This is Part 2 of our interview about sourcing with long-time seller Brandon Dupsky, co-founder of the ICE: Internet Commerce Entrepreneurs group.
Dupsky will speak more about sourcing at September's ICE Retailer conference in Atlanta, GA. In Part 1 of our interview, he discussed what every seller must know about sourcing. Here, he shares his favorite research tricks, where he gets his inspiration for new products, the most common questions he gets about sourcing and more.
Gotta love that research
Schepp: Research is the key to many aspects of sourcing. What media, websites, trade shows, etc., have you found are the most beneficial when conducting research?
Dupsky: For starters, I like to research a category on the "selling" side of the equation to assess the opportunity. To do this, I will do basic Google searches for the products using the top keywords, and see what comes up. I'll check to see who is at the top of these searches, both organic and on Google Shopping (formerly Google Product Search). In Google Shopping, I like to also see how many sellers are selling the top products and competing head to head, as well as the brand power in that product category.
Sifting through suppliers, getting quotes, ordering samples and building relationships can become the longest part of the process
Next, I like to do a similar search using Terapeak research on eBay. eBay only represents 10 percent to 20 percent of total U.S. online retail sales for most categories. But this kind of search tells me the low end of the market and saturation level. How many sellers are selling this product? Are there three or 30 sellers near the top of the list? Does one seller have more than 30-percent market share, or is it spread out? Also, what's the exposure to international sellers who focus primarily on price competitiveness?
After I've done the demand-side research and found a product category that looks promising, I turn to the supply side of the research by looking for sources. To do this, again I turn to Google wholesale search, and international websites such as Alibaba.com and Global Sources to find suppliers that might be able to satisfy my demand for this product. Sifting through suppliers, getting quotes, ordering samples and building relationships can become the longest part of the process. I like to start off small and build up from there, so this process can take many months from start to finish.
Finding the right supplier
Schepp: You're giving a presentation on product sourcing at the upcoming ICE conference, and you've been soliciting questions for the presentation. What's the most common question you have been asked, and how would you answer it?
Dupsky: The two biggest concerns most people come to me with, when sourcing internationally especially, are quality control concerns and how to find actual manufacturers versus distributors.
If they offer a wide selection of non-related products, most likely they are a distributor, not an original factory
Regarding quality control first: My approach and suggestion is to take things slow when dealing with a new supplier. Take baby steps before bigger steps and move things faster as the confidence builds over time. Sure, this makes for a longer time horizon for a product launch. Sure, this means you might not get the best, lowest price at the beginning. However, this approach offers you the ability to try new things, test the supplier out without betting the farm on a hunch that things will go OK. Take risks you are willing and able to lose that won't break the bank and put you out of business if they go wrong.
When I deal with a new supplier, I tell them right away this is my approach. I tell them my orders will get bigger over time as they prove their quality and support to me. This also lets them know that quality is a concern and I will be watching their quality. This is important because in some countries there can be two very different levels of quality control acceptance and you want the best quality all the time, and future business depends on it.
Finding manufacturers versus distributors that say they are the manufacturer is a little more difficult and can require additional time and research on your part to filter the field down. For me, I will review the supplier's website and see what products they display first and the most. By doing this, I'm trying to pinpoint the products they manufacture; they may well get the other products from other suppliers. Those are the products they are simply reselling. I also look at the quantity of products. If they are offering a wide selection of non-related products, most likely they are a distributor more than an original factory. If their product offering is very narrow with related products, there's a good chance they are the original factory for this product.
Another tip for narrowing the field from factories and distributors is the offer price and minimum order quantity. Distributors will most likely have a higher offer price to pad their margin but will allow for a lower minimum order quantity. The opposite is true for original factories offering a lower price but higher MOQ.
Don't outsource this task, and don't rely on database-driven dropship companies to handle the most critical component of your business
And finally, I look at the factory address. Most factories share a single building with many other small factories and their address will only be a "floor" in the building. This is very typical and not necessarily a bad thing. I deal with many small factories that only take a floor. However, the more successful the factory, the bigger they get and eventually they grow big enough to have their own "park" with their own gated entrance and security guards, etc. The size of the factory can tell you how long they've been in business and possibly their level of success selling the products they offer. This isn't a deal breaker but it's something to consider when finding your supplier.
'The most critical component'
Schepp: What else have you learned about product sourcing that's especially important for Auctiva EDU readers to know?
Dupsky: I always say you make your money when you buy the product from the source, and you only get it back once you sell the product. Unless you're an expert at selling ice cubes to Eskimos, where you can sell practically anything to anyone, sourcing the right products from the right suppliers at the right time is one of the most critical success factors in your e-commerce business. Don't overlook this part of your business, don't outsource this task to someone else and don't rely on large database-driven dropship companies to handle the most critical component of your business for you. You want to keep your success in your own hands.
Schepp: Thanks, Brandon.
Learn more about the ICE Retailer conference and read "What I Know Now: Sourcing, Part 1."