Sourcing merchandise begins with some questions: Should you buy from a manufacturer, wholesaler, or dropshipping supplier? How will every option have an result on your margins, branding, and enterprise growth?
These are big questions.
Why? Your product sourcing strategy will function your business’ basis and may have a major influence in your overall success.
Get this proper and you’ll set the stage to scale your corporation. Get it mistaken and you could waste numerous hours and dollars.
No stress then…
That’s why we’ve put collectively this product sourcing information. In it, you’ll learn all about the three major strategies of sourcing products. Plus, we’ll share an eight-step product sourcing strategy that will help you get began.
Let’s dive in.
What is Product Sourcing?
Product sourcing definition: Product sourcing is the method a enterprise uses to amass the merchandise it plans to sell. Businesses can source merchandise from producers, wholesales, dropshipping suppliers, or print-on-demand companies.
three Common Ways to Source Products
The first step when sourcing merchandise is to determine which kind of provider you wish to companion with:
These product sources are very different, and each one will heavily have an effect on the foundations of your corporation.
Before you start sourcing merchandise, it’s very important to understand their differences, strengths, and weaknesses. Only then can you choose the tactic most suited to your corporation.
Let’s take a extra in-depth look at each product sourcing technique.
Manufacturers are the companies that make the merchandise you want to sell.
Working immediately with a manufacturer is a nice way to supply merchandise if you have a unique product concept. This could be for a new product that’s not currently on the market or a variation of an current product.
Before developing a new product, you would wish to validate the market demand and be assured that it’ll sell.
You’ll additionally need to carefully handle the design process and create prototypes in partnership with the producer. This process could be prolonged, sophisticated, and expensive.
Manufacturers are sometimes extra centered on making than promoting. As a outcome, they usually prefer to work with a small number of massive retailers and traders. For this purpose, manufacturers normally promote merchandise in substantial portions. Think 4 figures, or even 5.
It can be difficult to construct relationships with manufacturers at first – particularly should you plan to outsource manufacturing to a foreign country like China or India. In these instances, time zones and language barriers can make communication troublesome.
Where to Source Products from Manufacturers
You can source merchandise from producers by attending trade reveals or utilizing in style B2B marketplaces, like Alibaba and IndiaMart.
* Low value per unit. Sourcing merchandise immediately from producers implies that there aren’t any middle-men. Consequently, you need to be in a position to attain a low cost per unit – and better margins.
* Unique merchandise. You’re capable of create unique, branded products that help to differentiate your corporation from competitors.
* Easy to broaden. Once you’ve a working relationship with a producer, it’s simpler to create new products and expand your small business.
* Large minimum order quantities (MOQs). Most producers set excessive minimum order portions that require businesses to speculate significant capital upfront, with no assure the merchandise will promote.
* Need for storage space and infrastructure. You’ll be liable for storing and transport orders. (Although, it’s possible to simplify this course of with the Shopify Fulfillment Network.)
* Logistically challenging. You have to handle product growth, prototyping, transport, duties, storage, and order achievement.
* Long lead occasions. Creating a new product and bringing it to market can take months, if not years. If you’re employed with a foreign producer, the delivery and customs clearing course of alone can usually take a few months.
* Potential for fraud and foul play. If you supply products from abroad, it’s attainable that manufacturers might try to rip-off you. As a end result, you’ll must do plenty of due diligence before inserting an order.
Wholesalers are brands that promote items and products in bulk to both brick-and-mortar and online retailers.
Wholesale product sourcing is a straightforward process that’s far easier to handle than working with a producer to create merchandise.
And by purchasing merchandise in bulk, you’re still in a position to get a low-enough price per unit to enjoy wholesome margins.
Most wholesalers list their merchandise on product sourcing websites, so it’s straightforward to search out new merchandise to sell. Plus, there are numerous product options to develop and broaden your business.
Where to Source Products from Wholesalers
There are many product sourcing web sites on the market designed to help you buy wholesale – together with Handshake!
I know – shameless plug, right? But for good cause.
Here at Handshake, we’ve vetted and curated a singular selection of unbiased creators. These suppliers and product collections are handpicked to make it straightforward so that you can source merchandise that assist your store stand out from the gang.
