Now is an exciting time to start an ecommerce business, and product sourcing is a vital aspect of ecommerce.
Available data shows that ecommerce sales will surpass $6.5 trillion by 2023
Are you well-positioned to effectively and profitably participate in this $6.5 trillion marketplace?
If so, you’ll realize that you need to bring the right product to the market.
I’m talking about a product that provides a solution to a particular problem consumers face.
Equally important, the product’s total landing cost and price must be right to ensure you generate a profit.
For these reasons, you need an effective product sourcing methodology in place.
Product sourcing is crucial for running a successful ecommerce business.
A successful ecommerce business is a profitable ecommerce business.
If your ecommerce business, online store, or whatever you choose to call it is not making profits, then you won’t be in business for long.
So in this article, I’ll provide you with some guidance on the vital things you need to know about product sourcing.
I hope that after reading this guide, you’ll gain more knowledge on how to effectively and profitably source products for your ecommerce business.
Product Sourcing 101 – The Fundamentals
When it comes to running a profitable and thriving ecommerce business, I cannot overemphasize the importance of product sourcing.
You need to learn how to find the right suppliers, source the right products, and coordinate logistics.
But first, what in the world is product sourcing?
What Is Product Sourcing?
Product sourcing is the processing of finding and buying the products you need for your ecommerce business.
Similarly, you need the products delivered to you, right?
Therefore, logistics and fulfillment are also part of product sourcing.
So I’ll define product sourcing as the process of finding, buying, and receiving the right products that deliver solutions that matter most to your customers.
With so many sellers out there in the marketplace, you must get your products from the right sources.
And this means that you must scrutinize every source for the validity of the information they provide you.
Most sellers out there pose as manufacturers when in fact, they are middle persons.
Other sellers are drop shippers who outsource the delivery and fulfillment of your products to a third-party.
To run a successful ecommerce business means delivering results to your customers.
You cannot deliver consistent results to your customers if you ignore the above intrigues with product sourcing.
As such, you must ensure that you’re sourcing your products from the right vendors, the ones who are who they say they are.
Next is reliability.
If you’re starting, then it’s hard to gauge the reliability of a given vendor.
When sourcing on marketplaces such as ThomasNet, Alibaba, or GlobalSources, you can mitigate this by considering each vendor’s reviews.
Nevertheless, you must give due consideration to a vendor’s reliability to ensure they are the right fit for your business.
For example, order a few test samples to see how effective they are in delivering.
Ask them a ton of questions and track if they respond on time and with the right answers.
No matter the scenario, product sourcing is crucial and not a walk in the park. It requires effort to ensure the delivery of high-quality products.
Types of Product Sourcing
Yes, there are different types of product sourcing.
First, you can do it yourself (DIY). Next, you can work with wholesalers or manufacturers. And last, you can collaborate with drop shippers.
Which type of product sourcing is better?
The short answer is – it depends.
It depends on your industry, customers, market, business size, and value propositions.
If you’re selling specialized car parts, you might find synergies by working with a drop shipper.
On the contrary, if you’re selling consumer electronics accessories, you may consider manufacturing your brand by partnering with a manufacturer.
Likewise, if you’re selling known brands, you find that working with authorized distributors (i.e., wholesale) is the best option.
So as you can see, it depends.
But let’s dive in and further explore the different types of product sourcing.
1. Do It Yourself (DIY)
Nowadays, several people are taking the “do it yourself” approach to product sourcing.
From a historical perspective, people have been making and selling their products for centuries.
And with the advent of the Internet and ecommerce technologies, anyone with handcraft skills can make and sell their products directly to buyers.
For instance, products such as handmade jewelry, skincare, cosmetics, pieces of furniture, arts, and crafts are examples that come to mind.
If you are considering making and selling your products, here are a couple of things you need to keep in mind:
- You own your brand and are responsible for its success or failure.
- You must bring to market a unique product and one that appeals to a given target audience.
- Get ready to spend a lot of time and effort in marketing, marketing, and selling your products.
- There’s a low barrier to entry given the low startup costs requirement.
- You need to always stay ahead of the game by thinking outside the box.
- Find new ways to scale and expand your product line and offerings.
The DIY approach to product source is most appropriate if you can produce your products by yourself.
2. Wholesalers and Manufacturers
As mentioned earlier, an alternative to producing the products yourself is to source through wholesalers or directly from manufacturers.
You can work with a wholesaler to buy known brands and sell those brands online.
