Sourcing Options for eCommerce Firms

Finding products to sell remains one of the hottest topics for online entrepreneurs, and it’s the top question eBay Radio gets from its listeners, according to Chris Malta, Product Sourcing Editor for The eBay Radio Show and Founder and CEO of Worldwide Brands, Inc. Malta defines product sourcing as simply finding and qualifying wholesale suppliers who are willing to work with small Internet businesses.

Many people start a business around a hobby like quilting, antiques, rare books, collecting memorabilia, etc., and then try to diversify their site’s offerings with additional products. Others decide they want to be an online retailer and look for quality products and the trendiest items to sell.

Four Ways to Locate Products

There are four key alternatives an etailer can take to locate products to sell online:

Take the “shoe-leather” tour.
Attend trade shows and industry markets and order in bulk or light bulk.
Purchase lists of wholesale suppliers that will drop ship for you or sell to you in bulk or light bulk.
Pay a monthly or annual fee to a product-sourcing company to be a part of their network of wholesalers that will drop ship for you or who will sell to you in bulk or light bulk.

Take the Shoe-leather Tour

By definition, such an effort requires a great deal of time and energy – and a comfortable pair of shoes. It requires legwork and lots of it. Such a tour would make an etailer hop from estate sale to garage sale to thrift store looking for valued items that can be bought and resold.

Jeremy Hanks, co-founder and CEO of Doba (www.doba.com) calls this method “creative product sourcing.” It would include visits to pawn shops, flea markets and auctions seeking deals. In Hanks’ book, eBay Inventory the Smart Way, which he co-wrote with Joseph Sinclair, he notes that liquidation auctions, going-out-of-business sales and newspaper classified ads can also be great resources for bargains.

SOME SHOE LEATHER PROS:

Bargains can be found for the wise shopper.
Etailer has a hands-on approach to products and can ensure inventory meets quality standards.
Items are shipped from the etailer, so packaging can be designed to include coupons to encourage return shopping; packaging can also contain information about other products available on the site.

SOME SHOE-LEATHER CONS:

It’s time-intensive. Most etailers can only spend a day or two hitting garage sales and pawn shops.
Inventory is limited. Etailers might find a great deal on a pocket watch at an estate sale, but they are unlikely to find more than one; etailers certainly want to be able to handle more than one order for such a product.
It’s geographically limiting. Etailers are probably not going to have a large number of locations to look for new products because of the time-intensive nature of such an option and will probably end up shopping at the same flea market 30 miles away on more than one occasion.

Attend Trade Shows and Industry Markets

Attending trade shows for business owners (as opposed to shows for consumers) can be a beneficial way of locating new products to sell. If you are selling items in a specific market (e.g., sporting goods, electronics, clothing, etc.), look for a trade event featuring those wholesale vendors. Most trade shows are closed to the public and are only accessible with a sales-tax license or federal tax-identification number. Trade shows are hosted at major venues all over the country, and wholesalers set up booths to hawk their wares and meet potential new retailers.

As an etailer, you’ll have to ensure that each wholesaler supplier you speak with will work with a smaller online business. Most of the suppliers at such an event are accustomed to working with small retailers, so the fact that you’re a small business won’t spook them. They may not, however, want to work with an online-only business, they may require the purchase of items in bulk, they may not offer drop shipping and may not offer credit terms. All of those items need to be covered with each potential wholesale supplier with which you visit.

There are many websites that include schedules for various trade shows, including Tradeshowweek.com.

SOME TRADE-SHOW PROS:

Attending a trade show can open your eyes to more products that you can imagine.
You might see new products that haven’t hit the market.
You can establish relationships directly with the supplier and don’t have to work through a middleman or intermediary.
You can order products at the event and have them shipped to your location.

SOME TRADE-SHOW CONS:

It’s time-intensive. Not only are you traveling to various major cities to attend such shows, but you’ll have to spend time evaluating each supplier to ensure it will work with an online business.
It can be expensive. You might have to pay for airfare to the event, hotel and meals for a few days and fees to attend the trade show; some suppliers may also require you to pay on the spot to order products at the show.

Purchase a List of Wholesale Suppliers

Unfortunately, there are a lot of scams out there, and the Internet is full of them. The web is full of stories from etailers who purchased a list of wholesalers only to discover the list they received was a fraud, out of date or wildly incomplete.

According to Laura Della Torre, eBay’s senior manager for the company’s developers program, Malta’s Worldwide Brands’ directory is the only directory that is eBay-certified.

Rather than the small-business owner having to develop relationships with potential suppliers and verifying the suppliers will work with a small Internet business, Malta’s team at WBI has already done the work. Malta is also the author of The Drop Ship Source Directory and The Light Bulk Wholesale Directory and the co-author of What To Sell On eBay and Where to Get It with Lisa Suttora, founder and CEO of WhatDoISell.com™, another eBay-Certified Service Provider. These directories offer more than four million products from more than 4,000 suppliers who have already committed to working with Internet businesses.

