Product sourcing…

As previously suggested, you will be approaching the idea of setting up your e-commerce website from one of several different positions. The work that you have to put into finding suitable sources of products that you want to supply to customers will to a large extent depend upon your background.
For example, you may already have a business that operates in the real ‘bricks and mortar’ world, and your move into e-commerce is an extension of your existing business rather than a completely new venture. In this scenario, you probably already have suitable suppliers for the products that you want to start selling online.
In a similar manner, if you are coming from a particular occupation and you plan to use your previous knowledge and experience as the basis of your e-commerce business, then you probably already have suitable suppliers that you can source products from.
The third possibility is that your new e-commerce venture is a ‘green field’ opportunity, something that you have never been involved in previously but want to be involved in from now on.
If you boil down these three different options, you have two possible sourcing situations. You either know where you can get the products that you want to supply from your e-commerce site, or you don’t.
Let us consider each of these in turn.
The first of these situations would at first glance appear to be very straightforward. If you already know where you can source the products that you want to supply to your customers via your e-commerce website, then that would appear to be ‘job done’, but is it?
While you are dealing with your local neighborhood or city, you are working within an environment where prices across the region do not tend to vary very much. If you buy a pizza from a fast-food store on one side of your city, the price is not going to be very different to that in a similar fast-food place on the opposite side of town.
Consequently, anyone who is a product supplier in that region is going to base the price of his products on what is acceptable to the retailer, who bases their judgment on what the customer will pay.
You can see this any time a new supplier moves into an area where they have not previously operated, and seriously undercuts existing suppliers. A percentage of businesses will switch to that new supplier, because they are trying to carve themselves a niche in the market based on price.
They have shaken up the ‘cozy cartel’ of suppliers who were previously happily working together to keep prices reasonably stable.
Whoever they are, the supplier that you are currently working with probably fits into this ‘cozy cartel’ picture. Most importantly, there is no guarantee that the prices they are charging you are competitive on anything other than a local or regional basis.
However, by moving online into e-commerce, you are presenting your business to all parts of the world, and you can guarantee that in other parts of the world, the prices that your supplier is charging to you would seem scandalously high.
Although you have a supplier already organized, you do not know how competitive you are going to be if you continue to pay the prices that they are charging.
If you want your e-commerce business to be truly able to compete on a national or global stage, you must have suppliers who can provide the products you need at prices that enable you to be competitive throughout the area from which you hope to attract new custom.
In short, although you may already have suitable suppliers in place, by using them, you may be limiting your ability to expand your business because your prices are going to be too high in other parts of the country or in the world.
Added to this is the question of shipping or delivery costs. Even if you are paying a very good price to your supplier, if you are in one geographical location and a new customer approaches you from several thousand miles or kilometers away, shipping charges become a significant consideration. Indeed, as suggested previously, many e-commerce businesses flounder because they build their business on the idea that they are going to use local suppliers and ship their products halfway across the world, without paying sufficient attention to the cost of doing so.
The bottom line is, if you want to maximize the profitability of your e-commerce site, you might have to reconsider your sourcing options.
Then you have the other scenario, where you have an idea of the kind of business that you want to run, but little or no idea of where to find the products that will enable you to do so.
In both cases, you therefore need to consider sourcing options. Let us consider a few ways that you can do this now.