If you’re in the skincare and beauty niche, you can buy NIVEA or Revlon brands from each brand’s distributors (wholesalers).
Here are some considerations to give when it comes to sourcing products from wholesalers:
- You want to sell established brands that are fast selling
- Ensure that the wholesaler is an authorized distributor of the brands you buy
- Check references to ensure the wholesale is reliable and trust-worthy
- Ask questions, evaluate your options and consider alternatives if necessary
However, what happens if you want to create your brand to compete with NIVEA or Revlon?
Then you’ll need to work with a contract manufacturer who can produce your products under your brand name.
When working with a manufacturer, you can either have them private label existing formulations under your brand name.
Or you can work with them to develop your custom formulations and manufacture under your brand name.
The first scenario when working with a manufacturer is what is known as private labeling.
And the second scenario is what is known as contract manufacturing.
Usually, private labeling or contract manufacturing costs more given the initial set up configurations and minimum order quantity requirements.
However, the key benefit is that you’re building your brand and can be very rewarding in the long run.
But bear in mind that building a brand comes with its own set of responsibilities compared to selling established brands.
3. Dropshipping
Dropshipping allows you to sell products without investing upfront in inventory.
How’s that possible, you may ask.
First, you need to find suppliers who are willing to work with you on a dropshipping basis.
Once you’ve gotten that aspect of the arrangement set up, then you’re all set to go and list the products on your ecommerce website.
All you need to do is generate orders for the given products, send the order to your dropshipping vendor for fulfillment.
That’s it!
Did you know that Wayfair, one of the largest ecommerce companies in the world, started as a dropshipper?
So, don’t ignore dropshipping as an option to build a formidable ecommerce venture.
Dropshipping is that type of product sourcing that gives you freedom and time to focus on other aspects of your ecommerce business.
Think about it.
You don’t have to worry about the initial inventory, packaging, and order fulfillment.
As a result, you have more time to hyper-focus on customer service, markets, and other operational aspects of your ecommerce venture.
While profit margins are generally low with dropshipping, it’s a good segway to expand product offers and test new market opportunities.
What Is a Product Sourcing Agent?
One term you’ll come across as you actively source product is product sourcing agent.
A product sourcing agent is someone with specialized skills and experience finding, locating, negotiating, and coordinating product sources in a given market or markets.
The product sourcing agent is an expert at what they do and can be an individual or a company.
One beneficial advantage product sourcing agents bring to the table is that they have market intelligence and a working relationship with many suppliers.
As such, by working with a product sourcing agent, you have the advantage of locating trusted and reliable suppliers.
Why You Might Need a Product Sourcing Agent
There was a time when having a product sourcing agent was critical to success for an ecommerce business.
In those times, it was more convenient to working a product sourcing agent located in China, Taiwan, or Vietnam to find suppliers for your products.
In fact, the alternative was to physically visit those countries yourself, spend months there, finding the right supplier for your products.
However, this all changed with the Internet and the introduction of online marketplaces such as Alibaba, Global Sources, etc.
So, right now, I can authoritatively state that you don’t need a product sourcing agent to source products for your ecommerce business.
Why?
Because with appropriate due diligence, you can source products online comfortably and conveniently from your home.
However, there are situations where you’ll need product sourcing agents.
So don’t discount their value and benefits just yet.
Let’s explore some reasons why you may need a product sourcing agent.
1. Business Representation
Imagine a situation where you’re sourcing products that need to meet FDA or FCC guidelines.
You have the product’s QA/QC (Quality Assurance/Quality Control) parameters documented.
But you’re not in Vietnam to oversee and verify that the manufacturer meets those parameters during the production process.
Such a scenario calls for having a product sourcing agent in Vietnam as part of your team.
The agent can represent your company in such situations and ensure you meet the local government’s regulatory requirements.
Similarly, product sourcing agents can also help you get better pricing, ensure a constant supply, and much more.
2. Finding Reliable Suppliers
Yes, while you can conveniently source products online from the comfort of your home, not all products are easy to source.
If you are having issues locating a reliable supplier, you might need a product sourcing agent.
These agents are well-experienced in their specialized fields and know how to find trusted and reliable suppliers.
Most importantly, they have what it takes to verify if a supplier is genuine.
And this is critical, especially if your product is complex and sophisticated in its production process.
Frankly, if you want to find out how genuine a supplier is, you would have to visit their factory.
No amount of online factory pictures, video tours, and verification certification can give you 100% assurance that a supplier is trustworthy and reliable.
