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A Complete Guide to Product Sourcing for E-Commerce Websites

August 31, 2020

product sourcing

On the surface, product sourcing for your e-commerce website sounds like the easiest part. 

Know your product, find a supplier, import, and sell. But in reality, the process is a lot more complex than that. Sourcing good quality products at good prices and good profit margins involves research and a lot of trial and error.

In this comprehensive guide, we look at what product sourcing actually is, to each stage of the product sourcing journey, types product sourcing strategies and finally how to evaluate and sell your products once you’ve sourced and supplied them.

What is product sourcing?

Product sourcing is the process of finding good quality products to sell from reputable suppliers at good prices. Within that process, there are a number of different stages, such as researching the chosen product, calculating the price and cost of the product, and then negotiating with suppliers in order to achieve the best deal. Ultimately, the goal of product sourcing is to locate the best products, from good suppliers, at prices reasonable enough that they allow for a distinct profit margin.

Product sourcing sounds simple but can be a minefield with unreliable suppliers, hidden costs, and sometimes misrepresented or low-quality products. To keep an edge on your competitors, it is important to take the time to learn effective product sourcing strategies in order to maximize your potential profit from each sale. Outreaching to a product sourcing agent is one way to make this process much more efficient by relying on their expertise of various suppliers and niches.

What is a product sourcing agent?

A product sourcing agent, or sourcing supplier, is someone who has several years of experience working either in or alongside a sourcing or trading company. Most of the time product sourcing agents come with an already established contact book full of reliable suppliers whom they have already formed good relationships with.

Product sourcing agents work as your representative and can help you identify a reliable supplier, negotiate prices on your behalf, as well as oversee production processes, sign off on any required documentation, undertake quality control procedures of your product, and most importantly, ensure that you receive your products at the agreed shipping time.

Whilst product sourcing agents are a good resource to use at any given time, they are particularly beneficial if you are sourcing your product from overseas in low-cost, multiple factory regions such as China or Taiwan.

What to look for in a product sourcing agent

Just like the product sourcing process, identifying a product sourcing agent requires similar levels of research! Key things to look for include:

A business license

All genuine sourcing agents should be licensed, which means they have legal jurisdiction to carry out their work. It’s also a layer of protection for your business – if anything negative was to happen, you could use their business license number to track and then subsequently get in touch with them.

Experience and industry expertise

It goes without saying that your agent should have proven levels of expertise, but specialisation in your chosen niche is just as important. If an agent has a good level of generalist knowledge but has very little experience sourcing your product, it may be worth continuing to search for an agent who has more relevant experience sourcing products like yours as they’re more likely to have a better network of suppliers and cost understanding.

Communication

Communication is vital in any relationship, but it’s even more so when sourcing products from abroad. Your agent should be available at all times to answer queries and should keep you well informed of every stage of their work. Miscommunication around the product, shipping time, or pricing can quickly become a big problem and is something to be avoided at all times, so if your agent is slow to respond, or avoids certain conversations altogether, it’s best to avoid.

4 product sourcing strategies to take note of

If a product sourcing agent isn’t available to you, or unnecessary for your e-commerce journey, then there are ways to learn and undertake product sourcing strategies yourself.

1. Work with a wholesaler

If a good relationship can be developed with a reputable wholesaler, there is a world of opportunity waiting in the form of being able to sell unlimited, unique products without the cost of needing to manufacture them yourself.

Additionally, many wholesalers will only produce products they know are guaranteed to sell well because of the huge quantities they make at any one time - so you already know there is an established need or market for your product. However, due to the nature of wholesalers, products will need to be bought in bulk which means bigger initial costs upfront, as well as inviting potential undercutting competition from other sellers procuring products from the same wholesaler.

2. Work with a manufacturer

Establishing direct working relationships with manufacturers cuts out any potential middlemen as you are shipping the product to yourself with no additional incurring fees. Whilst you will be able to attain products at lower prices than working with wholesalers, you will still need to buy in bulk because of the minimum order quantities manufacturers work to which could prove too expensive for a starter business with a smaller budget.

