10 Ways to Source Inventoryfor Your Ecommerce BusinessEverything you need to know about sourcing inventoryso you can find the right products and maximize your margins
10 Ways to Source Inventory for Your Ecommerce BusinessIntroductionAs an ecommerce seller, you wouldn’t have a business without inventory. What’s more, yourbusiness wouldn’t succeed or grow without the right inventory — after all, you want to sellproducts that are actually in demand. Not only that, you want to maximize your margins, whichmeans you should source your products in a way that’s most efficient — and hopefully moreprofitable — for you.Fortunately, there are several different ways of getting products these days and we’re breakingdown the top 10 so you can find the right method and set your business on a path for growth.Table of Contents 2Retail ArbitrageOnline ArbitrageDropshippingWholesalePrivate LabelAlibabaAuctions & Thrift StoreseBayYourselfVirtual Assistants/OutsourcingConclusion & SourcesPro Tipp.3p.4p.5p.6p.7p.8p.9p.10p.11p.12p.13No matter how you source, make sure you areaware of Amazon’s gated brands and products soyou don’t invest in something you can’t actuallyresell — and lean on resources like Jungle Scoutwhich will help you find the most profitable itemsso you can invest in inventory with confidence.
10 Ways to Source Inventory for Your Ecommerce Business1. Retail ArbitrageWHAT IS IT?Buying heavily discounted products from retail stores and reselling them for a profitWith retail arbitrage, you’d shop clearance aisles at big boxstores (think Walmart, Target, Big Lots and CVS - to name afew) and scour liquidation and surplus stores for heavilydiscounted items. But you wouldn’t buy just anythingbecause it’s on sale — after all, you want to make sure youcan resell it. So consult a tool like Jungle Scout for one-clickproduct research to see what’s in demand and will makeyou the most money. After finding the most promising saleitems, you’d resell them at or just below the retail sellingprice. By pricing just below retail, you give yourself competitiveedge while still making a profit.Pro TipChain stores often carry the same items andgenerally clearance them at the same time, eitherbecause of seasonality or restocking. So if you find agood deal at one location, you will likely find the sameone at other locations near you. Not only that, demandmay differ in person vs. online.In other words, “you could also find regular priced itemsthat sell for much more on Amazon. It’s all aboutsupply and demand,” according to our friends atFeedvisor. “Your local store may have a large supply ofan item that isn’t selling so they put it on sale to get ridof it, while across the country someone is desperatelysearching for this very same product, and then find youselling it on Amazon.”At the end of the day, do your research to see what’strending/in demand online before you hit any stores.3PROS & CONSPros: No large upfront investment required You’re primed to make a large marginCons: Time-consuming No guarantee you’ll find sellable goods Not scalable or sustainable
10 Ways to Source Inventory for Your Ecommerce Business2. Online ArbitrageWHAT IS IT?Buying discounted products online and then reselling them for a profitOnline arbitrage is just like retail arbitrage only you’re shopping online instead of in person.Because you don’t have to physically drive from store to store, it’s also more efficient than retailarbitrage. Not only that, there are several tools you can use to compare product pricing acrossmultiple online stores, including Amazon. These tools, such as Source Mogul, Invisible Hand,Tactical Arbitrage and Cleer Platinum, will give you peace of mind that you’re getting the bestdeal and, in turn, the highest margin.Image source: Online Selling ExperimentPROS & CONSPros: Efficiently find products and compare prices Don’t have to leave your home/officeCons: Must rely on shipping times, so won’t getinventory in-hand right away4Pro TipTo get even more bang for your buck, considershopping online with a cash-back service likeEbates or Swagbucks.
