Product sourcing to help your business grow
It can be challenging to navigate product sourcing methods for an ecommerce business. From manufacturing to trade shows, there are many sources to choose from, and each has advantages and disadvantages. For example, you could experience a lower profit margin with one option but kickstart your business or product line in no time.
Choosing the best product supplier is about weighing the pros and cons. Product sourcing is easier when you know how to select the strategy that most closely fits your business objectives.
This post will discuss popular approaches to product sourcing and offer advice for navigating the process. We’ll cover:
- What is product sourcing?
- Product sourcing methods
- 7 apps to help source your products
- Tips for sourcing products
What is product sourcing?
Product sourcing is the process by which a business finds inventory to sell. Manufacturers, wholesalers, dropshipping providers, handcrafters, and trade shows are all product source options for resellers.
The product sourcing process involves researching the product first. A business needs to know what products to stock, key characteristics of those goods, and the best place to consider for sourcing. After that, a business finds suppliers and compares prices. Once a supplier is chosen, vetting and negotiating ensure cost efficiency and quality.
Product sourcing methods
There are several ways to source goods and identify suppliers. Your ideal product sourcing method depends on your business and how you want to expand.
Dropshipping is when an external vendor fulfills orders on behalf of a business. In the ecommerce industry a dropshipper sources products and ships orders so that an online retailer doesn’t have to manage inventory. Dropshipping gives ecommerce businesses more time to focus on other aspects of the business.
Advantages of using dropshipping:
- Low cost. Dropshipping is a great low-cost option for businesses with a small budget or those that need to save warehouse space. No inventory is needed upfront. This also enables larger businesses to experiment with a new product without investing too much for a trial.
- Scales easily. Dropshipping is an easy-to-scale product sourcing method with no overhead issues or product management requirements. All you are responsible for as the retailer is managing orders and payments. As long as the dropshipper has the stock to meet your orders you have the ability to match sales to demand. And, you are not limited to one dropshipper, you can partner with multiple to scale your business.
- Quick start-up time. Since the dropshipper manages product inventory and shipping, all you need as a retailer is to establish a customer base and a way for them to place orders. You don’t need to rent warehouse space and stock inventory before you can get started.
Although business owners might have more time on their hands, there are some disadvantages to using dropshipping for product sourcing.
- Lower profit margins. The dropshipping company marks up the price of goods and shipping to cover their own costs and earn their own revenue. Retailers pay for inventory management and handling services, which factor into your profit margin.
- Reduced control. When a dropshipping company oversees and manages inventory, the retailer loses at least some control over inventory and product quality. This can also complicate customer service, since the retailer never actually touches the products.
- Difficulty standing out. If you are selling generic products through a dropshipping company it can be difficult to compete with other brands selling similar products. Dropshippers may source the same or similar products for other companies, making it difficult for your business to stand out from the competition.
Wholesaling products is when a supplier sells products to ecommerce businesses in bulk. Wholesaling enables businesses to pile stock and kickstart mass sales.
Advantages of wholesaling products:
- Quick start-up time. Wholesalers allow companies and product lines to launch quickly as they will offload plenty of product for the business to start selling when it is delivered.
- Higher profit margins. Ecommerce businesses get bulk discounts when they purchase products from wholesalers. Profits can range from 20 to 60%, depending on the wholesale company and the order quantity.
- Minimal need for research. Products from wholesalers are usually already established in the market, reducing the need for a business to perform thorough product research.
Disadvantages of using wholesaling:
- Higher upfront cost. Despite the discounts provided by wholesalers, you need to pay for the entire inventory when ordering or within 30 days of receiving the products.
- Difficulty standing out. If there are a limited number of wholesalers offering certain products, companies risk selling the same goods as their competitors.
- Experience required. Working with and sourcing products from wholesalers requires some expertise to ensure you are working with fair prices and timely measures.
Manufacturing is a product sourcing option that involves experts creating unique products for other companies based on their business design. Choosing manufacturers to help with product sourcing is ideal for any brand that wants to create a new product or a variation of an existing product.
There are two types of manufacturing for product supply. The first is private label manufacturing, where a business can get a unique product exclusively for their company.