Visiting their factory, on the other hand, puts all doubts to rest.
However, a product sourcing agent might have already worked with the supplier and have them on their reliable list of suppliers.
Or, the product sourcing agent will visit the factory on your behalf, saving you time and money for a factory visit.
3. Communication Efficiencies
Differences in language, customs, and culture put a snag when dealing with international vendors.
If there’s a language barrier when communicating with your product supplier, it will most likely reflect your product’s quality.
Likewise, if you don’t understand your product supplier’s local customs, traditions, and culture, this can lead to a communication breakdown.
Working with an experienced product sourcing agent can lead to achieving communication efficiencies.
When working with product suppliers, there is no room for assumptions.
If your supplier speaks a different language, then definitely, you need a product sourcing agent.
By the same token, if your product supplier using the latest communications tools (such as email, live chat, etc.) and is remote in location, you need a product sourcing agent.
Overall, attaining communication efficiencies means your product supplier has a 100% understanding of your requirements and expectations.
How to Choose the Right Product Sourcing Agent
Here are a couple of tips to help you find the best product sourcing agent for your ecommerce business:
1. Set Your Budget
To discover the right sourcing agent for your ecommerce business, one of the first and most important things you need is a set budget.
There are different types of sourcing firms out there, and they all have their pros, cons, and costs.
When setting your budget for a product sourcing agent, you should create room for unforeseen circumstances.
You should also make sure you and the supplier agree on the product’s specifications for the agreed amount.
2. Choose a Product Sourcing Agent in Your Niche
The global marketplace is vast.
With so many industries, sectors, suppliers, and products, it’s essential to have a product agent that understands your business and industry.
Some product agents focus on a particular (or a few) product niches.
If you can find a product sourcing agent specializing in your product niche, that will be the ideal situation.
The import of having an agent in your niche is invaluable and should be the first option for consideration.
3. Research and Compare Options
Don’t be shy to research and compare your options. This is a vital step to finding the right sourcing agent.
While doing this, you can use the method of comparing multiple service providers.
You should research about five different agents and compare them side by side.
After comparing, you can pick the most reliable one whose offerings meet your business or personal needs.
4. If Possible, Get Recommendations
One of the fastest and uncomplicated ways of finding a great sourcing agent is to ask for recommendations.
If you know people (i.e., family, friends, business associates, etc.) who has used such services before, you can use them for their recommendation.
Product Sourcing Evaluation Process
When done effectively, product sourcing rewards research, patience, and curiosity.
As such, you need to be meticulous and pay close attention when looking for your ideal product.
Here are some cues to help you source for the ideal product:
1. Research
To differentiate a great product from a good one, you need to carry out extensive research.
You need to thoroughly analyze the product to ensure it solves problems that matter most to your target audience.
Research the product on multiple channels and make sure the demand for the product is good.
If you’ve not read the product research guide, click here to read it now.
2. Is the Product Profitable?
Here’s my mantra – if it’s not profitable, it doesn’t make sense.
When evaluating a product you want to sell, you want to make sure the product has the right profit margin.
If you cannot make a profit on the product, then it is not worth selling.
3. Is the Product Seasonal?
Seasonal products are different from non-seasonal products. So seasonality is another vital variable you need to consider.
You need to understand the product and know if it is seasonal.
Seasonal products have peak and drop periods, and you need to keep that in mind as this will impact your cash in-flow.
Product Inspection
Product inspection is a vital aspect of product sourcing.
You want to make sure the product you are buying is of high-quality and meets the required standards.
As such, proper product inspection can help you avoid buying substandard products.
What Is Product Inspection?
Product inspection is the process of checking the products to make sure they meet your requirements and specifications.
This process focuses on checking the construction, appearance, and functionality of the product.
There are product inspection companies such as SGS and Intertek that operate in this space.
Types of Product Inspection
Product inspection gives you an idea of what is going on in the factory.
It helps you keep track of quality control, ensuring your customers are getting only the best products possible.
Here are the different types of product inspection:
1. Pre-Production Inspection
The pre-production inspection is also known as initial production control.
At this stage, the goal is to ensure the manufacturer understands the product’s specs and features.
It also involves checking the quality of raw materials, the factory’s readiness, or a prototype.
Pre-production inspections happen at the factory after the arrival of raw materials and before production commences.
2. During Production Inspection
This inspection occurs while the production of the product is in progress.