* Good margins. You’ll usually discover larger margins when manufacturing and smaller margins when dropshipping – wholesaler distributors provide a cushty center floor.
* Quick and Simple. Wholesale product sourcing is relatively quick and simple – particularly when utilizing a platform featuring only pre-vetted and curated suppliers, like Handshake.
* Validated merchandise. Other businesses are normally already promoting wholesaler’s products, so you realize they sell. As a result, there’s much less threat than when bringing a brand new product to market.
* Less capital is required upfront. Wholesale product sourcing typically requires much less cash upfront than you’d have to manufacture products.
* No must develop merchandise. Wholesale product sourcing doesn’t require you to spend time, effort, and money creating new merchandise.
* Branding opportunities. Although you’re often unable to differentiate the product itself, many wholesalers provide personal labeling services that allow you to brand products, similar to Stoney River.
* Differentiation is challenging. It could be difficult to differentiate your corporation from opponents when promoting the same products.
* There’s still some threat. You nonetheless have to purchase stock upfront with no assure the merchandise will sell.
* Need to manage inventory and success. You might must store inventory and fulfill buyer orders. (Again, you can get round this issue by using Shopify’s Fulfillment Network.)
* Supply administration challenges. As your business grows, you’ll likely begin sourcing merchandise from multiple wholesalers, which may turn into troublesome to manage.
To study extra about wholesale product sourcing, take a look at The Ultimate Guide to Finding the Best Wholesalers Online.
3. Dropshipping Sources
Dropshipping isn’t just a approach to supply merchandise, it’s also a method of fulfilling buyer orders.
Here’s the means it works: You associate with a supplier and list their merchandise in your online retailer. Then, when a buyer locations an order with you, your supplier is notified. The provider then ships the order to the client in your behalf.
Here’s an in depth breakdown of the dropshipping sourcing course of:
Where to Source Products from Dropshipping Suppliers
There are two primary ways to start dropshipping.
1. Strike up direct partnerships with wholesalers who provide dropshipping services. Then, create a approach to handle orders and payments.
2. Use a platform that connects you with dropshipping suppliers, which additionally automatically manages orders and payments for you.
The first choice lets you find tremendous area of interest products that not many different businesses are selling. But it’s much more tough to arrange and handle.
The second option makes it simple to attach with suppliers and start promoting on-line in less than an hour when utilizing a platform like Oberlo.
Other dropshipping sources include print-on-demand providers like Printify and Printful. These companies permit you to customise your products. You could additionally take a look at area of interest dropshipping sources like coffee provider Dripshipper and artwork provider Creative Hub.
* Inexpensive. Dropshipping is by far the most affordable and easiest way to begin promoting on-line since you don’t must buy inventory upfront. As a result, your funding could be as little as $29 per 30 days – the price of a Basic Shopify plan. (Oberlo is free!)
* Little-to-no danger. Because it’s possible to run a dropshipping business the place your solely expense is a Basic Shopify plan, the one thing at risk is $29 per 30 days and your time.
* Large selection of merchandise. Because you don’t must take possession of any merchandise, you probably can supply a big number of merchandise from the get-go.
* Easy to test new merchandise and increase. You can check as many merchandise as you want without any risk, as a end result of there’s no cost to adding extra dropshipping products to your store.
* Easy to scale. Dropshipping sources manage the storage, packaging, and transport for you. As a outcome, you can focus on rising your corporation with out infrastructure or logistical limitations.
* Easy to work remotely. Because you don’t physically deal with products, it’s easy to run a dropshipping business entirely on-line – so you possibly can do business from home or while traveling.
* Competition. The low barriers to entry mean that almost anyone can begin a dropshipping store – that is wonderful, nevertheless it also creates plenty of competition.
* Tough to distinguish. Most companies sell dropshipped products that aren’t branded or different from competitors’ products. This makes it challenging to face out from the crowd. To compete, you’ll have to develop a strong model and stellar customer support.
* Smaller margins. Another enterprise is sourcing, storing, and fulfilling customer orders for you – this makes your margins slimmer than when you supply merchandise wholesale or via a manufacturer.
* Difficult to reinvest. With smaller margins than wholesale product sourcing, you’ll have much less money to put money into advertising activities to grow your small business.
