Online retailers of all sizes have several options when it comes to sourcing their products. Retailers may get their products from:
- manufacturers
- affordable wholesalers
- various distributors
Online retailers may source products domestically or internationally. Quality and price vary widely, so start with thorough research and product samples.
If you are planning on starting an e-commerce business using your own website or a service like Amazon FBA, consider the pros and cons of each of your inventory sourcing options to boost your profit margins and deliver what your customers need in a timely fashion.
How to source products from manufacturers
Working directly with manufacturers may help online sellers get their inventory at the lowest possible prices by cutting out the middlemen (wholesalers and distributors). Without any middlemen to deal with, retailers can get affordable, high quality products that are in demand, further helping them boost profit margins.
However, many manufacturers prefer working with retailers who are able to place large orders, so online sellers who are just starting off with a low budget might not be able to work directly with manufacturers at first. In addition to minimum order requirements, a seller might also need to have an established reputation and sales record before a manufacturer will sign an agreement with them.
You can locate manufacturers by joining industry associations and trade organisations that are geared towards the products that you want to sell. You can even connect with domestic and overseas manufacturers by building the right network and attending trade show events, but sellers also have the option of contacting a manufacturer directly to discuss their options.
How to source products using distributors
Some manufacturers may not be willing to work directly with online retailers at all, so another option would be to work through a distributor. Contacting a manufacturer and asking them for a list of their recommended distributors may help you get access to better bulk discounts and may also ensure a higher-level of quality control. While distributors rarely sell the products directly, they are usually the preferred points of contact for the manufacturers. When you work with a distributor, you may get the benefit of being treated like a big fish, even if you’re still a small fry.
Some distributors have exclusive buying arrangements with manufacturers, so if you want to sell a very specialised product, you may have to go through a distributor. Distributors may also have rights to sell the product in a given location, so again, you may have to go through them depending on the item. Most distributors do not sell directly to consumers (or newbie online sellers), so you may need to go through a wholesaler to get the item you want.
How to source products from wholesalers
Many online retailers sell wholesale products, either as is, or with their custom brand applied to the product. Wholesalers work as middlemen between the retailer and the manufacturer of the item. For online retailers who are unable to purchase directly from a manufacturer or distributor, this is the most likely source of retail products.
Wholesale suppliers from Asian nations, including China, may provide the lowest prices to new online sellers. You can locate suppliers by browsing platforms like Alibaba, AliExpress, Global Sources, Bambify, IndiaMart, and Made-in-China.com.
Other directories, such as Wholesale Central and Wholesale Network, are also available to help online retailers get the products they need while sticking to their budget. Plus, sellers can also look through trade magazines and attend trade shows in order to find and meet the ideal wholesalers who can provide them with the right inventory at the right price.
Other popular options for online retailers
In addition to wholesalers, distributors, and manufacturers, there are a few other ways that online retailers can stock their inventory affordably. These include:
- Using an importer, particularly for purchasing products from abroad. This option allows retailers to buy direct from foreign businesses whose products may not be available through wholesalers and other distribution channels.
- Using auction websites, such as eBay’s Wholesale Lots section, to find a variety of products at affordable prices. It might take a bit of practice to learn the best ways to watch auctions and buy products at the lowest prices, but online sellers might be able to save money by participating in these auctions or using the “buy now” option.
- Using drop shipping methods. You may be able to find a manufacturer who will fulfill individual orders for you while you manage the digital storefront. This practice is called ‘drop shipping’. You can read more about the pros and cons of drop shipping here.
The pros and cons of overseas vs. domestic suppliers
Building an inventory might involve the use of both domestic and overseas suppliers. But there are some pros and cons that are associated with each of these options, so some sellers choose to stick with one over the other.
- Sourcing products domestically might involve higher costs and fewer product choices, but the items may be manufactured to a higher quality. If your USP is not strictly defined by price, you can even use the fact that you’ve sourced products domestically as a component of your marketing strategy to appeal to consumers who want to purchase products made domestically or to higher labor standards. Purchasing inventory domestically can help cut down shipping times and costs and may ensure that nothing gets lost in translation when you’re placing orders.
- Overseas suppliers, on the other hand, can often sell their products at a lower cost, making it easier for online sellers to generate higher profits once those items sell. However, It could also be more difficult to verify whether an overseas supplier is legitimate, and you might need to deal with the challenges that come with customs clearance to import products into your country. (Services like Amazon’s FBA may be able to help with this.)
Selling at home or abroad
When it comes to selling online, don’t forget that there’s a global market out there. More and more marketplaces are creating new programs to facilitate international selling, so don’t just limit yourself to your home market.
Sources:
https://www.shopify.com/blog/13975985-how-to-find-a-manufacturer-or-supplier-for-your-product-idea
https://www.entrepreneur.com/article/69902
https://www.thebalance.com/how-to-buy-wholesale-merchandise-2890056
IMPORTANT: The contents of this blog do not constitute financial advice and are provided for general information purposes only without taking into account the investment objectives, financial situation and particular needs of any particular person. OzForex Limited (trading as OFX) and its affiliated entities make no recommendation as to the merits of any financial strategy or product referred to in the blog. OFX makes no warranty, express or implied, concerning the suitability, completeness, quality or exactness of the information and models provided in this blog.