It involves the checking of the products after 20 percent of the production is complete.
The production inspections check the product’s dimensions, visual appearance, labeling, packaging, barcode verification, functionality test, and more.
3. Pre-Shipment Inspection
The pre-shipment inspection occurs once production is 100 percent complete and at least 80% of the products are packed.
Doing a pre-shipment inspection allows you to have the supplier fix any issues before paying and receiving the product.
4. Loading Inspection
The loading inspection is another quality check to ensure the products’ proper loading into the container.
It is another all-around checking of the products once they are ready to be loaded onto the container.
5. Sort Inspection
Sort inspection involves separating the defective products from the non-defective ones to know the exact number of good products for shipment.
Steps for Product Quality Inspection
When performing a quality inspection on your products, it’s essential to do so correctly.
Here are some of the steps of product quality inspection:
1. Checking Packaging Details
When inspecting the product, there are many aspects of the packaging that needs checking.
The shipping packaging, retail packaging, and carton packaging all have their unique checking style given that they also have their artwork, dimensions, and markings.
You should check to make sure that all of these meet your requirements and specifications.
The inspector should also make sure that barcodes on the product are functional and consistent.
2. Visual Inspection
At this stage, the inspector has to check the product’s dimensions and appearance.
They should also confirm that the package includes all the necessary accessories.
It is also imperative to make sure they are of the right colors, shape, and design.
The visual inspection stage is where defective and non-compliant products are selected out.
3. Reviewing and Writing Reports on Defective Items
Any defective or non-compliant products discovered should be removed, documented, and a picture taken.
The individual performing the inspection should write a report on all defective products review before production acceptance and payment.
How to Find The Right Suppliers for Your Online Store
When sourcing products to sell online, you first need to find a supplier.
However, with the vast number of suppliers out there, finding the right one for your business can be challenging.
Moreover, the process can be even more challenging if you sell numerous products online.
And this because you’re continually looking for reliable suppliers for multiple stock-keeping units (SKUs).
Nevertheless, with adequate research and guidance, you can find the ideal product suppliers for your ecommerce business.
Here is how to find suppliers for your online store:
1. Online
When looking for the right supplier for your store, one of the first, best places to start is online.
While searching online, you have two primary options: online supplier marketplaces (or platforms) and supplier websites.
Alibaba and Global Sources are great examples of online marketplaces for connecting with suppliers around the world.
Whereas ThomasNet is an excellent example of an online platform for discovering USA product suppliers.
These marketplaces and platforms allow you to achieve the primary objective of finding and locating potential product suppliers.
So you can browse them as well as supplier-specific websites to explore and discover products that matter to you.
You can also read customer reviews from other buyers to ascertain the quality of service a supplier provides.
On Alibaba especially, you’re able to view product pricing information and initiate the order process right on the marketplace.
Ultimately, sourcing products online is a standard practice that is fast, efficient, and reliable.
Unless in circumstances where you need a specialized product or custom manufacturing requirement, you can source most products online.
2. Offline (Tradeshows, Flea Markets, Etc.)
Online sourcing does not have a monopoly on the product sourcing process.
You can also source products and find reliable suppliers offline via tradeshows, flea markets, expos, etc.
However, the attendance of trade shows and industry expos has seen a considerable decline over the past years.
And with the recent COVID-91 pandemic, the situation is worse as governments worldwide have put restrictions on such gatherings.
Nevertheless, tradeshows and expos are still among the most important and reliable sources for new product research and acquisition.
In fact, with the COVID-19 pandemic, organizers now adapt tradeshows and expos into an online model that allows you to meet with suppliers live online.
Likewise, the same goes for flea markets, and community swap meets.
All these offline methods for product sourcing allows you to get immediate information about the product you want to buy, see the product firsthand, and establish relationships with suppliers.
Benefits of Sourcing Online vs. Offline
- Product sourcing online gives you a lot more product choices and suppliers.
- Competition is high among online suppliers, and as a result, you get better deals if you take the right approach.
- Sourcing products online is less stressful – no travel, being in an unfamiliar environment, etc.
Disadvantages of Sourcing Online vs. Offline
- With so many options (products and suppliers), it can get a little confusing to make a decision.
- Too many inexperienced suppliers and middle persons fill the online marketplaces making it a challenge to deal directly with the real source.
- Lack of proper communication and understanding of your requirements can lead to getting products that don’t meet your expectations.
