How To Decide On A Sourcing Strategy

Retailers find product from a variety of sources. The sources that you use depend on the nature of your business and product, your capacity for inventory and so on.
• Drop Shipping
• Local Sourcing
• Low Volume: Wholesalers
• Mid Volume: Importers and Distributors
• High Volume: Manufacturers
• Liquidation Sales
Drop Shipping
Drop shipping allows you to sell products without having to hold inventory of the merchandise. The drop shipper holds the stock for you, you don't actually pay for the item until you sell it. Also, you never even see the product because the drop shipper ships the product directly to the customer for you.
Drop shipping can be a good sourcing practice to test the market for a specific product. If the product sells, you may choose to make a larger investment with a bulk order of the product.
Pros:
• No cash tied up in inventory
• No storage requirements
• Low risk
Cons:
• Wholesale cost is higher
• No control over shipping
• Bound by supplier's return policies
• Easier to setup, therefore more competition
Local Sourcing
Local sourcing is finding products sources such as car boot sales, discount shops, and local outlet stores. This is a good technique to help you get started immediately in finding products to sell, but it is the most limited type of product sourcing because you are basically purchasing one time articles that you must resell as unique items versus being able to build a sales strategy around a collection of products that can be marketed to a specific group over and over.
Pros:
• Good starting point
• Profit can be high for one of a kind
Cons:
• Can't reproduce items
• Time consuming to sell individual items





Low and Medium Volume: Wholesalers, Distributors and Importers
If you plan to be a serious e-tailer, offering a consistent product line, you want to start holding inventory of the products you resell. To start with, you may want to begin small, then gradually increase the quantity of inventory you hold. Wholesalers are the best option for purchasing low volumes, they are generally very flexible with retailers. Once you are prepared to hold larger quantities of product, consider using Importers and Distributors; while they have higher minimum order requirements, they can offer you pricing arrangements which can be considerably more profitable than dealing with wholesalers. It is advisable that once you reach this stage of the sourcing cycle you consider registering as an official business, including having a business or tax ID number.
Pros:
• Lower pricing
• Control over inventory and shipping
• Opportunity to develop marketing strategy around product line
Cons:
• Requires cash flow
• Higher risk
High Volume: Manufacturers and Importing from Overseas
One of the best ways to increase profit margin is to purchase directly from manufacturers and to import goods from overseas factories and distributors. Many international suppliers can offer low priced, high quality goods that can help you increase profitability. However, importing requires a good understanding of managing suppliers, shipping issues and importation fees. However, once you have established a system for importing, it is easy to continue accessing goods at a much lower cost.
Importers are not typically willing to deal with small amounts because of the cost of transportation. So, importing is an option once you are fairly certain that you will be able to turn over your inventory quickly.
Pros:
• Better profit margin
• Many more unique products
Cons:
• Costs of importation
• Quality control
• Cash flow required
Liquidation Sales
Liquidation sales are usually bulk lots of merchandise that are being sold in an attempt to recoup some of the loss when a retail company goes out of business. Buying at liquidation can be a wonderful way of getting very low priced merchandise for sale. However, this approach, like other local sourcing, does not create an ongoing supply of product, therefore it carries the same problems as other local sourcing options.
Pros:
• Very low cost; higher profitability
• Immediate availability
Cons:
• Usually must buy in bulk
• Cash flow issues
• Storage issues
• May be available because it is an inherently poor seller





How to choose
Choose drop shipping and local sourcing to get a feel for products, for your ability to run a business and for the market. Add or switch to low volume wholesale to gain consistency and long term advantage. Include liquidation when a good opportunity emerges. Start importing and buying directly from manufacturers once you are fully trained to the risks associated with trading in large volumes, have the customer base to turn around stock quickly, understand market trends and the importance of market reseach.

Finding Branded Products Distributors

'How do I find the distributor of brand X?', 'I have seen a competitior selling brand Y, how do I know who distributes it?'.
Finding real wholesalers on your own is possible! The first instinct is to try sourcing through search engines, which is not an impossible task, however be aware that most real wholesalers do not appear and certainly do not advertise on search engines. Search engines are filled with middlemen and cheap wholesale information. Large wholesalers are mainly interested in supplying large retailers. This is because handling one large account is cheaper than managing many smaller accounts with the same aggregate buying volume.
Wholesalers operate on very thin margins; adding administrative costs by adding many small accounts to their buyers portfolio is not generally something they consider profitable. This is just the way wholesalers think, so you should be aware of this point, it is very important if you are to make progress with them and do business with them.