The second is the white label option, which puts your brand on an existing product. Private manufacturing involves design and prototyping before reaching the supplier-sourcing stage — lengthening the time you will likely see a return on investment on your product. White label manufacturing lets you bypass the investment in design and prototyping before making a sale.
Advantages of manufacturing products:
- Control over quality and inventory. Using manufacturing for product sourcing offers businesses more control over the quality of a product. The company can assess the materials and final result of the product before it hits the market.
- Unique products. Private-label manufacturing allows businesses to create unique products that other businesses cannot copy. Manufacturers will guarantee uniqueness and meet company visions.
Disadvantages of manufacturing products:
- Challenging designs. It can be tough to create a unique product. Your product must solve an existing problem well or better than what is currently on the market. A manufacturer will produce anything as long as they are paid, but it’s your responsibility to design a product that sells.
- High initial investment. The design and prototyping stages can be costly. Depending on the complexity of the product, you may need to go through several stages of development before it is ready to go to market. Each round of fine-tuning costs money — all before you make your first sale.
- Experience required. Working with a manufacturer for product sourcing requires experience, because the business will need an idea of the design, materials, expenses, and more. Furthermore, a business needs help from an experienced manufacturer for the best result.
Handcrafting products involves creating individual products by hand. The ecommerce business owner can perform this if they have the experience and passion, or the business can outsource the handcrafting to experts.
Advantages of handcrafting products:
- Control over quality and inventory. Creating individual products by hand gives a business maximum control over quality. Likewise, a business can control inventory levels and ensure no waste.
- Unique products. Creating high-quality, unique products will undoubtedly make any business stand out against competitors.
Disadvantages of handcrafting products:
- Time-consuming. Handcrafting individual products can take a lot of time, which might not be ideal for businesses selling as many products as possible for a quick profit.
- Slow start. A business must source supplies and equipment before product creation, which can delay sales. Creating products for an initial inventory takes a longer time as well.
- Hard to scale. A business might earn more orders than it planned for or make more products than they manage to sell. It can be challenging to scale how many handcrafted products to create.
Trade shows are a product sourcing option because sellers can meet dropshippers, wholesalers, and manufacturers in one place. Businesses and buyers can discuss and assess the latest products for buying and selling.
Advantages of sourcing products at trade shows include:
- Control over quality. The ability to test a product before buying allows you to find high-quality items and weed out those with any defects. Other product sourcing options rarely afford you the opportunity to sample a wide range of items from multiple suppliers.
- Faster negotiations. Being able to talk with suppliers face-to-face bypasses the lag time of negotiating asynchronously. You can discuss price and inventory in real-time — establishing a relationship with single interaction.
Disadvantages of sourcing products at trade shows:
- Difficulty standing out. At trade shows, buyers will come across products that multiple other businesses are purchasing. Finding specialized products to help you stand out can be tricky.
- Extra fees. Attending trade shows involves travel and attendance fees, increasing your investment.
Seven apps to help source your products
Product sourcing apps can assist with finding, buying, and selling products. Whether you own a coffee bean business or sell unique prints, there will be an app to help you experiment, choose, and finalize the products you want to sell.
It’s possible to use more than one app, depending on your business needs and the type of products you wish to buy and sell. The following seven apps are among the best on the market to help with product sourcing for various businesses.
Dripshipper is a coffee bean wholesaler that allows coffee enthusiasts and business owners to kickstart their own coffee bean business.
The $30 monthly membership helps you with the product sourcing and shipping of whole beans. Businesses choose the beans they want to sell, upload a brand logo, and customize labels to make their packaging unique and on-brand. Whole bean coffee options include single-origin coffee, single-serve coffee capsules, decaf coffee, and custom coffee products.
Coffee retailers use Dripshipper because the supplier sources and ships the whole beans on the same day they’re roasted for ultimate freshness.
Handshake is a free wholesale marketplace app that helps businesses with sourcing an array of products including apparel, candles, stationary, fragrances, and homeware.
Retailers have the option to choose from over 150,000 products from US suppliers on an easy-to-navigate platform. It’s built and operated by Shopify so suppliers have been vetted and products have been tested.