How to Source Products to Sell Online
Ecommerce is a highly competitive industry. You need to continually look for ways and strategies to stay ahead of the competition.
And one better way to do this is to find ways to source the right products that solve specified problems your target audience is facing.
If you’re not continually bringing trending, innovative and cutting-edge products to your audience, someone else will.
As a result, knowing how to identify and keep track of trending products is essential in ecommerce.
How to Source Trending Products
Fortunately, there are some resources that you can use to find new and trending products to offer your customers.
Here are some of those tools:
I covered some of these tools in the product research guide. So I highly recommend you take out time to read it.
7 Important Strategies to Sourcing Products to Sell
Here are some essential strategies to employ when sourcing products to sell online:
1. Product Research
When sourcing products to sell online, the first thing you need to do is to research the product.
It would help if you did proper market research to understand the product and its market potentials.
Market research is fundamental to your ecommerce business’s success, and you need to dedicate a lot of time and resources to it.
2. Adopt a Proven Model
There’s no need to re-invent the wheel. You can adopt a successful, proven product sourcing model of other online retailers.
Research any successful ecommerce store or the sourcing strategies of your potential competitors.
Your goal is to learn what they are doing, how they are doing it, and adapting it to fit your own business.
3. Conduct Supplier Outreach
After carrying out proper research, the next step is to reach out to your potential suppliers.
By now, you have clarity on the product you want, its specifications, and features.
So take advantage of the different online marketplaces and platforms to reach out to suppliers and present them with your quote request.
You should follow up with suppliers you met at tradeshows and expos via email and continue the communication process.
4. Request for Samples
Make sure that you request product samples to ensure the products meet your requirements.
The right supplier should be able to provide you with samples after reviewing your requirements and specifications.
Like I mentioned earlier, this is a good tell sign of a supplier’s reliability and trustworthiness.
If the sample request and receipt process are not smooth, move on and explore another supplier.
Note, it’s standard practice for suppliers to charge a sample fee.
Some suppliers might give the sample for free but require you to pay for the shipping cost.
So keep this in mind when requesting samples.
5. Place a Trial Order
So you’ve received the samples, and everything looks good and meets your expectations.
Some suppliers might even exceed your expectations, which is a good thing.
Now, you want to place your first order. If you’re going to buy 1,000 units of the item, start with a lesser quantity, let’s say 200 units.
Your objective here is to make sure this trial order meets the vital performance indicators and parameters you’ve set.
6. Evaluate Performance
During the trial run period, you should evaluate the supplier by setting parameters to gauge its performance.
If the supplier meets your needs and targets, you can establish a long-term relationship with them.
If not, you should try another supplier.
7. Have Multiple Options
Depending on the type of product, it’s risky to work with one supplier in ecommerce (or any business, for that matter).
Therefore, you should have multiple suppliers you work with in the event of market dynamics that you can’t control.
For example, if a supplier suddenly decides to hike prices or is having inventory issues, you can work with another supplier.
Having multiple product sourcing options is an acceptable practice to ensure you have products when you need them.
Importance of Having Multiple Wholesale Product Sourcing Options
Having the right products at the best price and in stock is essential to success in ecommerce.
As such, to ensure you have constant inventory availability and stable pricing, it’s vital to have multiple suppliers and wholesale product sources.
Doing so gives you an edge over the competitors, as you will hardly run out of stock.
Here are other great benefits of having more than one option when it comes to wholesale product sourcing:
1. Consistent Supply & Inventory Availability
As stated earlier, you are less likely to run out of products when you have multiple suppliers.
You will always have an alternate supplier if one increases its price or runs out of stock.
2. Better & Stable Prices
Having more than one supplier in your product sourcing mix gives you better pricing options.
You will get different offers from the other suppliers and pick an option to increase your profit margin.
Likewise, you’re able to offer consistently table pricing to your customers without constant price changes.
3. Quality Control & Assurance
You can compare each supplier’s product’s quality with multiple suppliers and pick only the best option.
Doing this will help you to avoid low-quality and substandard products.
Final Thoughts
Product sourcing is not a walk in the park as it’s a crucial operational aspect of your ecommerce business you don’t have 100% control.
While sourcing the right products and finding reliable and trustworthy suppliers is rigorous, it’s equally rewarding once you’ve found your best sources.
It would help if you learned to create good relationships with suppliers, as it will benefit your business in the long run.
How are you sourcing products and finding suppliers for your ecommerce business?
What challenges and sources are you experiencing? Please join the discussion and comment below.