3. Try handmade products

A recurring trend, the appetite for artisan, handmade products is growing year on year as buyers aim for originality and uniqueness in their products or furnishings. A majority of the time, most sellers will be small independent businesses, so there is no need to pay bulk fees and the margin for competition is lower as the products sourced are likely to be completely unique. However, inventory could become a problem if the demand outsurges the rate the seller can produce, or if the seller is unable to continue manufacturing the products.

4. Visit a trade show

Trade shows, exhibitions, and conferences can not only be great places to conduct market research, but also identify and establish relationships with manufacturers, wholesalers and other independent retailers often selling unique products that are not yet common market knowledge.

You will be able to inspect the product up close and gain a deeper understanding of the seller or supplier which enables you to better navigate any potential issues like supply and demand. However, depending on your niche and location, these trade shows may not appear regularly enough.

3 tips to improve your product sourcing strategy

The more you undertake product sourcing, the more refined you can make your process. The art of product sourcing is that it rewards patience, research and curiosity so try not to let it overwhelm you and instead enjoy experimenting with different methods and strategies. Try these tips the next time you’re sourcing your ideal product:

Research, research, research

Analyzing the demand for your product and then analyzing it again is the key to differentiating a good product from a great one. Research your product on one channel, and then research it on another one comparing audiences, expenses, and lifestyles. If it is an already existing product, check reviews on all the major supplier sites, and find tools to analyze sales data. Is the graph going up, or starting to plateau?

Emulate a proven model

Imitating a retailer’s proven, successful sourcing model will not put you behind in the e-commerce world - in fact, it’s one of the best things you can do. Undertake research into either your potential competitor’s sourcing strategies or any successful e-commerce store: Can you identify where they purchased the product? Was it a brand or have they bundled from an unknown wholesaler? Is it handcrafted, or have they simply white-labeled their products? See what’s working on their channels and replicate those onto your own.

Always prepare a plan B

Try not to get tunnel vision for just one product. If that product ends up outstripping supply and demand, or its demand suddenly plateaus overnight, your store risks falling into disrepair straight away. When sourcing your initial product, try to identify another, potentially unique product you could sell alongside, or instead of, the original. Is there something similar? If the products are similar in nature, this could open up great cross-selling opportunities too.

Where and how to find trending products to sell

Part of being an e-commerce store owner is trying to stay ahead of the trend, and sell new, or trending products before the competition gets to them first. Knowing how to identify and monitor trending products is, however, a skill in itself. When the product is so new, there is often not enough data to accurately assess its longevity or if it's worthwhile.

Luckily, major retailer websites can often give good indicators as to how well something is selling or will sell. For example, many major clothing websites include an option to shop by trend, offering an opportunity to watch how well new seasonal products are being received by consumers.

Away from large sites, tools such as Google Trends offer Featured Insight tabs and opportunities to filter by product, location, and age and supply their data in an easy to plot graph, making rising or falling opportunities easy to identify and validate.

If you want to potentially find these trending products quicker however, there are some valuable resources you can use.

  • Trend Hunter: Trend Hunter is a global online community that aims to share and inspire the newest trends.
  • TrendWatching: TrendWatching is one of the world’s leading consumer trend firms. They have in-house teams in Amsterdam, Berlin, Singapore and New York. They boast a network of 1,700+ spotters in over 80 countries who are always on the lookout for emerging consumer trends and new innovations.
  • Springwise: Every day, powered by their community, Springwrise finds, curates and analyses the newest innovations from around the globe. They put all this information out in a newsletter full of free new trend data.
  • Ecomhunt: A product curation website where trending products are added on a daily basis
  • Uncrate and Bless This Stuff are popular consumer product blogs and magazines of curated men’s products
  • PSFK: PSFK IQ is a membership-based platform that provides personalized trends intelligence & research to retail, strategy and innovation teams. It’s main aim is to provide the latest insights so you can stay ahead of the curve.

Product evaluation

Ultimately when selecting a product to take to market you only need to answer two fundamental questions:

  • Will I be able to produce a profit with this product?
  • Will this product help me scale by business?

If you have done your market research correctly you may already have a feeling of yes or no to both of those questions. There is however a lot more to consider before reaching your final answer.

Do you know the potential market size or demand? If your market is too small, or too niche this will limit how much you can scale. Standard market research should help you understand this, but it will also be worth checking search volumes to see online demand.

