Manufacturers vs. Wholesale Suppliers
The key to successfully running an e-commerce shop is having the right inventory that will attract the most buyers. In addition to figuring out what your customers want, you also need to be able to price your items competitively while maintaining high profit margins.
When it comes to acquiring your online store’s inventory, you have the option of going to manufacturers, distributors or to wholesale suppliers, and each of these product sources has its own benefits and drawbacks. What most new sellers find, however, is that wholesale suppliers can make it easier and more affordable to get started. Most of the time, manufacturers sell to distributors, who then sell to wholesale suppliers, who sell to a retailer.
Sourcing Products from Manufacturers
Manufacturers are responsible for producing the products that you will eventually sell in your e-commerce shop. If you can make purchases directly from manufacturers, you could gain access to the lowest prices on the items that you are searching for. After all, the fewer middlemen who take a cut of your earnings, the lower your costs will be, and the higher your profit margins can be. This is especially true if you’re pricing your products at competitive rates and generating a lot of traffic to your shop.
Working with manufacturers is great for your profits, but even though you can sometimes set up contracts with manufacturers to purchase directly from them, you will typically find that they will prefer producing large orders. They often have exclusive arrangements with distributors.
It is certainly a good idea to begin at the actual source for your products, as you never know if you can set up an agreement that will give you access to the inventory that you need at a great price. In the case of branded products, going to the manufacturer and asking them about their minimum order requirements is recommended. However, when you are starting out and your shop and budget are still quite small, a manufacturer may not sell to you directly.
Sourcing Products from Distributors
Sometimes you won’t be able to work directly with a manufacturer, as some manufacturers will only sell their products through established distribution channels, rather than directly to sellers or consumers.
In this case, all you have to do is ask the manufacturer to provide you with a list of their distributors and then contact those distributors to set up contracts with them. The good thing about taking this route is that you’ll access the most reputable distributors, so you won’t waste your time pursuing unreliable or poor quality sources for your inventory.
Sourcing Products from Wholesalers
When you are unable to forge a relationship directly with a manufacturer, or distributor, you may need to go through a wholesaler who can also give you access to the inventory that you need at low prices.
A wholesaler will basically bridge the gap between a manufacturer and you, the customer. You can locate wholesalers that will cater to the specific niche that you are selling in, or you can instead find wholesalers that will provide you with a wide range of product options.
As opposed to buying items at retail prices and reselling them, most e-commerce shop owners prefer sourcing wholesale products for their stores because they can purchase the items in bulk at a discounted rate. When you are not forced to pay the retail prices on your inventory, you will be able to increase your profits because you can still sell them at a competitive price while enjoying a solid margin on every sale.
Those who are first starting off will benefit from working with smaller wholesalers, but you should be prepared to pay higher prices until your inventory volume expands. As your online business grows, you will be able to move on to larger wholesalers, purchase more inventory, and enjoy lower prices