best practices when ordering samples:
- If shipping overseas, ensure there will be no duty charges.
- Include specifications, such as color and dimensions.
- Keep in contact while the sample is in production and after it has been shipped.
- Ask for a company tag and model to differentiate the sample from the items you’re selling (if you’re storing your inventory).
- Obtain the necessary trademarks or patents before creating the sample.
If you can, source samples from several suppliers. This way, you can find the highest quality items at the best prices. You’ll also ensure you work with a vendor that offers great services.
Production and Shipping
All vendors have different time frames for production and shipping. In cases such as dropshipping, your items might be available immediately. But if you order directly from a manufacturer, you may have to wait weeks for the production process.
If you’re storing your products, the vendor must also ship them directly to you. Shipping times vary from a couple of weeks to several months, depending on the size of your order and where the vendor is shipping to.
You must also plan your storage, stock management, packaging, and shipping strategies as a business. Some businesses seek help from a third-party fulfillment/shipping service, while others handle it DIY.
Set Your Prices
All of these product sourcing types come with expenses and other costs, such as shipping. You’ll also have your own operational expenses when you rent storage space and hire labor for inventory management, order fulfillment, and marketing tasks.
You must factor all these expenses into your price to make your ROI.
Do You Need Help Product Sourcing for eCommerce?
To stand out as an online store, you must have excellent product sourcing for eCommerce. This includes knowing where to source your products:
- Wholesaler
- Dropshipping supplier
- Manufacturer
Ecommerce businesses must also create a product sourcing strategy that includes market research, rating supplies, getting samples, pricing, and preparing for production and shipping.
This sounds like a lot, which can be intimidating for new businesses. Don’t worry, we help new brands launch on Amazon and other marketplaces, and we can help you find the best product-sourcing solution.
Click here to learn more about our services.
Author
Stephanie Jensen has been writing e-commerce content for seven years, and her copy has helped numerous stores rank on Amazon. Follow her on LinkedIn for more insight into freelance writing and creating high-quality content.
