Our complete guide to sourcing products for your e-commerce business

What is product sourcing?

Sourcing is the process of research, select and choose products to sell for a salesperson.

The aim here is to find suppliers who are both reliable and offering quality products at the best prices.

Why is it essential to source your products properly?

Sourcing is a fundamental process for any e-commerce business. Here's why

• Ensure product quality. The aim of sourcing is precisely to identify quality products, which are a guarantee of the company's reputation and customer satisfaction.

  Offering poor-quality products is a real risk for an e-commerce business. Its image could suffer as a result of negative feedback from customers on the Internet.

• Guarantee the company's profitability. Another aim of sourcing is to compare the different suppliers on the market. The aim? Find those offering the best value for money. By using competitive suppliers, you can maximize your margins.

• To stand out from the competition. An efficient sourcing process also enables you to discover unique products that will help you stand out in a competitive market. You'll be able to target a specific niche with innovative or exclusive products.

• To secure your supply chain . Efficient sourcing should enable you to find reliable suppliers, offering quality products and meeting delivery deadlines. This will help you avoid late deliveries or stock-outs, and ensure customer satisfaction.

• To diversify your suppliers. The supplier process allows you to benefit from alternatives and not be dependent on a single supplier.

Essential steps for efficient product sourcing

Sourcing is not a fixed process. It differs from company to company. However, the following stages are essential:

Identify your target market

The very first step in a sourcing process is to identify and understand your niche's needs and expectations. Such an analysis will enable you to detect market trends, opportunities and gaps to be exploited.

Search for suitable suppliers

Once you've identified your needs, you can start looking for suppliers. There are various ways of doing this, such as :

• Visit online platforms such as Alibaba, ThomasNet or Global Sources

• Participate in specialized trade shows in your business sector to meet potential suppliers

• Follow the recommendations of your professional networks .

Assessing supplier reliability

Once you've identified potential suppliers, you still need to evaluate them to refine your list . In particular, consider consult the opinions of former customers and find out about their e-reputation.

On the other hand, we also need to test products by requesting samples to be sure of their quality. Also check compliance with standards and certifications attesting to product quality.

Negotiating commercial terms

This is one of the most essential steps in the process. In particular, you need to negotiate the following points:

• The price. This is the key point to negotiate. To secure your margin and remain competitive, you need to negotiate the best prices. The question of minimum quantities to be negotiated should also be discussed. You may have to guarantee a minimum order volume to obtain advantageous pricing conditions.

• Terms of payment . This is also a good opportunity to discuss payment terms (payment deadlines, facilities, initial deposit, etc.).

• Delivery times . You must ensure that the chosen supplier is capable of meeting the delivery deadlines defined.

Even if you have to negotiate favorable commercial terms, keep in mind that any supply contract must first and foremost benefit both parties. This is the key to healthy, long-lasting business relationships, a guarantee of stability for your company.

What's more, retaining a supplier's loyalty will also, in time, enable you to benefit from advantages such as priority ordering and payment facilities.

The contract must therefore provide balanced benefits for both parties. Negotiate only reasonable terms that won't harm your business partner's interests either.

Mistakes to avoid when sourcing products

For effective product sourcing, avoid making the following mistakes:

Underestimating delivery times

Delivery times are essential to the success of an e-commerce business in more ways than one:

• To guarantee customer satisfaction. Setting a delivery date is not only a legal obligation prescribed by the Hamon law and the Chatel law, it's also a key element in customer satisfaction. Keeping your delivery promise is one way of satisfying your customers and building loyalty. But you have to be able to deliver. This means ensuring that your suppliers meet delivery deadlines. By accurately estimating the delivery times imposed on your supplier, you can also better set the delivery promise to your customers.

• To preserve your corporate image . A company with a reputation for breaking delivery promises is never a good thing. Especially since customers can share their opinions on review sites, which could greatly harm your business.

• For optimum inventory management . When your delivery times are correctly estimated, you can avoid the risk of out-of-stock situations.

• Avoid additional costs due to logistical problems and delays. In the event of late delivery, you may be obliged to issue refunds or offer compensation. This increases your costs and reduces your margins.

Underestimating delivery times exposes you to real risks.

Focusing solely on price to the detriment of quality

Of course, reducing costs is one of the key objectives of sourcing. However, neglecting quality would be a big mistake. Focusing too much on low prices increases the risk of finding faulty products.

Offering poor-quality products produces negative impacts on your brand image and customer satisfaction .

On the other hand, offering poor-quality products paradoxically exposes you to increased costs. The management of returns in the case of defective products and the overloading of after-sales services are in fact source of additional costs .

This means focusing above all on value for money. Your sourcing process should lead you to find a supplier offering quality products at the best prices.

Product sourcing methods

There are various methods you can use to source your products:

The search for local manufacturers

This is the method that consists of buy from suppliers located near your geographical area or in the same country .

This approach offers a number of advantages:

• Short delivery times

• Reduced transport costs

• The opportunity to visit the production site directly.

This approach also has its drawbacks. Purchase prices are generally higher than in low-labor-cost countries such as China.

Le sourcing international

Unlike the previous method, the aim here is to look for products with lower manufacturing costs from China and India, for example.

This method also offers a number of advantages:

• Lower purchase prices

• The ability to order in large quantities

• Access to a wide and varied range of products

On the other hand, long delivery times, quality risks and complex logistics are the downside.

Wholesalers and distributors

Sourcing from wholesalers and distributors offers the following advantages:

• The possibility of making smaller orders

• Faster delivery times because the products are available in stock.

On the other hand, margins will be lower here because distributors and wholesalers already take their own margins.

Le dropshipping

Le dropshipping consiste à sell without stock. Your company acts solely as an intermediary between the customer and the supplier. The supplier takes care of shipping the products when an order is placed.

The advantage of this method is that it doesn't require no initial investment, storage or logistics costs . On the other hand, profit margins can be low, and you have little control over product quality.

Sourcing agents

This involves outsource the sourcing process to an external professional . It's up to him to find suppliers, check product quality and negotiate prices.

This method offers save time and benefit from the expertise of a networked professional On the other hand, it's a service that comes with a price tag, reducing your profit margins.

Search via B2B marketplaces

You can also find suppliers by investing directly in B2B platforms like Alibaba or Global Sources.

Your sourcing process will then be easier, as you'll be able to easily compare suppliers against each other. What's more, the platforms already offer features for evaluating suppliers or finding out about their reputations.

On the other hand, since these are international suppliers, you are exposed to risks associated with language and cultural barriers .

Hero helps you finance your product purchases

Hero is a neobank offering payment facilities and factoring services for B2B customers . We can help you finance your product purchases pay your supplier invoices immediately .

You must then pay us either off-line (after 30 or 60 months) or split (in 3 or 4 installments).

In a nutshell, product sourcing is a crucial process for any e-commerce company. It determines the reliability and security of the supply chain, and guarantees the optimization of costs and customer satisfaction. Rely on Hero to finance your product purchases, and benefit from some of the most advantageous payment terms on the market!