Chapter 7 How to Source and Manufacture Products for Your Online Business
Congrats, you’ve gotten through the most critical first step of starting an online store — selecting the perfect products to sell.
Now you need to figure out how you’ll source those 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, common pitfalls and the steps to successfully selling 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 of demand and custom manufactured.
Types of Product Sourcing:
You have three primary sourcing options to consider.
- DIY products or services.
- Work with a manufacturer or wholesaler.
- 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.
But if you’re thinking about creating your own products, there are some factors to consider.
Perks and Pitfalls:
You will have full control over your brand and will likely be coming into the space with something new.
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.
You’ll want to make sure you’re always thinking ahead about how you will scale and possibly grow your product line over time in order to stay competitive and offer your customer base something new.
Tasks to Get 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 would hiring a shipping service be worth saving 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.
- Calculate how long your products take to make: You should know exactly how long it takes to make a product. Also give some thought as to whether or not you will make items to order or if you want to keep inventory on hand. Be sure to document any labor costs, whether it’s money spent or time spent.
- Consider where you’ll store your inventory: Even if you’re lucky enough to have an empty room in your home, that probably won’t scale with your business. Look into alternatives like renting a space, opening a storefront or using 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.
Passion + DIY
The motivation for starting my business was a sudden realization that the beauty industry is not what it pretends to be – that false advertising and marketing tactics based on fear were methods employed by the larger companies.
I felt that people were taken advantage of and that companies manufacturing products of high quality with healthy beneficial ingredients were scarce.
There was a need in the market and since I was already making some products for my own use and that of my friends, formulating more products was an easy next step.
I knew I would make a better product and I felt called to share the information I know and deliver healthier and better products for my customers and for the planet.
– Mira Herman, Owner, Rosemira
2. Working with a manufacturer or wholesaler.
This is a great option if you aren’t able to make a product yourself, or 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.
Perks and Pitfalls:
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.
Items to Consider:
- Finding products: 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 and taking 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. Finding the right partner can take some time, so don’t get discouraged.
- Checking references: As with any business, you need to make sure you’re dealing with someone who is legit. 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.
- Evaluating 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 be? Take into consideration production, shipping and potential hidden fees.
- How long will it take for them to make/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?
- Getting a sample: 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.
- Picking one: Weigh your options and get going! 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.
How You Run Business is How You Give Back
I run my business to honor the memory of my father & hero Arnold who was a Vietnam Veteran.
I do this in 3 ways:
- Give back 5% of my net profits each year to nonprofits serving Veterans,
- Offer 15% off entire store to Veterans and Active Duty military
- I support the American Manufacturers. 99% of my product offering is 100% Made in the U.S.A.
– Philip Kauppinen, Owner, Grand New Flag
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.
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 is also good for expanding the product catalog of an existing store.
Perks and Pitfalls:
Dropshipping means you don’t need to deal with inventory, packaging or fulfilment.
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.
Items to Consider:
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
- Pick one and go
Please note that, as with anything, there are always fringe cases.
Don’t get discouraged or give up on an idea just because it doesn’t fit into any of the above scenarios. These are intended to serve as a guide to help you begin research and bubble up your most profitable and realistic business ideas.
Continue on to learn about how to choose an ecommerce platform and finally launch.
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