How to source products to sell online?

Have you figured out what products to sell online? Have you researched whether is there any online demand for your products? If your answer is yes, it’s time to explore on methods to source your products, that’s unless you are producing them yourself.

Understanding the Distribution Chain

If you want to be in retail business, it’s critical for you to understand the basic of distribution chain. Not every single business will fit into this flow but generally it’s how a product reaches the consumers via several channels.

Distribution Chain

Distribution Chain

Obviously, you as an online retailer can source from manufacturer or wholesaler. However, most manufacturers and wholesalers are usually selling in volume. If you are not stocking up in bulk, it’s hard to get a deal with them. That’s why smaller retailers sometimes have to source from other intermediate distributors or suppliers.

As a rule of thumb, try to get as close to the manufacturer of the product as possible. The closer you get, the better your buying price will be, and the higher your profit margin.

Dealing with Wholesaler

Finding reputable wholesale suppliers requires some legwork. Some pose as a wholesaler but mark up the price, another reason is some genuine wholesalers don’t have web presence since they already have deals with big retailers thus don’t bother to expose themselves to small-medium businesses.

That’s why you need to do some groundwork offline. For example, if you want to sell Samsonite bags. You can call Samsonite’s headquarter and ask for the sales department. Tell the sales department that you have a retail business and intend to sell Samsonite bags. Request for a list of their wholesale distributors in your area and they should be willing to provide you that.

This is one of the ways to identify legitimate wholesalers, to give you an edge in both your profit margin and the competition.

Other Sourcing Methods

Besides the standard bulk wholesaling method, here are some other alternatives to source your product:

  • Local sourcing – Keep your eyes open on garage or yard sales in your area. Those often provide good profit margin but the inventory level is usually random or limited. You can also visit craft markets where there are countless small manufacturers, who are willing to work with you to reach wider audience.
  • Drop shipping – If you don’t have much budget to stock up your inventory, this is the way to go where you don’t need to keep goods in stock. You accept orders at your storefront, transfer the request to your drop shippers and they will ship the order. Since the shipping process  is not within your control, it’s extremely important to source for reputable drop shippers.
  • Light bulk – If you want the control over order fulfillment, some suppliers are willing to offer lower minimum orders. Pricing might not be that attractive but you can afford more flexibilities, especially if your are just starting your business.
  • Importing - More and more online retailers are sourcing products from overseas, especially China. However, bringing in products yourself could be expensive, as a workaround you can look for those importers who have already brought in the products to your country.
  • Liquidation - Business is being closed down for a reason. If product demand is not that particular reason, clearance sales is a great way to find bargains to stock up your inventory. But, bear in mind that this is not a renewable source. If the products are sold out, it’s tough to restock them in the same manner.

Useful Sourcing Tips

Every sourcing methods have their pros and cons. It is best to use a mixture of sourcing methods and find the right balance to maximize the profit for your business.

Always start small and play safe.  For a start, order in smaller quantities even though the profit is thinner. Again, go as far as you can to verify the legitimacy of your suppliers. Avoid the scammers and impostors!

Image credit: BBC

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