8 Proven Ways For Efficient Product Sourcing
Product sourcing is the process of acquiring goods for a business to sell. Learn the best avenues for sourcing products as well as key tips to keep in mind.
The heart of a successful business is the quality of the products it offers and its potential to add value to the lives of consumers. The lifecycle of inventory tracking, from the supplier to the business, then to the hands of buyers, all begins with product sourcing.
Product sourcing refers to the process of finding a credible and reliable product supplier to purchase quality products at a reasonable price. In short, it includes the process of conducting research, calculations, and negotiations in order to find the right supplier.
This means looking for quality products sold at low prices with large mark-up potential. By exploring different product sourcing strategies and obtaining inventory for cheaper prices, businesses can undercut competitors sales of similar or identical goods, while still turning a profit
8 Types of Product Sourcing
There are numerous product sourcing methods to choose from and a variety of factors to take into account when making a selection.
However, businesses shouldn't be afraid to experiment with more than one method to determine the best route for their business model.
1. Wholesaler - This is a useful product sourcing method for businesses that are not looking to assemble the products themselves and allows companies to easily scale up or down depending on demand. However, the expectation of the wholesale supplier method is to buy in bulk, meaning a larger upfront cost. Additionally, because it is widely used by retailers across various industries, the products purchased are likely to be similar to those of competitors.
2. Manufacturer - Recommended for eCommerce retailers and online stores, this is beneficial as it doesn't involve the middlemen and means direct contact between the business and the manufacturers. Although this is often more affordable than wholesale options, they do still require a minimum order quantity, making this difficult for small businesses.
3. Dropshipping - Companies using this method will never even have to come into contact with the products. By listing the items that the business intends to purchase from the supplier, then having the supplier deliver this directly to the customer when it is ordered, the businesses themselves will no longer have to worry about packaging, shipping, or storage.
4. Existing Marketplaces - Depending on the desired products, it's possible to purchase inventory from other sellers, then mark up these prices to make a profit. While this is uncommon as it can increase the final price of products, it does provide businesses with market research insight regarding the popularity of certain items and price points.
5. Trade Shows - The purpose of these events is to bring together retailers and suppliers. Trade shows, as well as exhibitions and conferences, are a place to see new and upcoming products. However, their relevance would depend on the industry of your business and its location.
6. Product Sourcing Companies - This involves hiring a third party to find the best products at the best price on your behalf. However, businesses taking this route would also need to factor in hiring costs and check the legitimacy of these companies before moving forward.
7. Sourcing Platform - With the rising popularity of online stores, it should be no surprise that there are online platforms entirely dedicated to marketplace B2B retail product sourcing. Online marketplaces bring together suppliers and retailers and can be useful for making comparisons between products and prices. However, it is important to keep in mind that these platforms are also easily accessible to competitors.
8. Directories - Similar to sourcing platforms, directories are lists of potential suppliers. However, unlike an online marketplace, it doesn't provide the research information regarding these vendors, leaving businesses to do their own research and contact the suppliers directly.
5 Tips for Product Sourcing
When it comes to the product sourcing process, there are certain things management should be mindful of in order to ensure their business is choosing the most profitable suppliers.
The following are 4 helpful tips to consider-
- Product sourcing is a continuous process - Even when things are going well, the need for product sourcing during this time is as high as ever. It is important to keep in mind that even as products are being sold quickly, the restocking of these items should be seamless. To customers, it should appear that the supply of products is endless in order to meet the demand. An easy mistake to make would be waiting until the sales percentage has decreased before beginning the product sourcing process again.
- Conduct market research - The Importance of market research cannot be overstated. Take into account the customer demand for the product, the target audience, and the durability of the product is it an item that lasts a long time or something that customers are likely to purchase regularly? When conducting market research, also keep in mind the desired price and work within that budget as much as possible.
- Utilize a proven model - Use a well-known and commonly used method when product sourcing. Look into existing sourcing methods used for a specific type of product and consider adopting these techniques as they've already been tried and tested.
- Choose local manufacturers - Although this does not apply for every case, as a rule of thumb, the closer to the manufacturer, the better. When sourcing products from overseas, the profit margins tend to be smaller. It is important to think about what method will suit the business needs best - a small bundle or a bulk buy from manufacturers. Keep in mind that buying bulk quantities comes at a reduced cost, as it is cheaper for manufacturers to produce and sell large quantities of the product. However, it could result in increased holding and labor costs.
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