For a one-time fee, a subscriber gets a lifetime subscription of an ever-evolving list of suppliers within a directory. The service is easy to use: log in; search products by brand, product type or supplier; access all the supplier’s contact information, telephone numbers, main contact’s email address, etc.

These online resources are continually updated and very detailed. For instance, if your online business has something to do with animals, and you want to add some new products around that theme, there are 23 different categories related to animals – from animal charms and finger puppets to animal-shaped lamps. WBI also sells Market Research Wizard, a product that gives etailers an instant, complete analysis of any product they are thinking about selling.

SOME ONLINE RESOURCE PRODUCT PROS:

The research is done for you. Each of the suppliers in The Drop Ship Source Directory and The Light Bulk Wholesale Directory has committed to working with Internet businesses; the directories also provide the contact name of a key person at the company.
Members have access to additional resources, including the E-Biz Knowledge Base, newsletters, online marketing and legal resources and more.
WBI has the mark of certification from both eBay and Entrepreneur magazine, lending credibility to its products and services.
There aren’t any reoccurring monthly or annual fees to continue accessing the product. It’s a lifetime access.

SOME ONLINE RESOURCE PRODUCT CONS:

You still have to do some work to contact the companies with which you want to work, but all the necessary inforation is provided.
There is a one-time fee, though the cost is reasonable (perhaps the cost for this product is more of a pro than a con, considering the research time it saves you). The Drop Ship Source Directory and The Light Bulk Wholesale Directory are each $69.95, and the online Market Research Wizard is $97.00. All three purchased together (at $197.00) also includes WBI’s General Wholesale Directory and The WBI Home EBiz Office Supply Center.

Product Service-sourcing Companies

There are various companies who fall into this category, including Doba (formerly Wholesale Marketer), Dropship Direct, Mega Goods, Dropship Design and Net Dropshipper.

Many companies within this genre advertise as actual drop shippers when they aren’t, so be careful to ask direct questions and do plenty of research.

With these companies, you’ll often pay a monthly or annual fee to be a part of their network. Though many of the companies don’t have warehouses (so they can, by definition, be considered a drop shipper), they work with multiple wholesale suppliers aggregating all products into one service and standardizing much of the data.

If you’re an aspiring etailer who doesn’t want to travel to trade shows or spend time developing relationships directly with wholesale suppliers, a product-sourcing company might fit your business model. Product-sourcing companies are middlemen, facilitating relationships with suppliers. When possible, many advertise they can get you a better price on a product because they negotiate a better deal with suppliers. You might want only five widgets, but their entire membership may order 5,000 widgets, giving you the benefit of a lower cost because of that buying power.

Doba is the only product service-sourcing company that is an eBay Certified Solution Provider. It has access to a huge variety of wholesale products that can be drop shipped directly to your buyers for immediate order from its easy-to-use site. The company is in the process of doubling its suppliers and will offer about 250,000 products beginning in June, said Hanks.

“We have a lot of customers who have direct relationships with suppliers and use our service as well,” said Hanks, who is also the co-author of Drop Shipping For Dummies, with Nicole Haims and Brandon Williams. “We’ve built a platform that gives etailers access to the inventory of multiple suppliers.”

“Doba also adds a layer of service and tools that manufacturers don’t want to do,” he said. According to Hanks, the company’s Push to eBay wizard and its data-export tool are popular enhancements to the core subscription that many businesses use.

When possible, Hanks said, the company is able use its buying power to leverage better prices for its members. The Doba site is intuitive to use and can save you money. For instance, a Coleman® Outfitter Cook Kit was listed at the wholesale price of $40.98 ($33.71 for the product and $7.27 for shipping) through Doba. The same product was listed as a sale item at Cabela’s, an outdoor equipment hot-spot, for the retail price of $57.74 ($49.99 for the product and $7.75 for shipping). In other words, when etailers can buy at competitive wholesale prices, there is still room to mark up their own prices while remaining competitive with other retailers.

SOME PRODUCT SOURCING COMPANY PROS:

They provide quick access to products, helping get your store online fast.
They provide a variety of products, many of which are name brands a customer will have confidence in.
Some companies offer additional tools and resources an etailer can use to make building an online store easier.
Some companies provide free trials, live phone support and other key benefits.

SOME PRODUCT SOURCING COMPANY CONS:

There’s a fee. Rather than doing the work yourself to contact suppliers, you’re paying for the convenience to access their resources.
Some companies just aren’t honest and hide various fees. Be thorough when doing your research.