10 Ways to Source Inventory for Your Ecommerce Business3. DropshippingWHAT IS IT?Having a third-party fulfill your orders on your behalfDropshipping is a low-cost method for buying inventory. After all, you don’t have to make anupfront or bulk investment, pay any warehouse storage fees or manage shipping and itsassociated expenses. Instead, you purchase product from a third party only after you’ve madea sale, then have that third party manage the fulfillment of the order. With dropshipping, youessentially act as the middleman between a supplier and a customer, but the customerassumes they are buying directly from you.PROS & CONSPros: Don’t have to carry any inventory or pay warehouse storage fees More forgiveness for a poor-selling product since you only purchase after acustomer ordezrsCons: Can’t control how well something is packaged Can’t guarantee an item isn’t defective (or already sold out) before it ships Margins tend to be low because someone is doing the fulfillment for youPro TipThere are a handful of dropshipping companies thatspecialize in this ecommerce business model — and,even if you don’t primarily dropship, these companiescan help you avoid stocking out by giving youwhat’s referred to as the “endless aisle”.According to our friends at nChannel, “as soon as yousell your last on-hand item, start forwarding incomingorders directly to a dropshipper, who will fulfill theorder directly. You seemingly always have stockon-hand, which appears as an ‘endless aisle’ ofproducts to your customer.”5
10 Ways to Source Inventory for Your Ecommerce Business4. WholesaleWHAT IS IT?Buying brand name products directly from the manufacturer or brand owner, most often inbulk and therefore at a discountSelling wholesale allows you to give your business the best chance to scale. But not allwholesalers are created equal. You have to find legitimate suppliers. One way to do this isby contacting the manufacturer directly. Chances are, they won’t sell to you directly, but theymay share their distributors’ contact details withtheyyou. Not only will this ensure you are workingwith a legitimate entity, it could also save youmoney. After all, you’re effectively cutting out themiddle-men.According to our friends at Ecomdash, “The moresteps there are in the distribution chain, thehigher the price you will pay for your products.When it’s possible, go directly to the source forpurchasing (or as close as you can get). This willhelp keep your costs down, and your marginshigher.”PROS & CONSPros: Strong path to scalability Get lowest possible price comparedto other methods, so you’ll end up withhigher marginsCons: Requires more startup capital than othermethods as you’ll have to make largeupfront investment inventory6Pro TipYour status as a buyer/reseller is extremelyimportant when it comes to going thewholesale route, so make sure you get thenecessary approvals to resell a particularproduct or brand. If you’re not an authorizedseller, you risk getting flagged for copyrightinfringement and could be suspended fromyour ecommerce platform. For more wholesalehelp, check out this wholesale success storyfrom The Wholesale Formula.
10 Ways to Source Inventory for Your Ecommerce Business5. Private LabelWHAT IS IT?Buying generic products directly from themanufacturer, adding your own labels andselling under your own brandSelling private label is just like sourcing from awholesaler, except you have the added step ofbranding your products. You also have to finda manufacturer that will allow you to use yourown brand which, in many cases, can be foundoverseas.PROS & CONSPros: Since you’re selling your own brand, you cut out a lot of middlemen and therefore loweryour costs and increase your marginsCons: Similar to wholesale, private label requires more startup capital Often requires you to work with a vendor overseas, which means navigating throughdifferent time zones, language barriers, customs fees, and more. Lengthy processPro TipSourcing from China and overseas is a common practice in ecommerce because prices tend to be lower thanin the U.S. Just keep in mind that production takes time so planning ahead is key. According to Tim Jordanfrom Hickory Flats, here’s what a typical timeline looks like when ordering private label from China: Pay supplier to begin and get production done - 40 daysInspect and ship from China to USA via Ocean (assuming no clearing delays) - 45 daysOnce they land, they need at least 5 months of inventory. That lets them sell without immediatelyordering more. So be sure to plan ahead, especially for holidays and seasonality.To start your search for an overseas supplier, Hickory Flats can do the work for you, or you can check outsites like Global Sources or Alibaba (more on this on the next page).7
10 Ways to Source Inventory for Your Ecommerce Business6. AlibabaWHAT IS IT?Buying in bulk and at a discount from leading wholesale marketplace in ChinaAlibaba, often referred to as “Chinese Amazon”, is one of the largest online marketplaces in theworld, with a massive product offering and extremely inexpensive prices. However, fraudulentactivity is a concern, so you want to make sure you find a trustworthy Alibaba supplier. Thereare a few ways to do this:1. Research! Simply look up the supplier name and “scam” and see what comes up.2. Check their legitimacy. How long have they been on Alibaba? Are they “gold” suppliers? Dothey have Trade Assurance? Is their email address from an actual business and not something like Gmail? Will they share customer references? Do they offer samples? Before shipping you your inventory, will they send you pictures of it you can do a quick quality check?3. Compare their prices to other suppliers — if they are dramatically lower, consider it a redPROS & CONSPros: Inexpensive prices Wide range of productsCons: Often lower quality and, in some cases,counterfeit items8Pro TipVisit our friends at Jungle Scout for anin-depth guide on how to ship fromChina plus how to find the best Alibabasuppliers.