So in summary, don't expect wholesalers to come after you. You will have to go after them to get their attention, and there are ways you can do so and get their response.
So how do you go about finding the distributor of product X ? It is quite simple actually, and involves only 1 call. That is when you know the manufacturer of the product (the manufacturer is not always so obvious, brand names do not always correspond to manufacturer names).
You can normally find out the manufacturer's name by buying the product and reviewing its stickers or manual. Either one has to include the details of the manufacturer or importer (by law). Take down the manufacturer's name and find their phone number. Call them and ask to speak to their sales department. Finally explain them you are a retailer, and that you would like the details of their main distributor or wholesaler. You might be confronted by a voice mail, and have to wait a couple of days for a reply, or have to chase a response. Don't despair, the sales department should get back to you with the information you have requested.
Please be aware manufacturers can only rarely provide details of liquidators of their products. If you resell in a very price sensitive marketplace, it pays to ask the wholesaler whether they can provide you with the details of the liquidators that work with them. Liquidators generally have higher order requirements, but can offer you a much lower price than a wholesaler (because the item they are clearing was purchased from the manufacturer or importer at or below cost).

How to approach a supplier

You have done your research, you know what you want to sell, and now you have found a supplier for your products. The next step is to establish a relationship. It is in both parties' interest to approach this new relationship professionally.
Approach the relationship professionally
As you probably already know, there are plenty of ecommerce dabblers out there who think they want to sell online, waste a lot of suppliers' time asking uninformed questions or making unreasonable demands, and then decide they can't really pull it off and drop off the face of the earth. No supplier wants to use their time unproductively but it can be difficult to know who is a legitimate eCommerce retailer and who is a tire kicker that's going to consume more time than ever gets paid back in merchandise purchased. As a result, suppliers can be a bit wary at first. Here's how to prove to a prospective retailer that you are a serious buyer who will respect the supplier's time and who expects similar treatment in return.
1. Before contacting the supplier directly, learn as much as you can from the website. Most supplier websites have been designed to be as helpful as possible to buyers as well as to reduce the amount of staff time involved in responding to redundant questions. If after accessing all the information you can find, you still have a question, you should most certainly contact the supplier. When you do contact a supplier, be as efficient as possible in information seeking. That means get to the point quickly and make any needs known clearly. Be sure that your emails use proper grammar and are spellchecked. Nothing looks more amateurish than an email that's poorly written with bad grammar or spelling.
2. Give the supplier a reasonable amount of time to respond. This may be your first foray into selling and everything feels urgent to you but to the supplier, you are one of many clients and he may feel the need to respond to currently contracted clients first.





Signing up as a merchant
If you decide that you want to do business with a supplier, you will need to open an account. Most suppliers have an on-line form to fill out to establish an online account. Every wholesale supplier will need to have proof that you are a legitimate retailer in order to give you access to wholesale pricing. You will need to provide your registered business name, business license if applicable and business ID number (VAT-number), usually the number associated with filing business taxes. If you are a sole trader, make sure you have already set yourself up to start selling before you present yourself to the supplier: make it clear that you understand their time is important to you, demonstrate that you are ready to trade, clarify where you will be selling, and be concise.
You will also need to establish a payment mechanism. Generally on-line supplier systems accept credit cards although credit cards are less common in international transactions. Be sure you understand how you will pay for the merchandise and under what terms you will pay, i.e., what are the incoterms involved in the transaction.
Know how the relationship works
Be sure you are aware of return policies, shipping times, delivery fees and so on. Don't put all your eggs in one basket. It's prudent to find several suppliers who can meet your needs so that if the circumstances of one supplier change, you have immediate backup suppliers to pick up the slack. Finally, don't worry about being solely an on-line retailer. Suppliers are looking for ways to sell product so they will be happy to work with any retailer who offers a professional, profitable relationship.

