e-Commerce Simplified (4)
There are three main ways you can source products for your e-commerce store:
- You can use a drop shipper
- You can buy through a wholesale company or the manufacturer
- You can create the products yourself
Each method has its own pros and cons, and no single method is the best method for every single store, so let’s talk about those factors so you can decide the best way to source products for your store.
In case you’re not familiar with drop shipping, the way it works is that you take orders on your store, and once someone orders from you and pays you, you go to the drop shipper’s website and order the product. The product is sent directly to the buyer from the drop shipper, and you keep the difference as your profit.
Let’s say you are selling a snow globe for $10. The drop shipper charges $5 for that snow globe. Your customer pays you $10, plus whatever shipping cost you charge. Then you go buy the product from the drop shipper for $5 and you keep $5 in profit.
There are also systems you can use that will automate the ordering process for you, such as plugins for major e-commerce platforms like WooCommerce and Shopify.
The major benefit of this method is that you don’t have to pay upfront for merchandise, so you can pretty much start your store for free, minus the cost of a domain name, hosting, etc. Additionally, you don’t have to deal with having warehouse space to store the merchandise, or dealing with packing and shipping.
But the drawback is that you lose a lot of control, which can cause issues at times. For example, you won’t be able to ensure that the correct product is sent to your customer, and you won’t be able to control the shipping speed.
The most common method of sourcing products for most stores, both online and offline, is buying wholesale from the manufacturer or from a wholesaler that acts as a middleman.
You’ll generally get better prices buying wholesale than from a drop shipper, because most drop shippers are middlemen who must mark up wholesale prices to make a profit. This is one of the biggest benefits to this particular method of sourcing.
You’ll also have more control, because you can be certain you’re sending the right product to the customer, and you can control how it is packed and shipped. This results in fewer returns.
However, you’ll need to have warehouse space to store the products, a system to manage inventory, and time to package and ship all the products to your buyers.
Additionally, many people cannot afford the substantial cash outlay of buying inventory upfront. This is one reason why many online stores start with drop shipping.
Creating Your Own Products
The final way of sourcing products is to make them yourself. If you have a hobby you love, such as making jewelry or painting, you can create all of your products. You can also create a prototype for a product and search for companies to manufacture the product for you. This can be prohibitively expensive for many, but it’s a fantastic way to have a unique product.
There are many benefits to this, such as having a product no one else has, which can increase sales. But there are a few drawbacks, too.
For example, it can be quite expensive to make your own products. If you make them by hand, you still have to purchase materials. If you get a company to produce the products, you run into huge startup costs.
Having your own unique products will almost always be the best option IF you can afford it, but you can always build your brand on drop shipping or wholesale products and move into your own stuff later.