10 Ways to Source Inventory for Your Ecommerce Business7. Auctions and Thrift StoresWHAT IS IT?A type of retail arbitrage that is specific to auctions and thrift storesIf you’re running a retail arbitrage business, you’re not limited to clearance aisles, discountstores or liquidation sales. Some ecommerce sellers have found high-profit items by going toauctions, garage sales and thrift stores. Of course, these items are most often used and youwon’t be able to buy them in bulk, but that doesn’t mean you can’t resell them for a profit. Insome cases, even, a high profit. For example, if you find an item that’s not well represented onyour ecommerce platform, it could command a high price.PROS & CONSPros: Little to no competition Often requires minimal upfrontinvestmentCons: Time-consuming to actually shop/findsomething worth reselling Limited quantities available/rarely findmore than one of a really profitable item Harder to resell used items unless theyare collector’s and/or like newPro TipThrift stores have been overwhelmed with donations so far this year thanks toNetflix’s popular documentary series Tidying Up with Marie Kondo - so if therewas ever a time to try this method, it’s now.9
10 Ways to Source Inventory for Your Ecommerce Business8. eBayWHAT IS IT?A type of online arbitrage and auction/thrift store shopping that is specific to eBayIf you’re interested in sourcing high-profit one-of-a-kind items but don’t have the time orresources to visit auctions and thrift stores in person, eBay is a logical option.PROS & CONSPros: Little to no competition Minimal upfront investment Opportunity to price high and maximizemarginsCons: Likely can’t duplicate your efforts sincethese items are one-of-a-kind10Pro TipIn this particular instance, we are NOTadvocating for “Amazon to eBay arbitrage” ordropshipping from one platform to another,whereby you effectively steal a listing froma site like Amazon and repost it on anotherplatform with a higher price (this method isoften frowned upon and could be groundsfor suspension).
10 Ways to Source Inventory for Your Ecommerce Business9. YourselfWHAT IS IT?Fully control the manufacturing and branding of a particular itemIf you want to have total control over your products, you could go the advanced route andmanufacture your own branded products. Take personal care products, for example. Youcould develop your own formula for shampoos, soaps, lotions, etc., find a manufacturer thatwill make and package the products for you, then sell them on your ecommerce platform. Or ifyou’re creative and crafty, you can make and brand your own products to sell on a site like Etsy.If you go this route and work with a factory to produce your item(s), just make sure you havesolid contracts in place that specify your ownership. This will eliminate any chances of them —or another seller — ripping off your brand.Speaking of contracts, make sure you and your supplier agree on all terms before any money isexchanged. Jungle Scout has a great Purchase Order Agreement template you can download forfree.PROS & CONSPros: Less competitionCons: A lot more investment, bothin terms of time and moneyPro TipHeed this helpful advice from our friends atJungle Scout: “Don’t pay your manufactureruntil you’ve seen photos of your productassembled and ready to ship.” (This is alsoimportant if you’re a wholesale or private labelseller — not just if you manufacture yourself.Quality control is of utter importance to thesuccess of your business.)11
10 Ways to Source Inventory for Your Ecommerce Business10. Virtual Assistants/OutsourcingWHAT IS IT?Outsourcing your inventory acquisition to an employee or virtual assistantIf you don’t want to do any of the work, you could hire an employee or virtual assistant tosource products for you. Your ability to do this depends, of course, on your business’ size.“Many growing businesses [consider outsourcing at some point],” says Connor Gilivan, CMOand cofounder of Freeeup.com. “It requires letting go of control and becoming an organizer anda manager of people. It costs money but it saves time. If you speak to any successful businessowner though, most would say that it’s an important step to take, to ensure continued growthand to ensure that you can work smarter, not harder.”PROS & CONSPros: You don’t have to do any workCons: Gives you an added expensePro TipDid you know you can outsourcemore than just inventory sourcing?Services like Freeeup.com and Jungle ScoutMarket will connect you to freelancers whocan help you with everything from businessconsulting to marketing to copy writing tolisting management and more.12
10 Ways to Source Inventory for Your Ecommerce BusinessConclusionSo what do all these sourcing methods have in common?They require some form of an investment, which means you need to be prepared with theright amount of cash. Easier said than done when your income is tied up for weeks or longer.Thankfully, Payability can help fix these cash flow issues so you can invest in inventory whenyou need it. Learn how you can get a large lump sum of (your own) cash, get daily payments asyou earn them, and more at Payability.com.Sources g/effective-manufacturing-milestones/Stock photography on pages 1, 6, 7, 9, 10 & 14 sourced from lescout.com/blog/importing-from-china/
Source Inventory with PayabilityHowNailyoutheLaunchGetthetocashneedtoday ofto Ainvest [email protected](646) 494-8675524 BroadwayNew York, NY 10013 Payability 2019
10 Ways to Source Inventory for Your Ecommerce Business 7 Pro Tip Sourcing from China and overseas is a common practice in ecommerce because prices tend to be lower than in the U.S. Just keep in mind that production takes time so planning ahead is key. According to Tim Jordan