Chapter 7 How to Source and Manufacture Products for Your Online Business

Beatriz Estay / 5 min read

How to Source and Manufacture Products for Your Online Business

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Congrats, you’ve successfully found a niche product to sell that has great market viability, competitive advantage, active target audience, and fits within legal requirements. You found the perfect product for your business!

Now you need to figure out how you’ll source your products.

How you source products will serve as the foundation for your business, guiding your day-to-day activities.

In this chapter, you’ll learn about your options for sourcing: the perks and common pitfalls that come with navigating how to sell online.

What is Product Sourcing?

Product sourcing is the process by which a business attains a product to sell

There are a variety of methods by which sellers source their products. Most sellers use a combination of methods including dropshipping, wholesale, print on demand, and custom manufactured.

Types of Product Sourcing

You have three primary sourcing options to consider.

  1. DIY products or services.
  2. Work with a manufacturer or wholesaler.
  3. Hire a dropshipper.

No option is inherently better than another, but there are a variety of factors to weigh when determining which works best for your business — and for you.

1. DIY products or services.

The idea of crafting your own product dates back centuries.

Today, thanks to the internet, you now have a much wider reach for selling handmade goods — like, handmade jewelry.

But if you’re thinking about creating your own products, there are some factors to consider.

First, you will have full control over your brand and will likely be coming into the space with something new when introducing a handmade product.

Second, startup costs are typically low, although you’re going to need to put time and energy into your business, which is a sacrifice in and of itself.

And, third, you’ll want to make sure you’re always thinking ahead about how you will scale and possibly grow your product line over time. This will help you stay competitive and offer your customer base something new.

A Checklist to Get You Started:

Source materials.

It could be from your local flea market, craft stores, estate sales, an established retailer, or even friends and family. Identify your materials, where you’ll get them, and how much they’ll cost.

Determine how you’ll ship orders.

Will you be running to the post office or UPS store yourself, or will hiring a shipping service save you more time and energy?

Learn what it will take to ship.

Give thought to packaging, since it will have downstream effects on total costs and could create shipping challenges later on. 

Look into companies like Noissue, which make it possible for your packages to reflect your brand feel. After all, the rise of the “unboxing experience” could have a long-lasting effect on your customer experience.

Calculate how long your products take to make.

You should know exactly how long it takes to make a product. Also, be sure to document any labor costs, whether it’s money or time spent. You’ll also need to decide whether or not you will make items to order or keep inventory on hand. 

Consider where you’ll store your inventory.

Even if you’re small enough to legally run your business out of your home, that probably won’t scale with your business. Look into alternatives like renting a space, opening a storefront, or using a 3PL.

Make a plan for communicating timelines.

Your website should set expectations on how long it takes to craft a product and complete an order. You can do this in places like your product description and shipping and returns policy, plus reiterate in your transactional emails. It’s always better to be transparent and upfront so your shoppers feel confident purchasing from you.

2. Working with a manufacturer or wholesaler.

Working with a manufacturer or wholesaler means you’re hiring a partner to develop your product.

This is a great option if you aren’t able to make a product yourself, when you’re ready to scale your DIY product by hiring someone else to make it for you, or to supplement for higher than planned sales.

While this gives you the option to pursue a unique idea or sell popular products without making anything yourself, you may need to invest more heavily upfront.

You can still have control over your brand and the quality of your product, plus get a great deal of assistance with production.

To determine if hiring a manufacturer or wholesaler is right for you, you’ll want to consider a few factors.

First, you’ll need to find the products.

If you’re looking for a product to sell, this can be as simple as forming a business relationship with a friend who makes a product you’d like to sell, product-sourcing using Alibaba, partnering with an existing company to take their business online or from B2B to B2C, hiring a manufacturer, building relationships with makers on Instagram, or using Etsy Wholesale

If you’re looking for a manufacturer to make your products, you can easily research options online. Remember that finding the right partner can take some time, so don’t get discouraged. It’s worth the wait to make sure you choose the right partner to create your dream product.

Next, you’ll want to check references for the manufacturer or wholesaler in consideration. As with any business, you need to make sure you’re dealing with someone who is legitimate. 

