Product sourcing is the backbone of any successful retail business. It involves finding and acquiring products to sell, ensuring they meet quality standards, and obtaining them at a price that allows for a profit margin. If you’re a beginner who is entering the world of entrepreneurship or e-commerce, then understanding the basics of product sourcing is crucial. Here’s what you need to know.
Logistics, product sourcing – illustrative photo. Image credit: Centre for Ageing Better via Unsplash, free license
Define Your Niche
Before sourcing your products, you’ll need to clearly define your niche. This is because it’s so important to know your target market and the products they want, and any slight differences or nuances that make what you’re buying most suitable for them. Focusing on a niche helps you to tailor your efforts and build a brand that connects with your audience.
Research and Identify Suppliers
Next you’ll need to research to find potential suppliers. You can use online platforms such as Like Sourcing, or go to trade shows and industry events. You’ll want to look for suppliers with good production, quality control and reliability, and be sure to choose suppliers that match your business values.
Consider Different Sourcing Options
There are a number of different sourcing options you can choose for your business, for example those from domestic vs international suppliers. Each has pros and cons- domestic suppliers will give you quicker shipping since they’re closer but they can cost more. International suppliers may have lower costs but longer shipping times, there can sometimes be ethical issues involved too such as overseas staff manufacturing products not being paid fairly. Consider your budget and product needs when you’re choosing and do your research to source responsibly.
Understand Minimum Order Quantities
Suppliers often have minimum order quantities (MOQs). Depending on your budget and storage capacity is, this can help to rule out certain suppliers, especially if you’re a small business just starting out. You’ll want to avoid committing to MOQs that exceed your selling capabilities, as this can end up in loss rather than profit!
Quality Assurance and Testing
You will want to make sure the product quality you’ll be getting is going to be good by requesting samples from suppliers. Test products for durability and functionality- reliable suppliers will have no problem providing samples and working with you to meet your quality standards.
Establish Clear Communication
Effective communication with suppliers is so important. Any miscommunications or issues getting in contact can be the difference between success and failure for you. Clearly express your expectations, specifications and timelines, and if you’re buying from overseas, make sure the company is easily contactable without a language barrier to avoid issues. Build strong relationships with your suppliers by being reliable and transparent. Regularly check in, provide feedback, and address issues promptly. A strong partnership leads to better terms and a smoother sourcing experience.
Negotiate Pricing
You’ll want to negotiate your pricing with suppliers, taking factors like order volume and payment terms into consideration. Be sure to research market prices to get a fair deal, and balance your cost and quality to maintain your profit margins. If you continue working with suppliers, they might eventually offer you better deals too. Consider all costs, not just the purchase price- including shipping, import duties, and storage fees. Understanding the total cost of ownership helps you to make informed decisions and keep your spending vs profits in check.