Ultimately, the best way to make money in online retailing is to source your products in a way that will work for you. Now some people think that product sourcing is as easy as looking through your favorite search engine results and clicking on as many wholesalers offering a great deal as you can. But if it were that easy then everybody would be doing it, right?
Product sourcing is much more than simply finding suppliers. To make money online, you have to think long and hard to formulate a strategy for choosing and sourcing products that will work to your advantage. Here are some tips that will point you in the right direction.
Of course you need a product you can sell, and you can make a smart choice by starting with popular products as well as brands in demand and work your way from there. You may be tempted to go the other route by looking at a seemingly awesome product offered by suppliers at great prices, and then marketing to create a demand for it, but unless you already have a rabid fan-base, you'll be wading into unknown waters. You'll likely be in over your head.
Starting with demand means you're treading in the footsteps of those who have gone before you, standing on the shoulders of giants, so to speak. There's no shame in that; you don't need to reinvent the wheel when you can pick and choose among the most successful models available. The best way to see what the demand is for a certain product is to do market research.
Back in the day this involved interviewing as many retailers and wholesalers as you could manage, handing out survey forms, and conducting focus group discussions. It took forever and you ended up with a lot of raw data you then had to crunch into useful insights.
Today, all you need to do is to use market research tools such as our very own Market Research Lab. If you're a registered member, you can find out how a product is performing on online eBay, gathering daily sales statistics, price variations, and other market indicators. These are statistics from actual, live sales so you know it's not just editorial hype. Everything you'll see originates from electronic currency (which I'm finding is quickly becoming the new cash) changing hands. Good sales indicate high demand; great sales mean it's time to start looking for a supplier.
The beauty of it is, as a dropshipper, you can easily test the market yourself without any capital investment at all. But let's not get ahead of ourselves. We're assuming at this point that you haven't found a source for a product, but that you do know what type of products you think will perform well.
As a rule of thumb, you want to a strike a balance between high demand and high competition. This way you don't get lost in the crowd. Narrow down your choices to products that sell well, but ones that don't have a whole horde of retailers offering them as well.
An important note about competition: high competition for a product is not necessarily a deal breaker. Dropshipping lets you take a chance on making the attempt to break into a tough market without losing your shirt. Sometimes it works out and other times it doesn't. But the potential is there for you to make a lot of money if you are willing to do a little creative product sourcing and innovative marketing.
Speaking of high competition, remember what we said about reinventing the wheel? It is interesting to note that the guy who actually invented the first rubber tires did it to keep his son from breaking all his teeth riding a bike with metal wheels. These days, we have all types of variations on that theme to satisfy demand in different categories, and they all sell well.
Consider, for instance, the explosion of electric cars. We're reinventing the way we drive (and consume natural resources) to meet higher safety demands and environmental concerns. It's a new business model designed out of dissatisfaction with the old. Instead of reinventing the wheel, we're reinventing the whole car as we move from gas to electric.
You can do the same by taking a high-demand product and looking for lesser known brands to target different markets. We see this all the time with electronic products: same features, different brand, and lower prices. You can make a killing by targeting buyers who aren't willing or able to shell out cash for high-priced brands; or along the same lines, those who need the product but disdain the notion of being one of the herd. You can easily use this strategy with clothing, household products, and other product categories.
This parallels with the process of actually finding these branded products. The old way to do it, searching and hoping something turns up, is no longer viable. You need a product sourcing strategy that runs at the speed of today's business.
You can look for these suppliers online through reliable directories such as SaleHoo, as well as by going to targeted trade shows and local fairs. These physical venues are a great way to look over what's on offer, examine an interesting product more closely, promote the local industries, as well as establish an important, personal connection with suppliers or their agents, which will give you a definite advantage over “virtual” partners.
Additionally, targeting the smaller suppliers affords you some unique opportunities that aren't as easily available with the big guys. Suppliers of these lesser-known brands are apt to be more flexible in their terms, less restrictive, and more open to building relationships with new retailers.
By following my suggestions, you will have a better idea of the type of product you want to source and where the best sources can be found. That's half the battle right there. However, you shouldn't rest on your laurels.
Be successful enough and you can be sure that others will follow, and you could find yourself getting left behind. Keep looking at alternative sources, alternative products, and better ways to package your items, and always continue to refine your business model. Strategic product sourcing is only one part of retailing and it is an ongoing process. There is no statute of limitations on new competition.
What is your product sourcing strategy? Is it working for you? Tell us all about it in the comments.