Reach out to others who have used the manufacturer or wholesaler, and maybe do a little digging at the Better Business Bureau. It’s a good sign if the company you’re researching asks for information that proves that you have a legitimate business, too. Be prepared to provide necessary licences or tax information.

Now, it’s time to evaluate your options. Be sure to ask questions of each company you’re considering so you can make the best decision:

  • What will the total cost of production and shipping be? Are there any potential hidden fees?
  • How long will it take for them to create, fulfill, and ship the product?
  • What does shipping and inventory management look like? Will you need to ship and store, or is that included as part of their service? Is there any additional cost? What are the timelines and conditions? Do you have control over package branding?
  • What do the contracts and terms look like? Is there any wiggle room for things your business or customers need? Is there an evaluation period or terms for termination?
  • What do support and communication look like? How frequently will you be updated on information like inventory, product changes, or even discounts?
  • What are the minimum order quantities? Will you have to commit to a certain number of units or spend a minimum amount?

When you’re ready to take the next step with a manufacturer or wholesaler, you’ll want to sample the items you plan on selling. Before you sign on with anyone, make sure their products meet your expectations. While some manufacturers will charge a fee to send you a sample, you can often negotiate a deal to only pay for it if you keep it.

The final step: weigh your options and confirm your partnership! You want to ensure you’re making a smart decision, but that doesn’t mean you should sit in research mode forever. Worst case, you pivot and go another direction.

3. Hiring a dropshipper.

Dropshipping is a method of product sourcing that lets you purchase from a vendor and list their products on your online store. You essentially won’t need to deal with inventory, packaging, or fulfilment.

The vendor charges you for the products as they are sold, and typically ships orders on your behalf.

It’s a great option for starting a new online business, but it’s also great for expanding the product catalog of an existing store.

The catch is that you’ll typically have more competition, as many of the products offered by dropshippers are readily available all over the internet.

However, most have a wide selection of products from which you can choose. Dropshipping usually gives you a lower profit margin, so you’ll need to sell a lot before making a good profit.

The steps to find a dropshipping supplier or aggregate dropshipper — a dropshipper that works with a variety of dropshippers for you — are nearly the same as those you’d follow for the manufacturing option.

  • Find some options,
  • Check their references,
  • Evaluate all of your options,
  • Ask for samples, and finally,
  • Pick one and get started.

Now that you’ve taken all the steps to create a detailed business plan, let’s dive into the next chapter to learn about how to choose an ecommerce platform and finally launch.

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Table of Contents

IntroHow to (Realistically) Start an Online Business That (Actually) Grows in 2020
Chapter 1 How to Craft The Perfect Product and Brand For The Online Market
Chapter 2 How to Evaluate Market Viability for Your Products
Chapter 3 How to Conduct Online Market Research
Chapter 4 How to Conduct a Competitive Analysis for Your Online Business
Chapter 5 10 Online Business Laws You Need to Know for Internet Selling
Chapter 6 How to Identify and Analyze Your Target Market in 2020
Chapter 7 How to Source and Manufacture Products for Your Online Business
Chapter 8 Choosing The Right Ecommerce Platform For Your Business
Chapter 9 59 Productivity Hacks for Online Small Business Owners
Chapter 9 How to Create, Setup, and Launch a Profitable Online Store (Seriously)
Chapter 10 Driving Traffic to Your Online Store
Chapter 11 Next Steps After The Sale: Your Guide to Small Business Shipping
Chapter 12 Measuring Success: Analytics
Chapter 13 Time To Grow: The 5 Things To Consider When Scaling Your Online Business
Chapter 14 17 Tips For Online Small Business Owners

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Beatriz Estay

Beatriz Estay

Beatriz is a Small Business Content Marketing Specialist at BigCommerce and the fashion and lifestyle influencer behind The Letter Bea, an Austin, Texas based blog. She holds a B.A. in Communication and Sociology/Anthropology from Lake Forest College and specializes in ecommerce, marketing and merchandising strategies, influencer and branding work, and social media. When she's not curating content, Beatriz loves to travel the world, share her journey with Type 1 Diabetes, and find Austin's most Instagram friendly spots.

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