Sourcing inventory is one of the most important aspects of running an online store. Having the right products in stock and ready to ship is crucial for providing a good customer experience, maximizing sales and maintaining healthy profit margins. But finding reliable suppliers and manufacturers to provide those products can be a major challenge, especially for new ecommerce entrepreneurs.
In this comprehensive guide, we’ll walk through all the key steps involved in sourcing inventory for an online retail business. We’ll cover how to identify top suppliers, evaluate manufacturers, negotiate terms and pricing, manage shipping and logistics, and build strong relationships with vendors. Follow along for tips and strategies to source quality products at affordable costs.
How to Find Suppliers for Your Online Store
The first step to sourcing inventory is finding potential suppliers and manufacturers to work with. Here are some of the best ways to locate suppliers:
Search Online Marketplaces
Online marketplaces like Alibaba, Globalsources.com and Salehoo connect you with thousands of manufacturers, wholesalers and liquidators from around the world. Browse their directories or use keyword searches to find suppliers selling products related to your niche. Vet listings carefully to find reputable sellers.
Attend Trade Shows
Industry trade shows allow you to meet and evaluate suppliers in person. You can see product samples, discuss customization options and negotiate deals through face-to-face interactions. Make sure to attend shows that align with your product niche.
Get Referrals from Other Businesses
Speaking with other business owners in your industry is a great way to discover suppliers. They may share contact details of vendors they’re already working with and trust.
Search Import Records
Websites like ImportGenius provide searchable databases of shipping manifests and allow you to identify the major importers, exporters and suppliers of specific products.
Contact Local Distributors
Lookup distributors located near your business premises. They may offer lower minimum order quantities and faster shipping times.
Contact the Manufacturer Directly
If you find an established brand you want to carry, get in touch with the manufacturer directly to discuss ordering. This ensures you’re purchasing authentic products.
How to Evaluate and Select Suppliers
Once you’ve identified potential suppliers, it’s important to thoroughly evaluate them to find reliable partners. Here are some key factors to consider in your decision process:
Product Quality
Evaluating product samples is crucial – test materials, inspect workmanship and check for flaws. Ensure quality is up to your standards.
Pricing
Compare wholesale pricing from different suppliers. Ask for quotes on bulk order discounts. Make sure their pricing model aligns with your profit goals.
Minimum Order Quantities
Some suppliers may require large minimum purchases that are unfeasible for a new business. Look for MOQs that fit your budget and needs.
Production Capacity
Assess whether the supplier can handle your ordering needs as you grow. Large volumes may require working with multiple vendors.
Reliability & Reviews
Vet supplier reputation through online reviews and testimonials. Reliable delivery, good communication and a history of good service are essential.
Payment Terms
Preference suppliers who offer favorable payment terms like 30-60 day credit periods. This gives you flexibility over cash flow.
Certifications
Legitimate certifications like ISO demonstrate a supplier’s commitment to quality control standards.
Location
Domestic suppliers provide faster shipping. International suppliers can offer lower costs but longer lead times.
How to Negotiate with Suppliers
Being a strong negotiator is key to securing the best possible terms with your chosen suppliers. Use these negotiation strategies:
Leverage Bulk Orders
Suppliers offer better pricing for large, bulk orders. Bundle your inventory needs for multiple products into one big order.
Pay Faster
Offer to pay invoices early in return for discounts on orders. This improves your supplier’s cash flow.
Agree to Exclusivity
Committing to source certain products exclusively from one vendor can earn you preferential pricing and inventory allocation.
Offer Lower MOQs
If minimum order volumes are preventing a deal, negotiate to reduce the MOQ by guaranteeing higher volumes in future.
Request Free Shipping
Qualify for free delivery to lower overall costs by meeting order minimums or geographic requirements.
Discuss Payment Plans
Negotiate installment payment plans to ease upfront costs associated with large orders.
Build Long-Term Agreements
Formal long-term supplier contracts provide terms, cost controls and protections for both parties.
How to Manage Logistics with Suppliers
Setting up clear processes for shipping, delivery and inventory management is vital for keeping operations with suppliers running smoothly:
Define Fulfillment Expectations
Formalize timeframes for order processing and delivery within your agreements.
Set Up EDI
Use electronic data interchange to seamlessly integrate purchase orders, invoices and ship notices between systems.
Organize Stock Tracking
Use inventory management software to sync product levels and automatically generate replenishment orders.
Streamline Communication
Centralize communications through channels like email, product databases and team collaboration apps.
Monitor Supply Levels
Keep real-time visibility into inventory stocked across all your warehouses and with suppliers.
Plan for Restocks
Factor in supplier lead times, seasonal demand changes and sales trends to time restocks appropriately.
Cross-dock Shipments
Use cross-docking to quickly transfer prepped supplier shipments to outgoing customer orders.
Inspect & Report Issues
Thoroughly check deliveries for damage, defects and accuracy. Quickly notify suppliers of any problems.
How to Build Strong Supplier Relationships
Developing positive, productive long-term relationships with suppliers is invaluable for any online retailer. Here are some tips for fostering great partnerships:
Communicate Frequently
Open, honest dialogue builds trust and understanding between both parties. Be proactive with updates.
Provide Feedback
Give specific feedback so suppliers can address any issues and improve processes to better meet your needs.
Make Timely Payments
Consistently paying on time demonstrates you’re a reliable partner and strengthens the relationship.
Visit Facilities
Touring manufacturing facilities helps you understand their full capabilities and forges closer working bonds.
Collaborate on Solutions
Brainstorm together to troubleshoot problems or identify efficiency improvements through collaboration.
Offer Win-Win Opportunities
Negotiate deals that benefit both sides, such as exclusivity in exchange for higher volumes.
Don’t Make Unrealistic Demands
Respect supplier capacities and limitations to avoid putting them in difficult positions.
Provide Growth Forecasts
Share current sales data and projections so suppliers can prepare for your brand’s growth.
Request Supplier Feedback
Ask suppliers for input on strengthening your side of the working relationship as well.
Top Tips for Sourcing Inventory
Follow these additional tips for effective inventory sourcing as an online retailer:
- Diversify suppliers to minimize risk if one vendor falls through.
- Order samples before finalizing large orders to confirm product quality firsthand.
- Factor extra lead time for custom/personalized items.
- Start with small test orders to evaluate new suppliers before increasing volumes.
- Negotiate inventory discounts or extended payment terms as your order volumes grow.
- Consider private labeling products by customizing products with your own branding.
- Attend industry events to connect with suppliers and manufacturers in-person.
- Manage supplier relationships proactively to foster trust and reliability.
- Monitor competitor sites for new products to consider adding to your inventory.
- Clearly communicate needs, expectations and processes to avoid issues.
Key Takeaways
Sourcing inventory may seem intimidating but breaking down the process into actionable steps makes it much more manageable. The keys include:
- Using a wide range of tools and resources to identify potential suppliers
- Thoroughly evaluating options based on pricing, quality, reliability and other factors
- Negotiating favorable terms through tactics like bulk orders, exclusivity and timely payment
- Closely managing logistics with inventory management systems and clear communication
- Building strong relationships with suppliers over the long-term
Following structured sourcing strategies will help you secure quality inventory at affordable costs so you can scale up your online business. With the right suppliers and products, you’ll be equipped to better satisfy customers, outperform competitors and achieve ecommerce success.