Small Business Boot Camp: 3 Ways to Source Products When Selling Online

January 21, 2015

This is the second installment of the #SellMore Small Business Boot Camp series. In part one, we discussed how to find a product niche. This week, we’ll be covering various ways to source your product.

Congrats, you’ve gotten through the pivotal first step of starting an online store – selecting the perfect product or service to sell. Now on to step two: sourcing your product.

Deciding how you will source your product or service will be the jumping off point for tasks like conducting research, determining topics like scalability and the nitty gritty must-do’s like crunching the numbers. How you source your products will serve as the foundation for your business and will guide the process via which your online store functions on a day-to-day basis.

Watch this week’s #SellMore video to learn about your options for sourcing products, the perks, common pitfalls and the steps to starting to sell products online successfully.

First things first: know that you have three primary options. No single option is necessarily better than the others, but there are a variety of factors to consider before determining which is best for your product or service –– and for you.

Option #1: DIY Products or Services

The idea of crafting your own product by hand dates back centuries. Today, thanks to the internet, you now have a much wider reach than you would have ever had back then. However, if you are going to customize or craft your own product or fulfill your own service there are certainly some factors to consider.

Perks and Pitfalls: You will have full control over your brand and will likely be coming into the space with something brand new. Typically start up costs will be low, although you’re going to need to put some good old fashion time and energy into your business, which is a sacrifice in and of itself. You’ll want to make sure you’re always thinking ahead about how you will scale and possibly grow your product line over time in order to stay competitive and offer your customer base something new.

Tasks to Get Started:

  • Locate where you will source materials: This could be your local flea market, craft stores, estate sales, an established retailer or even friends and family. You will want to identify your materials, where you get them, as well as how much this will cost.
  • Determine if you will ship your own products or hire someone to handle it: Will you be running to the post office or UPS store, or would hiring a shipping service to handle this be worth the time saved in energy?
  • Learn what it will take to ship: Give thought to packaging (labels, stickers, boxes) since this will have downstream effects on total costs and could create shipping challenges later on.
  • Calculate how long it takes to make: You’ll want to consider whether or not you have items readily available or if you need to calculate how much time it takes to gather materials as well as craft the product. Give some thought to whether or not you will make items to order or if you will create some inventory. Additionally, be sure to document any labor costs, whether they be monetary or based on how much time you’ll need to spend away from other priorities in your life.
  • Consider where you will store your inventory: Perhaps you’re lucky enough to have an empty room in your home but that may not scale forever. You may want to look into alternatives like renting a space or even opening a storefront.
  • Give thought to communicating timelines with customers: In developing your website messaging, you’ll want to communicate information on how you craft your product and set expectations for it’s arrival. You can do this in places like your product description and shipping and returns policy, as well as reiterate within your transactional emails. It’s always better to be transparent and upfront so your shoppers feel confident purchasing from you. Check out other ecommerce stores for tips and tricks on how to best set proper, branded expectations.

Option #2: Working with a Manufacturer or Wholesaler

In working with a manufacturer or wholesaler, you are essentially hiring on a partner to develop your product or perhaps fulfill your service for you. Either way, someone will be providing the product rather than you having to make it yourself. This is a great option if you are not able to make your product yourself or for when you are ready to scale your DIY product by hiring someone else to make it for you.

Perks and Pitfalls: These options open up the opportunity to pursue a unique idea, although you may need to invest fairly heavily upfront. You can still have control over your brand and the quality of your product, but can get a great deal of assistance with production. Perhaps you have a great idea but don’t have the skillset to execute or you want to simply purchase products and resell them.

Items to Consider:

  • Finding options: This could be as simple as striking a business relationship with a talented friend who makes a product you’d both like to sell, partnering with an existing company and taking their business online or tapping a formal manufacturer to produce your product. Naturally, if you want to work with a friend or existing business, you’re going to need to kick-start those conversations. Otherwise, if you’re looking for a formal manufacturer, begin your research by completing a simple Google query. This process of finding the right partner and getting the ball rolling can take some time, so don’t get discouraged.
  • Checking for references: As with anything in business, make sure you’re dealing with someone who is legit. There will always be a risk that someone is going to try and take you for a ride. So, be smart and check for references, reach out to other businesses who have used the manufacturer or wholesaler before and maybe do a little digging at the Better Business Bureau. A big red flag will be whether or not the company asks for information about you, including proof that you, yourself, have a legitimate business. Be prepared to provide any necessary licences or tax information.
  • Evaluating your options: Be sure to ask questions and evaluate each of your options so you can make the best decision.

    • What will the total cost be? Take into consideration production, shipping and potential hidden fees. You’ll really want to keep in mind that prices are usually established by the manufacturers, but you’ll need to know what final price is expected by the market. (Don’t worry: we’ll help you with this in future posts).
    • How long will it take for them to make/ship the product?
    • What does shipping and inventory management look like? Will you need to ship and store or does this rollup as part of their service? Is there any additional costs? What are the timelines and conditions? Do you have control over branding your packaging?
    • What do the contracts and terms look like? Is there any wiggle room for things your business or customers need specifically? Is there an evaluation period or terms for termination?
    • What does support and communication look like? How frequently will you be kept abreast of information like inventory, product changes or even discounts?
    • What are the minimum order quantities? Will you have to commit to a certain number of units or spend a minimum amount?

  • Getting a sample: Before you sign on with anyone, make sure any and all products meet your expectations by viewing a sample either in person or having one sent to you. Some manufacturers or wholesalers will charge a fee. I always attempt to negotiate here – if I like it and keep it, I’ll pay for it. Otherwise, no thanks. This decision is entirely up to you though.
  • Picking one: Weigh your options and get going! You want to ensure you’re making a smart decision, but that doesn’t mean you should sit in research mode forever. Worst case, you pivot and go another direction.

Option #3: Hiring a Dropshipper

If you don’t feel you are able to create a product yourself (DIY), hire someone to make it for you (manufacturer) or want to purchase products upfront (wholesaler), there is always the option of dropshipping. This options means you will purchase from a vendor and list their products on your online store. They charge you for the products as they are sold and (typically) ship on your behalf. Not only is this an option for starting an online business, this is a viable option to try out if you want to expand your product catalog.

Perks and Pitfalls: Dropshipping can be a great option for folks who are looking for a low risk option to getting started. You don’t need to deal with inventory, packaging or even shipping. The catch is that typically you’ll find a great deal of competition as many of the products you’ll find available with a dropshipper are readily available all over the internet. However, they will have a wide selection of products from which you can choose.  Finally, you’ll find that your profit margin will be low, which means you’ll need to sell a whole lot before making a substantial profit.

Items to Consider:

Honestly, the steps to finding a dropshipper or aggregate dropshipper (a dropshipper that works with a variety of dropshippers for you) are nearly the same as those you’d follow for the manufacturing option.

  • Find some options.
  • Check their references.
  • Evaluate all of your options (and ask questions).
  • Ask for some samples.
  • Pick one and go!

Last but not least, please note that, as with anything, there is always room for fringe cases. Do not get discouraged or toss out an idea because it doesn’t fit into the following criteria or you cannot currently provide an answer to a question. These posts are intended to serve as a guide to help you begin conducting research and bubble up your most profitable and realistic business ideas so you may pursue to the next level.

There’s a lot for you to think about as you evaluate your product or service idea. Feel free to toss questions or topics you’d like to learn more about in the comments section below. We’d love to hear from you! Tune in next week as we continue to dive into specific areas that tend to get folks hung up when starting an online store.

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