It’s understandable that Sourcing would be very frustrated if you are a newcomer or only have little understanding to the sourcing business. You may confused about many things, from product suppliers to product shipping.
how to sourcing product is about finding other companies that may want to sell their products to you. Instead of producing the product yourself, you can pay another company for their product and then pass it on to your customers.
What this does is allow you to get into retail without actually needing a factory or an inventory – all you need is a place where your customers can buy from you, which could be online or off. However, there are several considerations before choosing whether or not to source your products.
In this article, we will share some basic content about Sourcing, which would be helpful to your business. The blog will include following content
- The overall process of sourcing
- The Pros and Cons of Sourcing
The overall process of Sourcing
1) Determine what country or countries you will source from
2) Determine what product category (i.e., jewelry, shoes, clothing, construction material ) do you want to sell in
3) Research the top 3-5 factories that produce that product category in that country
4) Contact those factories and send them your product requirements
5) Select the one with the lowest quotation
6) Start production and order samples to be tested for quality
7) Conduct final inspections of the finished product before shipping it to your warehouse.
# What are the benefits?
The benefit of sourcing through wholesale companies is that they have lower costs than if you were to start production yourself. Typically, these companies have suppliers in Asia that manufacture products at very low rates due to economies of scale.
That means that you can sell to your customers at a lower cost but still make the same amount of money. What’s better is that many of these companies are already familiar with selling to consumers, so they have retail experience and understand how margins work in different markets around the world.
# What are the downsides?
As with any business venture , there are always risks involved when deciding whether or not to start sourcing products for your business
The biggest risk is in being able to recover from theft or damage to product when it comes into your possession because you will be responsible for what you receive.
For example, if someone steals your product when it’s in transit, then you need to replace it right away because otherwise, none of your customers are going to get their product.
Not only do you lose the money you paid for the stolen shipment, but you lose out on all of your revenue because your customers aren’t getting their product. With that said, there are some grey market products like pharmaceuticals and watches that cannot be sourced in this manner.
From this part of content, we can know that Pro and Cons of Sourcing,. You might wonder where can i choose to source products, how’s the grey makket and so on, we will give the answer in the following parts.
# What about China?
The reason why companies source from Asia is mainly due to costs; however, after packaging and shipping , it can be more expensive than importing them directly into North America or Europe .
What happens is that you end up paying duty taxes on the items when they come into your country which applies even if they were made in a different country.
For example, if I was sourcing from Thailand then I would have to pay duty fees on all items that I import into Canada. What this does is increase product costs which makes it difficult to provide a competitive price in the market.
What companies end up doing are passing these expenses onto their customers, but then they have to charge more for their products or run the risk of losing out on sales . What usually ends up happening is that smaller companies cannot afford to pay duty taxes so they source from other countries like China where there is no duty fee.
# What about grey market?
Grey-marketing of consumer products happens when unauthorized trading takes place across national borders of different countries. What this means is that if you try to sell imported goods directly to consumers in another country without going through customs , then you’re breaking the law .
For example, if I was to try and sell a product like the iPad in Canada after importing it from China, then I would be breaking the rules. What happens is that you end up paying duty taxes which also stops other people from selling these products themselves because they will have to pay duty fees as well.
What’s more is that many manufacturers do not want their products sold on the grey market because they lose revenue due to theft or counterfeit items . What ends up happening is that some factories create different versions of their product for sale in different countries with varying prices; however, this causes issues for wholesalers trying to source out legitimate items.
# What about customs?
Customs is an agency under government control responsible for receiving, clearing and processing goods that enter a country.
What happens is that these agencies use a combination of technology and human resources to make sure only legitimate products come into the country while also stopping illegal goods from flowing in.
What you have to keep in mind is that every country has their own set of rules regarding product sourcing, so what you can or cannot sell depends on where you’re located. What usually happens is that larger countries like the USA, Canada and Great Britain have stricter controls because they’re at higher risk for dangerous counterfeit items entering the marketplace which could hurt consumers.
What this does is stop people from selling grey market goods within their countries because there are stricter laws being enforced making it easier for them to get caught if they do try. Another way customs helps with grey market product sourcing is by stopping illegal shipments from being sent out to another country.
What happens is that corporations are able to sell their products at a cheaper price because they’re not having to pay duty fees, which increases the chance of consumers buying these cheaper grey market items even more.
What happens is that most companies will try and avoid selling into certain countries because there isn’t much profit to be made due to cheaper prices with most customers opting for the better deal.
What’s interesting is when it comes down to smaller countries where there aren’t many controls. What ends up happening is that you have retailers in these locations who are buying products by the container so they can resell them in their own countries at a higher price without worrying about getting caught.
# What about alternative markets?
Alternative markets are online sites where people sell their products directly to consumers which usually deprives other wholesalers from making any sort of profit while also decreasing the potential amount of revenue generated by manufacturers.
What’s interesting about these websites is that many ship all over the world, so people from all countries have a chance to purchase items that aren’t available in their country.
What happens is that manufacturers usually end up increasing prices because of this alternative market competition making it difficult for grey market wholesalers to make any sort of profit off selling these goods.
Pros of the alternative markets
What’s the benefits of alternative markets? We will explain the reason in this part.
What’s interesting about this model is that you can source out products by purchasing them directly from the manufacturer which does allow you to benefit from the low price point.
What ends up happening is that there are websites where you can set up your own online store and sell whatever products you want as well, but just like regular product sourcing, the key here is finding a high demand product with a lower than average price compared to its US and Canada counterparts.
What makes finding these items possible is by finding products that are being sold through Chinese wholesale stores, but they’re currently not being exported to the US or Canada.
What you have to understand here is that there are many countries who are happy with buying goods from China because of their low cost, so it’s just a matter of finding what’s in demand while at the same time having a much lower sale price than normal.
What is your factory’s MOQ (Minimum Order Quantity)?
If they don’t have one and ask you to call them and negotiate it on a case-by-case basis, run away. What this tells you is that they will keep increasing the price until you either accept or walk away.
Never give in! You must make them stick to their MOQ even if it means saying “I am sorry but I can’t place such a large order with you at this time.” What factory would be willing to lose your business over $100-200? Not many, so don’t worry too much about turning them off because there are plenty more fish in the sea.
What about quality control costs?
Factory owners in the apparel industry have bragged to me about how much money they can save by getting their product out quickly and cutting corners during production- I cannot believe how these people sleep at night! There are companies who spend upwards of $100,000 per year just for QC alone!
When a factory cuts too many corners with their production process, there is no way for them to hide behind a quality control team- defective product will go to the customer!
What if you are shipping to Wal-Mart? What kind of customer service do you think they will give to your customers when they return items at 10 times the cost that it takes for them to make them?
Why we can trust Pangea?
As a sourcing agency Pangea is your No.1 choice for product sourcing in Australia. With factory partners in China, United Kingdom, Hong Kong and other markets you can be sure your products are sourced from the right place.
Pangea’s mission is to be a sustainable, ethical sourcing provider who helps our customers save over 20% on their orders
Pangea’s vision is to help Australian businesses by providing sustainable, high-quality products at the best possible price
If you’ve read this far, I’m sure it has become clear that sourcing is not an easy process. There are many things to think about when deciding on your supplier and factory for the products you want to sell.
To help you find a great supplier for your goods, we offer our services as international buyers. Our team of experts will work with you every step of the way in order to ensure that all aspects of production run smoothly so there won’t be any hidden costs or unforeseen problems down the line.