If you’ve been reading our previous posts on finding niche ideas and evaluatingg products to sell online, you may have started coming up with some ideas of your own. This can be an interesting time for an entrepreneur as momentum begins to build and excitement grows the more you think about your idea.
However, time and time again, many entrepreneurs find themselves hitting a brick wall and losing momentum when it comes time to actually source products. Whether it be manufacturing your own product or finding suppliers to purchase wholesale from, they aren’t always easy to find.
In this post, we’re going to look at the basics of sourcing a supplier for your next project. We will look at some places to search, how you should approach them and what to ask.
Let’s dive in.
The Basics – What Are You Looking For?
For the purpose of this post when we refer to suppliers, we are referring to anyone that has the capability to provide you with products and inventory. This encompasses manufacturers, wholesalers and distributors.
There are a ton of helpful resources to be found online just by searching Google. However before you begin, there are a few things you should know and decide.
First, you should determine what type of supplier you’re looking for. This will help determine the terminology you need to use in your research. I would highly suggest you start by reading our post on Make, Manufacturer, Wholesale or Dropship.
There are several options, with the most common being:
- A manufacturer to produce your own product idea
- A supplier, who may also be a manufacturer, wholesaler or distributor to purchase already existing brands and products
- A dropshipper to supply products and fulfill orders of already existing brands and products
Domestic vs. Overseas Suppliers
A classic question when looking for suppliers if you plan to manufacture or wholesale is whether you want to source domestically or from overseas. Overseas can refer to any location overseas but usually, and for the purpose of this post, refers to Asian countries like China, India and Taiwan.
You likely already know that it’s almost always cheaper to source your products overseas but there’s a lot more to that decision than just the upfront investment and cost per unit.
Both domestic and overseas sourcing have their advantages as well as disadvantages which we will take a look at below:
Domestic Sourcing
Advantages
- Higher manufacturing quality and labor standards
- Easier communication with no language barrier
- Marketing appeal of being made in North America
- Easier to verify reputable manufacturers
- Faster shipping time
- High intellectual property right protection
- Greater payment security and recourse
Disadvantages
- Higher manufacturing costs
- Less product choice (There are many items that just aren’t made in North America anymore)
Overseas Sourcing
Advantages
- Lower manufacturing costs
- High number of manufacturers to choose from
- One-stop services like Alibaba have made it easy to navigate suppliers
Disadvantages
- Lower perceived quality from customers
- (Usually) lower manufacturing and labor standards
- Little intellectual property protection
- Language and communication barrier can be difficult to navigate
- Difficulty/costly to verify manufacturer and visit on-site
- Longer shipping time
- Cultural differences in business practices
- Product importation and customs clearance
- Less payment security and recourse
Where To Begin Your Search
Now that you have a better idea of exactly what you’re looking for, as well as the advantages and disadvantages of domestic vs. overseas sourcing, where do you begin your search? Naturally, the internet is the best place to start, but there are a few places in particular that can help with your search.
Directories
Some of the best sources can be free online supplier directories. These directories can contain profiles for hundreds or thousands of manufacturers, wholesalers and suppliers. Below, we have listed out a few of the most popular ones below for both domestic and overseas suppliers:
Online Domestic Directories
Online Overseas Directories
The Depths of Google
Over the last handful of years, we’ve become accustomed to being able to easily search Google and find what we’re looking for in the first few search results. However, many suppliers haven’t kept pace with the internet and in particular, Google’s algorithm changes. Their websites are usually old, sparse on information and most certainly are not search engine optimized.
So how do you find suppliers on Google? For the first time ever, you’ll need to explore page ten of Google search results, and beyond. You’ll also want to use a variety of search terms. For example, words like wholesale, wholesaler and distributor may be used interchangeably so you should search for all of them.
It may help you make yourself familiar with Google’s search shortcuts to improve the quality of your searches, thus the results.
Local Library
You may also want to consider dusting off your library card and heading to your local library. Many libraries pay monthly subscription fees for online business and manufacturer directories that you normally wouldn’t have access to, or you would have to pay a large amount of money for, like the Scotts Online Business Directory. These directories contain profiles for many manufacturers, wholesalers and distributors in North America, depending on the exact directory.
Make sure to give your local library a call ahead of time and ask them if they have access to these types of private directories. For larger libraries, you may need to chat with the business and technology department.
Referrals
Some of the best leads can come from referrals by friends and family. Social networks have made it much easier to get the word out so make sure to use these channels.
As you do start to uncover suppliers, even if they aren’t the right fit for you, be sure to ask them if they can point you in the right direction. Being in the industry means they will likely have great contacts and many would be more than happy to refer you to someone that might be a better fit.
Other Research Tips
Another possible way to search for product suppliers is by searching for your products by their NAICS code.
NAICS is the North American Industry Classification System, and pretty much every single industry and product you can think of is attached to a NAICS code. Sometimes manufacturers and suppliers may list their products by the NAICS code which can make your product manufactures and suppliers easier to find, especially if you’re using professional directories.