Is the product a trend, fad,is it in a flat or growing market? Is your product a long term one or just something to make a quick buck? Understanding which category your product fits into will help you understand if it's worth it. You don’t want to spend a lot of your time and energy to source a product to find you missed the boat and the market is set to decline.

Is the product available locally? Simply put if your product is available locally there is less need for people to search for and buy it online.

Who are your target customers? Do they regularly buy online? Can they actually buy your product? How are you going to reach them? For example understanding that your target market is 18-25 year old females who regularly use Social media will help you formulate a marketing plan that can instantly get your product in front of them and potentially your first few sales.

What is your potential selling price? What are you competitors charging? What price do you need to charge to make an acceptable profit margin?

What is your product profit margin? This will be a make or break question, if you’re not going to be able to make any profit on the product you may want to give it a miss and continue your search.

What is the size and weight of the product? This will impact your shipping costs, which again will eat into your margins so you need to get an idea of costs here as well.

Is the product durable? Linked to the above when your product is in transit you don’t want it to break easily and have costly returns or replacements to deal with.

Do you need to take into account seasonality? Understanding this will help you plan stock and also prepare yourself for potential drops and peaks in sales so you can manage your cash flow better.

Does your product serve a passion or solve a pain? Is your product a nice to have or will it make your customers' lives easier? If the answer is yes to both then you might be onto a winner.

Are you aware of any restrictions or regulations for your product? It’s vital to learn about any potential restrictions and regulations before investing your time and money into a new product. If you plan on shipping worldwide some countries may have different import regulations compared to others. Having an understanding of these in the beginning will save you a lot of time, energy and money.

Supplier evaluation

If the product has passed your initial evaluation checks, now it’s time to find a supplier. Look for suppliers that are reliable, and have experience in balancing supply and demand - especially if the product has the potential to sell many units in a fast amount of time. Make sure to order a test product from the supplier first so that you ensure you are getting the product for its expected quality.

If the product is priced well, communicate with the supplier for your shipping time estimations, and don’t jump straight in at initial prices - ensure that you are still making a profit margin for your store once shipping and purchase price are incorporated.

The importance of product pages on e-commerce websites

Once you have your product sourced, supplied, and ready to sell the next stage is showcasing it on your website’s product page. Product detail pages are often overlooked but they are one of the most crucial pages on any e-commerce website.

Product pages play a vital role in convincing your website visitors into a sale, and as such, they should be primed and prepared for maximum conversion value. Here are some key things to include for maximum value.

Clear, high-quality photos

It’s a well-known fact that the majority of people buy with their eyes. In fact, 67% of consumers say that the quality of a product image is “very important” in selecting and purchasing the product. Crisp pictures displaying your product in a variety of real-life scenarios and allowing your potential customer to envision it in their daily life can make the difference between a window shop and a must-have.

A positive product description

Product descriptions need to accurately define the features, benefits, and functions of your product. Descriptions should also appeal to either the needs or wants of the potential consumer, or explain how the product solves a problem the consumer could have.

The price

It sounds obvious, but the positioning of the price can be vital for conversion. It should be prominently displayed near the Buy or Add To Cart buttons to help with the natural flow of the page, and price anchoring, or compared at pricing that encourages your consumer into buying a deal should be used.

A call-to-action

An essential part of the product page. Without a call to action like an “Add to Cart” your visitor will not convert to a buyer. Make these demands short, catchy, and snappy.

Social proof

Another well-documented fact is that often purchasers make decisions based on social proof, or in layman’s terms, the opinions of other people. In fact 88% of customers trust reviews as much as personal recommendations. So don’t discredit reviews. Make sure there is an easily navigable and easy to find review section where customers can all but sell the product for you by including their own pictures or talking about how great it is.

Conclusion

Within our comprehensive guide, we have charted the process of product sourcing and mapped out the key elements you need to achieve the one successful goal: Finding good products, from good suppliers, at prices that you provide you with a good profit margin.

We’ve talked extensively about developing relationships with product sourcing agents if it is an option suitable for your e-commerce business, and outlaid product sourcing strategies that you can undertake to further your experience and research, and we’ve given you tips on how to keep improving and refining your strategy, as well as some useful pointers for being able to identify trending products in the future.

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