Listening to Demand Trends

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You may be familiar with the fact that product sourcing is essentially split into four main categories:

1. Sourcing products that you already know sell well. This type of products are very easy to identify, by simply observing what the majority of your prospective competitors are selling*. You will be competing on price, and service. Offering add-ons like exceptional customer service, after sale support and product guides (publish the latter free online and use them to drive traffic to your site or auctions shop) are just some of the extra services you can offer to attract repeat sales in a price sensitive market. *Another indicator of high demand is supply shortage: when the supply of a product cannot meet its demand it is often indicative of a high demand product, however bear in mind that supply shortages can also indicate a new demand trend, as we will observe in point 4) below.
2. Identify a niche market. For example, a large fellow who just couldn't find shoes to fit decided to open a business selling large size shoes – bingo! Just as he suspected, he wasn't the only person who had that problem. Often niche markets are developed out of a personal passion or need, only to find that many other people share the same necessity.
3. Branding. Probably the highest risk option, often requires high marketing budgets and differing levels of R&D depending on how much innovation is a key factor in your market.
4. Predicting and anticipating market trends. This is the topic we will be covering in this article.

Everyone needs to economize on fuel costs

Okay then, what's happening around you right now? What is everyone talking about? The high cost of energy and the threat that energy costs will continue to spiral more out of control. People will be looking for ways to save on energy costs. They will be altering their own practices, e.g., setting the thermostat to a cooler setting in the winter and the air conditioner to a warmer setting in the summer, as well as purchasing energy saving devices such as energy saving bulbs, programmed thermostats that automatically set temperatures at the best temperature depending upon the circumstances, etc. This is an enormous market need that will spawn thousands of new products to help people and businesses lower their energy costs.

Energy saving products

There are already many energy saving products in the marketplace that can be promoted. For example:

• Spiral fluorescent light bulbs that use less energy and last many times longer
• Light switch and wall outlet sealers to plug possible leak spots that let cold air into a house
• Caulk and foam sealant
• Water heater blankets
• Weather stripping
• Foam pipe insulation
• Flow reduction faucet attachments
• Flush attachments that reduce water use for toilets
• LED Christmas lights
• Exterior shade screens
• Solar-driven products
• Air deflectors to direct heat and cooling

This is a short list in a burgeoning industry.

Products to support an energy savings lifestyle

Now let's look at the next level of energy savings. More people will be weather stripping their houses and changing their light bulbs. Those same people and maybe others will also be looking for other ways to change their lifestyles as well. For example, leisure industry analysts are reporting decreases of 4-25% in people traveling for vacation, using rental properties and eating out. Many, many people are substituting expensive trips with stay-at-home vacations, camping trips and other less expensive, closer-to-home options. Are you getting the message, here? Yes, this means there should be a spike in all things related to economising on vacations. For example:

• Camping equipment
• Outdoor furniture
• Outdoor games – croquet, badminton and so on
  
  
  
• Insect removal supplies
• Bicycles and other sports equipment
• Board games, puzzles

You can easily make a huge list.

Your entrée

You can become involved in selling products in this marketplace in many ways.

• Open a new area of sales and focus on this market
• Add some lines of energy saving equipment that complement your current business, e.g., regulated flow watering systems for your gardening business
• Become an affiliate marketer for other people's products
• Improve on products already in the marketplace and manufacture your own, original products. (Note: you don't have to be an engineer to make an improvement. For example, weather stripping is typically grey or brown. Why not make weather-stripping that complements current home design colors so that energy efficiency is not only practical but stylish?)
• Discover and introduce innovations that are already available in other countries but not well known in your country.
• Dust off old favorites and introduce them in a fresh way, such as the game of horseshoes as a better way to improve eye-hand coordination than video games

As you can see, many very common products can be repositioned to sell as energy saving (or money saving) devices.

Finding Products

Your search might begin by identifying possible energy saving products for your current business arena. You can Google 'gardening and energy saving products' to get an idea of the kinds of options available for that niche. Once you have a good sense for the products you are looking for, return to www.leverandor.dk to find your trustworthy, well-priced wholesale sources.

Go for it!

The high cost of energy is a problem for all of us. But, within every problem there are opportunities for those who are creative and entrepreneurial. And, even better, the energy-saving and 'simpler life' products you sell will improve everyone’s life and that's a benefit that it's hard to put a price on.

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