A Small Business Guide to Product Sourcing

Discover the process and strategies for finding the right product and reliable suppliers for your online store. The Ascent covers the ins and outs of sourcing products to help you start your business.

At first glance, product sourcing is a fairly simple process. You identify your product, find a supplier, fill your inventory, sell your items online and voila. But the process is really much more complicated than that.

Finding quality products at great prices and with good profit margins requires research and trial and error. Additionally, online shoppers are expected to increase to reach 278.33 million by 2024 In the United States alone, selling online will only become more competitive, making it even harder for e-commerce business owners to source products.

Overview: What is Product Sourcing?

Product sourcing is the process of obtaining quality products to sell. Products are often obtained from reliable suppliers and manufacturers at a reasonable price. The method includes research, calculating product price and acquisition costs, checking reputable suppliers, and negotiating to get the best deals.

Ultimately, your product sourcing strategy should lead you to finding quality products at prices that allow for significant profit margins.

7 popular ways to source produce

Understand the different product sourcing methods to determine which ones are best for your business and support your e-commerce strategies.

1. Do it yourself (DIY) or make your own

Selling handmade products has its advantages. First, you don’t need to rely on third-party vendors to manufacture your products from scratch. You source only the necessary materials and then manufacture the product in-house.

Second, you have more control over the production process. This allows you to scrutinize and optimize every step of the manufacturing operation. Third, it is easier to regulate production. If necessary, you can create just a handful of products. This isn’t always an option when working with manufacturers or other vendors, as they usually require a minimum number of orders.

The difficulty when selling handmade products is scaling. If your sales suddenly skyrocket, your production needs to be able to keep up.

Tips for developing a product sourcing strategy when you are a manufacturer and supplier:

  • Identify the raw materials to create your products and where you will get them. Calculate all the costs involved to come up with strategic product pricing.
  • Consider your product packaging, as it affects your total downstream costs and may present shipping issues later.

2. Work with wholesalers

Develop good relationships with reliable wholesalers. This opens up incalculable opportunities for your business. You can negotiate better payment terms, get discounts, or maybe get exclusivity on certain products they sell.

Work with individual manufacturers or sellers or partner with existing businesses that have their own production line and those that want to take their business online (among others).

3. Hire makers

Although sourcing products from manufacturers is often cheaper than sourcing from wholesale distributors, you should still buy in bulk as most manufacturers have minimum order quantity requirements.

If you are a startup, be very careful with your budget. In most cases, it makes more sense to choose other methods of sourcing products at a lower cost than to work with manufacturers.

4. Drop shipping

The dropshipping model allows you to list supplier products on your online store and start selling without holding inventory or managing product fulfillment and packaging.

Suppliers bill you for products as you sell them, and they ship orders directly to your customers on your behalf. E-commerce platforms like Shopify make dropshipping easier by letting you integrate with the Oberlo e-commerce solution and find verified suppliers and products from one place.

Image of ponytail hat and scarf set on Oberlo, including product information such as price, shipping period, supplier, etc.

Find products to sell on Oberlo and add them and product details to your Shopify store with just one click. Image source: author

Go to Oberlo to find products to sell. With one click, import all vendor product information, including image and description and other marketing materials, to your Shopify store.

You will also get supplier information by clicking on the name, and you will know which suppliers are verified. This streamlines the product sourcing process for your online business, click and mortar store, and other online retail businesses.

5. Attend trade shows

Conferences, exhibitions, and trade shows are some of the best places to do market research. Use these events to see products up close, learn more about the vendor or vendor, and learn about industry trends. This is an opportune time to network and build strategic relationships with independent wholesalers, manufacturers and retailers selling uncommon products in the market.

6. Keep sourcing from marketplaces

Product Sourcing Marketplaces give you access to a wide range of vendors and various products, with specifications and other crucial details.

For example, the Alibaba B2B e-commerce platform features thousands of suppliers, manufacturers, and products. It has features that allow you to easily search, allowing you to better manage your inventory.

An image showing the Alibaba homepage, search bar, navigation menu, exclusive September offers and other features.

You can search for products and suppliers quickly and easily on the Alibaba platform. Image source: author

On the Alibaba platform, you can search for products by typing keywords, filter by category, submit a quote request to advertise the product you want to have made, check suppliers, and more.

7. Use sourcing companies and sales agents

Sales agents and supply companies act as intermediaries between you and your manufacturers. They offer support throughout the process by communicating directly with your manufacturers, assisting with quality control and verifying the production process for you.

This allows you to delegate manufacturing responsibilities to trusted third parties and benefit from their expertise and established relationships. This, in turn, allows you to focus on your front-end business processes.

3 tips for choosing the right product sourcing method

The product sourcing method you choose has a huge impact on your business. The right process can reduce your expenses while improving your efficiency, while the wrong one can lead to delays, unnecessary costs and frustration.

Consider these tips when choosing a product sourcing method.

Do in-depth research

Pay close attention to your business process, then choose a product sourcing method that fits right in with your current dynamic. For example, assess whether sourcing from wholesalers works better with your inventory control and management than working directly with manufacturers.

Remember that product sourcing is not just about product quality and cost. There are processes involved, relationships that need to be established, terms of payment and other arrangements that need to be agreed, and so on. The more information you gather during research, the better your chances of choosing the right product sourcing method.

Study your competitors

Instead of conceptualizing or developing a product sourcing method from scratch, study your competitors so you have a starting framework to build on. This saves you time, effort and resources.

Obtaining information about your competitors’ product sourcing methods is not always easy. However, if you keep asking around, you are bound to get clues about their process. You can even email your competitor’s customer support team asking where and how they source products. You will be surprised how some will give you the information you are looking for.

Develop your product sourcing strategies now

Although product sourcing consists of many variables and elements, you can still develop a process that works for your business simply by learning the basics, doing your research due diligence, and taking action.

Also, don’t forget to track your results. It allows you to identify which parts of your product sourcing process are problematic and filled with inefficiencies and which are bringing you significant results.

Gary C. Lisi