2017-01-10 00:00:00OperationsEnglishAre you trying to decide how you should acquire products for your e-commerce store? Explore these four options to help you decide.https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2017/01/Man-Acquiring-Products-For-E-Commerce-Store.jpghttps://quickbooks.intuit.com/ca/resources/operations/how-to-acquire-products-ecommerce-store/How Should You Acquire Products for Your E-Commerce Store?

How Should You Acquire Products for Your E-Commerce Store?

2 min read

It is exciting when you think of a great product or product concept that consumers may want. Your e-commerce store can obtain goods to sell in several ways. It is worth considering the benefits and drawbacks of various options to help you make an informed decision that fits your business.

Create Your Own Product

Many small businesses choose to make their own products to sell. Creating your own inventory could be suitable if you have the necessary resources and skills required, and are trying to minimize your startup costs. For example, you may have unique skills for making beaded jewelry. New technologies, such as 3-D printing, have made it easier for businesses to manufacture their own products. Producing your own goods allows you to monitor quality control to ensure it meets your customers’ expectations. It also gives you the flexibility to modify your products at short notice to keep up with new trends. Creating your own products may not be appropriate if you have limited time or intend to offer an extensive product range.

Have Your Products Manufactured

If your e-commerce store requires products to be mass-produced cheaply, you could get them manufactured. Outline your expectations about price, turnaround times, and quality. Due to the large number of manufacturers in China and other parts of Asia, you can often negotiate favourable terms that fit your business. For example, if you require mining equipment to be manufactured, you could negotiate for a free sample to assess its quality before commencing full-scale production. Manufacturers often impose minimum order requirements that can result in a large initial investment. Cultural differences can create misunderstandings when working with manufacturers overseas.

Purchasing Through a Wholesaler

Acquiring products through a wholesaler may be appropriate if you want to sell a variety of different goods. Wholesalers’ minimum order requirements are generally lower than manufacturers, reducing your inventory outlay expense. Your marketing costs may be reduced, as wholesalers often sell brands that are familiar to consumers. Purchasing wholesale is not the best option if you want to differentiate or customize your products. E-commerce stores planning to sell an extensive range of goods may find it difficult to manage multiple wholesalers.

Drop Ship Your Products

Drop shipping is an inexpensive way to open an e-commerce store, because you do not hold any inventory – the drop shipper sends products directly to customers on your behalf. You may find drop shipping beneficial if you want to offer a wide product range or regularly sell new products, but you don’t want to get caught holding inventory that doesn’t sell. For example, an online ski and snowboard store may use drop shipping to offer the season’s best-selling brands each year without worrying about unsold products. It helps if your products have a high turnover, because drop shipping will erode your margins – businesses that use drop shipping typically have a profit margin of roughly 20%. Your drop shipper may occasionally run out of stock, which could reflect badly on your business.

References & Resources

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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