The NAICS directory can be found at your local library or on the Internet at:
USA – NAICS Code
Canada – NAICS Code
Requesting A Quote
Once you’ve found a suitable supplier, how do you approach them?
The biggest question you’re going to have is “how much?” but before you hastily send the supplier your request for quotation (many times referred to as a RFQ), take a few minutes to plan out what you want to say and the questions you need to ask. Planning your email will increase your chances that you will receive a response and the correct information.
Here are a few important questions to consider for your email:
- What is your minimum order quantity? – Also referred to as a MOQ, you want to make sure their minimums are manageable for you and that you can afford them. This minimum order quantity can vary wildly depending on the product and the supplier so it’s important to ask upfront.
- What is your sample pricing? – You’ll likely want samples to inspect before making a full order. Sample pricing ranges, depending on the product and supplier. Some suppliers that receive many requests may change the full retail pricing, others will offer you samples at a discounted rate, and some may even send you samples for free.
- What is your production pricing? – One of the most important questions is how much your products will cost. You’ll probably wan’t to ask for pricing for several quantities to get a sense of if and how they do discounted pricing at higher quantity levels.
- What is your turnaround time? – Knowing how long it will take to produce your order is an important consideration and depending your exact business, time can be critical.
- What are your payment terms? – Many suppliers will require new businesses to pay for the full order upfront. This is important to know since inventory is a major cost for ecommerce startups. You may want to also ask if they provide payment terms on future orders.
Suppliers get bombarded with email quote requests all the time from flaky buyers that are just ‘kicking the tires’ so it’s not unusual for many suppliers not to reply to every request. A lack of supplier responsiveness is a common complaint from new ecommerce entrepreneurs.
So how do you avoid being ignored? There are a few things that you should avoid when you reach out to suppliers for the first time:
- Long emails – Your first email to a manufacturer should be clear and concise. Avoid telling too much about your story and background. The first email should be purely to assess potential fit at a high level. Focus on what suppliers care about the most like the details of what you’re trying to source.
- Asking for too much – Requests aren’t always easy for the supplier to produce. It’s important to ask for a few prices for multiple quantities, but avoid asking for too much or too many quotes. Stick to asking for what you absolutely need to assess fit between you and the supplier.
- Asking for too little – If you ask for a quote well below the supplier’s minimum order you risk being met with silence. If you are unsure if your request is too small, consider giving them a quick call or send a quick one question email prior to ask what their minimum order is.
Finally, if you’re contacting a supplier from overseas, keep in mind that in many cases, they may be using translating programs to translate your email as well as their reply. Keeping your emails short, concise, well formatted and spelling error free will not only help the manufacturer but it will ultimately provide you with better replies and answers. Also, when asking your questions, it’s best to number your questions, so that they can easily reply to each number, keeping the questions and communication clean and organized.
Here is an example of an email I might send out:
Hi,
My name is Richard and I am from XYZ company.
I am interested in placing an order for Widget A. I just have a few questions beforehand:
1. What is you minimum order quantity?
2. What is your cost per unit at the minimum order as well as if I were to order 3x your minimum order?
3. What are your payment terms for new customers?
I would also like to order a sample of Widget A to verify quality. Can you please send me the cost for the sample, including shipping to:
Richard Lazazzera
80 Spadina Avenue, Floor 4
Toronto, ON, Canada
M5V 2J4
Thank you,
Richard
As you can see from the sample above, it’s short, concise and it’s goal is to make sure at a high level that there is a fit between us. I have also set myself up to immediately order a sample unit, should there be a good fit between us. Once I have received the samples and I’m happy with them, I can then start getting into more detail knowing I’m not wasting their time, or mine.
Negotiating Minimums
If you’re looking for a supplier for the first time, you’re going to quickly learn about ‘Minimum Order Quantities’ (MOQ’s). It’s not uncommon for a manufacturer to require a commitment to purchase hundreds or even thousands of units for your first order depending on the product and manufacturer.
MOQ’s make it difficult when you have limited funds, or simply want to play it safe by starting small to test the market before making larger purchases. The good thing is that MOQ’s are almost always negotiable.
Before you begin negotiating, the first step is to understand why the supplier has imposed a minimum. Is it because there is a lot of work upfront? Or maybe it’s because they prefer to work with larger buyers. Understanding the reasons behind the minimum will help you better understand their position and allow you to negotiate and propose to best counter offer.
After you have a better understanding of your suppliers position, you can offer a lower order quantity. Compromises can include giving the supplier a deposit for a larger order, but just producing small amounts at a time or paying a higher price per unit.
Have You Found Your Supply Partner?
Sourcing suppliers and manufacturers is a unique process, and for many, a new experience. Trying to locate suppliers that are a good fit is a critical decision for your new business and aren’t always easy to find. It’s easy to get frustrated when you hit dead ends or brick walls but in most cases, it just requires a little more patience and perseverance to find the perfect partner for your new business.