Printify is a dropshipping service that can help businesses infuse some creativity into their print-on-demand products.
The app offers a free plan for pay-per-order services that lets companies create t-shirts, hoodies, tote bags, coffee mugs, wall decals, posters, beach towels, pet beds, notebooks, and more. Businesses can choose a paid plan to improve profit margins by offering a 20% discount on all products, which costs $29 a month.
DSers is a dropshipping app for businesses in almost any niche because of the app’s wide variety of products — from watches, to apparel, electronics, jewelry, and more.
A free account makes it easy to source products on any budget and for any industry — even niche markets. You can create a brand with a selection of products within your vertical. DSers provides data on how each product performs so you can understand more about your sales.
Creativehub is a free-to-download app that allows businesses to source premium art to sell. You don’t have to be an artist to kickstart a business selling contemporary and unique artwork.
For each piece you are shown a retail price — the minimum you can sell it for — and what you will make as a vendor. You aren’t limited to stock images or reprints. Some of the pieces are limited editions, which means there is demand for higher prices. The cost for international shipping is fixed so you can sell around the globe without any headaches.
Printful is a print-on-demand business that helps companies create and sell unique products from clothes and accessories, to home goods and decor.
Printful offers retailers a lot of customization options and the ability to include branded items like stickers, package inserts, and labels with the products. You can purchase product samples at a discount in order to test out your products before advertising them.
Lulu is a print-on-demand product sourcing app that focuses on books and calendars.
This app gives you complete control over your book without any set-up or handling fees. You can choose the type of cover, paper, binding, and more. Users can create a store on the Lulu site, sell products on their own ecommerce sites, or sell books through popular retailers like Amazon.
Tips for sourcing products
Understanding some best practices for sourcing products will help you increase profit margins and keep more control over the quality of your products. You will learn a lot as you get work on sourcing products, but here are a few proven tips to get you started.
Research industry trends and consumer needs
Successful product sourcing starts with research. Researching industry trends and consumer needs will help you determine what to invest in. Create surveys, ask for customer feedback, and see what other businesses are doing.
Asking customers and new audiences for their opinions can help you identify the products and unique selling points (USPs) your business needs to initiate to attain the most success.
Decide on the right product before finding a supplier
A common mistake that online retailers make is to find a supplier they like and let that supplier determine which products the retailer sells. It’s important to have a good relationship with your supplier, and some suppliers can make strategic recommendations that serve you wellI. But it’s better to build your brand first.
Decide on the products you want to sell or what your market has a demand for before you look for suppliers. This helps your brand stay focused and grow into the kind of business you want.
Request samples from suppliers
Requesting samples from suppliers before buying allows you to find out what the buying experience, packaging, shipping times, and product quality are like. Consider the feel and usability of the product, price, and delivery time. If a product feels cheap, doesn’t work to your standards, is too highly priced, or is delivered late, choose another supplier.
Use multiple suppliers, if you can
Multiple suppliers can add complexity, especially if you are new to product sourcing, but it can also reduce risk and costs if done well.
- Building and maintaining relationships with multiple suppliers offers buyers flexibility if shortages or delays occur.
- If you sell globally, multiple suppliers can help reduce shipping costs and avoid any import taxes accrued.
- Working with multiple suppliers can also allow businesses to reassess prices after several months. If costs are too high or you find another supplier offering a better discount, you can choose your supplier accordingly and reduce costs.
There is no simple answer for how many suppliers a business should work with. However, the more supply options you have the more likely you are to reduce lead times, maintain a consistent price, and keep customers happy.
Vet suppliers to discover if they are worth your time and money. The best way to investigate suppliers is to reach out to other companies that have used the supplier you are considering. It will help you decide if they are timely, responsive, communicative, and a good value for money.
Taking your ecommerce business further
Knowing the best product sourcing option for your ecommerce business can be tricky. Each method has its pros and cons, but now you should have a solid understanding of which method will work for your business as well as a few apps to get you started.
When you’ve established which product sourcing avenue fits your ecommerce retail model, Adobe Commerce can help you manage both product sourcing and your ecommerce store. With Commerce, you have a hub for the fulfillment, inventory management, scalable payment methods, and powerful analytics to support product sourcing.