Looking to run a profitable and thriving eCommerce business? Then adopt the product sourcing strategy in your procurement process. Product sourcing will play a significant role considering it is the foundation of your business process and how you make it scalable.

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Product sourcing is essential to your eCommerce business as it helps you find the product that suits your brand. Without compromising quality, product sourcing helps source cost-effective items.

What This Guide Covers:

• What Is Product Sourcing?
• Methods
• Steps
• Conclusion

What Is Product Sourcing?

Product sourcing is a sourcing strategy that you use to acquire products for your business. From manufacturers to wholesalers or going to trade shows and even browsing through products sourcing directories, there are various ways for you to procure products to sell.

The definition of product sourcing sounds like a relatively simple process but entirely isn’t. It requires some deep understanding, research and analysis with the goal of sourcing the best product at an affordable price.

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Methods

Regarding product sourcing, there are multiple methods to consider, but you must pick the best one. Why not weigh all your options before you finally make a decision?

Discussed below are the different methods of product sourcing:

Manufacturers

Establish direct communication with the manufacturer without going through a mediator. This is a more affordable option than wholesalers, but you have to buy items in larger bulk quantities. This is because when it comes to manufacturers, a minimum order quantity (MOQ) gets placed.

Wholesalers

Are you looking to scale your business but not up for arranging products yourself? Then going with wholesalers is a decent product sourcing method for you. Like manufacturers, bulk buying is also predominant here, but you might have to pay more upfront.

Dropshipping

Other than being a product sourcing strategy, dropshipping is also a customer and order fulfillment method. Sales are made easy by investing in dropshipping software and suppliers. It lets you take a hands-free approach as you no longer have to manage packaging, inventory or shipping personally.

Marketplaces

Browsing through existing marketplaces and conducting research are essential to product sourcing. This is a cost-effective alternative to sourcing multiple suppliers and products if you markup the price to make a profit. However, the only disadvantages to this method would be the potential risk of getting scammed and a delayed sourcing strategy.

Trade Shows

Large-scale events like trade shows and conferences are an excellent place for buyers and suppliers to network. Buyers can easily interact with multiple suppliers all under one roof and make their final choice(s) accordingly.

Product Sourcing Companies

Simply put, you outsource the product sourcing process by hiring a professional. They will do everything from research to product scouting within the correct price range. The only downside to this method is scammers, who proclaim the best results but cannot consistently deliver.

Sourcing Platform

With the rise in eCommerce sites, a sourcing platform like Alibaba centralizes suppliers and buyers in one location. You can seek out the best options at a reasonable price and increase competition since competitors will do the same.

Directories

When you have exhausted all other methods, resorting to product sourcing directories is your fail-safe option. Reference directories, such as the Product Sourcing 101 Directory, which contain all the necessary information when it comes to retailers, vendors, manufacturers and dropshippers.

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Steps

Product sourcing can be tedious if you don’t know the ins and outs. You need to follow a few steps to take control of the process and make product sourcing seamless.

To understand further, let’s take a detailed look at the different steps of product sourcing:

Conduct Market Research

Having a solid grasp on consumer demand is step one toward product sourcing. What is it that consumers want? What are their concerns and feedback? What engages them on social media? Figuring out the answers to these questions is crucial. Researching and analyzing market trends is fundamental to discovering if there is a high enough demand forecast to help your business grow.

Set a Budget

After conducting the initial product research and analyzing its potential market effects, it’s time to fix a budget. Cross-reference your competitor’s pricing guides and create your budget before contacting suppliers.

Contact Potential Suppliers

Once you have your product requirements in order, seek out suppliers that cater to your required specifications and features. You can scour the internet for potential suppliers while looking into different online platforms and marketplaces. Or you can organically reach out to suppliers with whom you have established prior contact at different expos and trade shows.

Request Samples

Would you ever buy a car without taking it for a test drive? Or invest in real estate without first visiting the place? Of course not! Similarly, why procure products without sampling them? Sampling lets you scrutinize the product closely, test its quality with your procurement team and pick the one with the best quality to cost ratio.

Run Supplier Trials

Once satisfied with their samples, are you planning to invest in the supplier? Hold that thought! Before you fully commit, why not take a trial run? Set necessary sales ratio, customer feedback, key performance indicator (KPI) and parameter requirements surrounding the trial period. If the product doesn’t meet your standards, you can opt to try for another product.

Evaluate Suppliers

While you are acquiring samples and running trials, you need to conduct thorough supplier evaluations as well. You analyze the metrics and evaluate supplier performance based on the above mentioned parameters.

Retain Backup Suppliers

Now that you have mostly gone through the steps of product sourcing and got into a long-term supplier relationship, it is advisable to maintain a database of other potential suppliers. In case of unforeseen circumstances like businesses merging or discontinuing in the future, it’s better to keep certain vendors as a backup.

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Conclusion

With different product sourcing strategies and steps, it might get a little overwhelming to figure out which one’s right for you. It’s all about what fits your business. If you are still confused, you can browse through our procurement requirements template for added information on software that will aid you in your sourcing processes. What else would you like to know about product sourcing? Let us know in the comment section!