What is Product Sourcing?

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Key Takeaways:

  • The goal of product sourcing is to find the best quality stock for your online store, at the best prices, with the best potential profit margins.

  • Generally, you will get better pricing for buying larger quantities of items-- whether from wholesalers, manufacturers, trade shows, or through B2B companies.

  • Keep conducting research, looking at supplier options, and watch your competitors because things can change quickly in the eCommerce world. 

 

For eCommerce sellers, sourcing products to fill your shelves is critical to the success of your online store. Without quality products, you won’t attract customers, and without customers, you won’t stay in business. 

Fortunately, in today’s market, retailers have many options for sourcing products. Small- and large-scale suppliers have millions of unique products just waiting for eCommerce business owners to start selling. However, with so many options, it can be overwhelming to decide which product sourcing method and which supplier is best for your business. 

Here’s some important information to help you get started with product sourcing. 

What is Product Sourcing? 

Simply put, product sourcing is the process or method you use to find products to sell. Doing it well means that you find reputable suppliers from whom you can buy quality products at reasonable prices to offer your customers. 

Diving a little bit deeper, product sourcing involves researching products and suppliers, price and cost calculations, collaborating with suppliers, and deciding which sourcing methods are right for your eCommerce business. Of course, the goal of product sourcing is to find the best quality stock for your online store, at the best prices, with the best potential profit margins. 

There are several ways to source products. Many eCommerce sellers use a combination of three or more of the most popular methods. 

Read more about eCommerce: What is eCommerce? The Basics of Selling Online

Ways to Source Your Products 

Take a look at the following product sourcing methods and how they work:

Asian woman working on her garment designs for her fashion business.

1.     Make Your Own Products

If you plan to sell handmade products that you make in-house, you’re the supplier. However, you still need a sourcing strategy for the raw materials. You may already have a source, if not, you can visit craft websites or brick-and-mortar stores, other retail stores, estate sales, or flea markets. Once you identify the materials you need, where to get them, and the costs, you’ll be able to price your products effectively. 

2.     Work with Wholesale Distributors 

Wholesalers are suppliers who offer products to retailers at lower prices. However, they often require you to buy items in bulk to get significant discounts. This may require you to pay more upfront, but it may also allow you to price your products at a healthy profit margin. Additionally, when you use a wholesaler as your supplier, it makes it easier to scale your business by simply adding more products as your business and product demand grow. 

3.     Buy Straight from Manufacturers 

Sourcing products directly from manufacturers can give you an additional break on costs. It’s often cheaper to buy from manufacturers than wholesalers. You’ll likely still have to buy in bulk because many manufacturers have minimum order requirements. If you’re just starting your business and are closely watching your budget, it may make more sense to consider other product sourcing options. 

4.     Use Dropshipping Companies 

Using a dropshipping company as a supplier allows you to be hands-off in the order fulfillment process and offers lower start-up costs. With dropshipping, you list items for sale, and the supplier charges you for them as they sell. Then, they fulfill and ship the order directly to your customer. You never actually see the item, and you only pay for the products you sell. Of course, dropshipping companies charge fees for their services, so your profit margin will be lower.

Read more about drop shipping here: How to Start an Ecommerce Business Part Time

 

Directional signs at a trade show

5.     Go to Trade Shows 

Exhibitions, conferences, and trade shows are great places to perform product research. You can use these types of events to view products up close, become familiar with suppliers, and learn about industry trends. It’s a good time to network and build relationships with the manufacturers, wholesalers, and other retailers that you may do business with in the future. 

6.     Shop on Marketplaces 

One of the more obvious places to look for products is large marketplaces like eBay, Amazon, and Etsy. These types of sites offer millions of items from sellers all over the world. However, while you may be able to find products priced low enough to resell them at a profit, it does require a lot of time and research. But, if nothing else, the effort will provide you with valuable market research that you can use to identify top-selling products, buying trends, and competitive pricing information.  

7.     Use Product Sourcing Companies 

Product sourcing companies are essentially middlemen in the product supply chain. You pay them to do the product sourcing for you, and hopefully, they will deliver high-quality products at good prices without you having to do anything. The cost of hiring a third-party sourcing company will eat into your profit margins, so outsourcing your product sourcing may only be the best option when you don’t have the time or resources to do it yourself.  

8.     Buy from Sourcing Platforms

Sourcing platforms like Alibaba are marketplaces that target suppliers and retailers for B2B product sourcing. This method makes it very easy to find products to sell, but keep in mind that if it’s easy for you to find high-quality, low-price products there, it’s just as easy for your competitors to do the same.


Generally, you will get better pricing for buying larger quantities of items. 


9.     Use Overstock and Liquidation Buying 

Sourcing products using these methods can be a great strategy to buy products at really low prices. Usually, suppliers that are liquidating excess stock want to get rid of the inventory quickly, so they will sell at lower prices. However, while you may be able to purchase items for lower prices when suppliers have liquidation stock, there’s no guarantee that they’ll continue to have those specific products in the future. Just be diligent about checking product quantity before purchasing, if you have the ability to do so.

10.     Consult Product Sourcing Directories 

Lastly, if all else fails, there are product sourcing directories, such as Product Sourcing 101, that list wholesalers, importers, manufacturers, distributors, and dropshippers. Directories are just lists, so you will have to research the suppliers yourself. While that’s more work for you, it may increase the likelihood that you’ll find deals that your competitors haven’t. 

Interested in setting up an online store? Read this: How to Set Up an Online Store: The Complete Guide

Final Thoughts about Product Sourcing

While there may be several elements and variables involved with product sourcing, you can come up with the process that best fits your store’s brand just by learning and understanding the basics of obtaining inventory, doing thorough research, and then taking some action. 

The above information and tips are a good starting point for you but don’t stop there. Keep conducting research, looking at supplier options, and watch your competitors because things can change quickly in the eCommerce world. 

 

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