If you want to start an online business, the first thing you would want to know –
‘What are the best products to be sold online and how can I get them?’
The answer to this question forms the fundamentals of online selling. Without the right products by your side, you won’t be able to attract customers. Without customers, there’s no point in running an e-commerce business.
In the past, merchants used to embark on long journeys to faraway destinations, travel in caravans, or ride atop a horse to source the right products for their target customers. There was Silk Road, Amber Road, etc., crisscrossing the chest of the globe to link buyers to sellers. But time has significantly changed now and merchants can do product sourcing without even leaving the comfort of their homes.
Unless you are creating products yourself, product sourcing is one of the first few steps to starting an e-commerce business.
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Want to know more about product sourcing and how to do it right? This complete guide will walk you through the basics, types of product sourcing, tips to get started, and more.
What is Product Sourcing?
Product sourcing refers to the process following which you can attain the stock for your store. In other words, it is about buying product inventory from a third-party source and then reselling them through your online store. Even if you want to sell both offline and online, the right product sourcing strategy will be the linchpin for your business.
From a business perspective, finding trustworthy vendors or suppliers in the market is not a tough task these days. You can simply add your profit margin and other overhead expenses (for logistics, brand marketing, and customer support) over the cost of sourcing products to make your business profitable.
Types of Product Sourcing
Since the world of product supply is vast and wide-ranging, you may get lost in the rabbit hole of product research easily. But to keep your product sourcing research, prioritize the following types carefully:
| Types of product sourcing | Description |
| DIY services or products | This is preferred by solo artisans or a group of artists specializing in producing certain niche products such as handmade jewelry, rugs, etc. |
| Manufacturers/wholesalers | This involves dealing with a manufacturer or wholesaler for product sourcing. Here, the chosen manufacturer can produce custom goods as per your specifications or sell their standard stock. Similarly, a wholesaler can supply you with their product inventory. |
| B2B Marketplaces | This involves dabbing into B2B marketplaces like AliExpress to source products globally and then sell them through your online store under your brand name and packaging. |
| Dropshipping | This is where the selected vendor or supplier fulfills the customer order completely and the product is shipped straight from the dropshipping partner’s warehouse. This way, you need not deal with the inventory on your side. |
| Trade shows | This involves visiting trade shows and business shows that are meant to connect distributors, suppliers, and vendors with prospective business owners like you. |
Also Read: What is D2C Ecommerce? All You Need to Know
6-Step Checklist to Get You Started with Product Sourcing
Conduct detailed market research and analyze trends
In the start, you might feel tempted to sell different types of products but that does not mean you will easily find customers for them all. For instance, you want to source a specific product because of the high-profit margin around it. But before you invest in it, make sure you know about its demand. This is where market research around product sourcing is quite essential.
It involves gathering information about target customers, existing demands, costs involved, and more to get a better idea of what the market needs. Detailed findings from your research will help you pick products carefully based on margins, demands, and initial hiccups involved before you can sell them.
When sourcing products, also look at:
- Industry trends
- Changing consumer needs and behavior
- Legislative trends (like new laws around simplifying how you can do business)
Contact suppliers for trial-run
As an online seller, you would not want to put a product in your store without sampling it and checking if it meets the quality standards you want to deliver. While you can easily find multiple suppliers or manufacturers online and offline, a significant part of the research is selecting the right ones to take things forward.
When contacting suppliers, a part of your task should be to ask for samples to get them checked with your team members and view the product up close and order a trial run for the product.
On one hand, asking for samples will help you test the product quality. On the other hand, the trial run for that product will tell you how the supplier handles the delivery of the first lot of products. As the online store owner, it is up to you to decide if you want to select a certain type or number of samples for the trial run from the supplier’s lineup.
Evaluate potential suppliers
Whether you would like to move forward with the chosen supplier(s) depends on how they perform during the trial run. Supplier evaluation is quite important as it enables you to inspect the quality and ensure every order is worth the price payable. Analyze the following parameters as you proceed with product sourcing:
- Product quality
- Time it takes to deliver a shipment
- Performance of the product(s) in terms of sale in the long run
- Packaging of product before they arrive at your warehouse
On the other hand, if you choose not to pursue a business relationship with the suppliers, leave it with honest, constructive feedback. Indeed, your supplier/manufacturer relationships can give your brand a competitive edge. Whenever you feel that a supplier is not working in your favor, you can reconsider the relationship, renegotiate contracts, and explore other options as a part of running an online business.
Understand your supplier’s capacity
At the time of product sourcing from suppliers, make sure you know well about their individual capacity to deliver what you want. This is especially important when you are just starting with one supplier but have long-term goals to grow your business.
To ensure that the capacity or inventory cash flow of your supplier won’t hamper your business plans, think about how many products you will need in the next year and ask the supplier about his delivery expectations. While doing so, you can easily spot supplier capacity crunches before they arrive and can build new relationships
Work with multiple suppliers
Here, the question you might want to ask about product sourcing is –
‘How many suppliers should you work with?’
There is no concrete answer as it may vary from one business to another. However, when faced with a supply chain crisis or to be prepared for it, it is a good idea to be proactive and build relationships with multiple suppliers as a part of your procurement process. A multiple-supplier strategy can give you a safety net to fall back on when faced with shortages, delays, and other stock issues.
You can evaluate different suppliers based on the following criteria:
- Delivery turnaround time
- Product quality
- Defects handling
- Return handling
Try dropshipping
Dropshipping basically refers to the method of product sourcing where the vendor (dropshipper) fulfills the customer’s order. In the start, you only need to list the vendors’ inventory on your online store while they handle everything that happens after the sale – product packaging and shipping.
For many individuals, dropshipping turns out to be a great way to start an e-commerce store and it also works in expanding the product catalog of your existing store (if any). You will also save money related to extra inventory management overheads.
Recommended Read: A Comprehensive Guide to Starting a Dropshipping Business in 2023
Not Having Products to Sell? No Problem.
Irrespective of what your product sourcing strategy is, the key here is to understand that the competition in the market is ever-growing. New businesses will emerge and dissipate over time. But if you follow the right strategy to build and run an e-commerce store, you are sure to survive. If you are running short of product ideas, read this complete guide on how to find profitable product ideas.