* No management over inventory. You’re reliant in your dropshipping suppliers. For example, you may set up a profitable product, solely in your dropshipping supplier to expire of stock.
Which Product Sourcing Strategy is Right for Your Business?
It’s important to weigh every product sourcing method’s professionals and cons to resolve which is probably the most suitable in your business’s needs.
Most massive, established companies prefer to work instantly with manufacturers to chop out middle-men, have extra management over the design process, and purchase merchandise in massive quantities. They’re also extra comfy dealing with the sizable upfront investments, long lead times, and complicated delivery processes.
On the other hand, smaller companies which are keen to minimize threat, source products shortly, and simplify logistics are probably to keep away from working directly with producers.
Established small businesses, assured entrepreneurs, and growth-minded retailers are likely to choose wholesale product sourcing. This technique doesn’t require such large investments as sourcing merchandise from producers. However, it still supplies good margins, control over inventory, and branded packaging alternatives.
New entrepreneurs and those with little or no startup capital should contemplate sourcing products from dropshipping suppliers. There’s no need to invest in inventory upfront – which means there’s little-to-no risk. It’s also a nice way to be taught the ins and outs of ecommerce, selling, and digital advertising.
That mentioned, you might consider using multiple of those product sourcing methods.
For example, it’s not uncommon for a business to design and manufacture a flagship product after which supply complementary merchandise from wholesalers or dropshipping suppliers.
How to Source Products: A Step-by-Step Product Sourcing Strategy
If you want to know how to source merchandise for your small business, here’s an eight-step technique to help get you began.
1. Conduct Market Research
Before you begin sourcing products, it’s important that you simply conduct some market analysis to make sure there’s a demand on your thought. Make positive to analysis rivals, pricing, and your goal market. Plus, create a plan to differentiate your business.
2. Choose a Way to Source Products
Do you need to work with manufacturers to create a model new product or supply merchandise from wholesalers and dropshipping suppliers?
3. Use Product Sourcing Websites
Choose a method to attach with suppliers, corresponding to Alibaba or Handshake.
four. Decide Whether to Source Products Locally or From Abroad
Are you involved in global product sourcing from international locations like China or India? Perhaps you’d choose to source merchandise from the USA? Make sure to weigh the pros and cons of home suppliers vs. global suppliers.
5. Verify Your Product Sources
Before you place a big order, make sure to confirm your product sources. You can do this by asking for official documentation and verifiable testimonials.
6. Verify and Test the Products
You additionally need to verify the merchandise themselves. The greatest way to do that is to order samples. It’s additionally a good suggestion to begin with a small test order. This means, you can see how the product sells and how prospects reply earlier than making a larger investment.
7. Have Backup Suppliers Ready
When sourcing merchandise from wholesalers and dropshipping suppliers, it’s important to make certain that you don’t run out of inventory. However, you don’t have control over the supplier’s stock, so it helps to produce other suppliers ready within the wings.
8. Keep Sourcing Products
Don’t wait till gross sales slow down to begin sourcing merchandise. Plan for the future – consumer preferences might change, and competitors will catch up. When gross sales are sturdy, begin on the lookout for your subsequent best-selling product.
Summary: Product Sourcing a hundred and one
Product sourcing is a course of businesses use to acquire products to promote. In summary, there are three primary kinds of product sources:
* Manufacturers make the products you intend to promote. They usually present the greatest level of control and the bottom price per unit. However, they usually set sizeable minimum order quantities and require businesses to deal with complex logistical and communication challenges.
* Wholesalers supply products from manufacturers and promote them in bulk to companies. They typically present good margins, and the product sourcing process is way easier than working with a manufacturer. However, companies usually must adjust to the wholesaler’s pricing rules and handle their own stock and fulfillment.
* Dropshipping suppliers own and retailer the merchandise you sell online. When a buyer places an order in your web site, the dropshipping provider will ship it to the client on your behalf. This product sourcing technique presents little-to-no threat and allows businesses to check as many merchandise as they like. However, this method often offers the smallest margins, and it may be difficult to distinguish from rivals.
Make certain to gauge each product sourcing strategy’s execs and cons to guarantee you select the best technique for your business.