You’ve gotten past the most difficult part of starting an online store: finding a product. Your hard work isn’t over yet, though! Now it’s time to find a supplier to work with.
Remember: Your suppliers are your partners. If they screw something up, your business hurts. So be wary of who you decide to bring on your team!
Before I discuss how to find a supplier, let’s quickly review the types of suppliers out there.
Manufacturers are the actual producers of the product. Think of this as “buying direct”.
An MOQ is the minimum number of items you have to buy in order to make a purchase from them. The big problem with manufacturers is that they typically won’t sell you just one item or ten items.
You’ll likely have to buy in bulk: Hundreds, if not thousands of items at a time.
Because of this high starting cost (and the fact that you will have to store all that inventory), I don’t recommend sourcing your goods from manufacturers if you’re just starting out.
Side note: You may be able to get together with another seller to purchase a single bulk order and split the cost. This is a good way of getting the low price, while still meeting the MOQ requirements of a manufacturer. But as with any business dealing, it’s not without risks, so be careful who you team up with.
The second type of supplier is the wholesaler. Wholesalers are companies that buy from the manufacturer, then resell the items (usually in smaller quantities) to other businesses, adding their own margin onto the price.
When you buy from a wholesaler you’ll be paying more per item than you would if you bought from a manufacturer, but you won’t have to order as many items at once. This drives down your initial investment, which makes it a more affordable way to source goods when you’re getting your business off the ground.
Keep in mind that sourcing goods from wholesalers still means that you need to store your inventory somewhere. If you use the next kind of supplier you can skip that part.
Dropshippers are suppliers (usually wholesalers) who will ship straight to your customer whenever you get an order.
This means you don’t have to worry about storing or shipping the goods yourself. The downside is that, your profit margin will go down, because you’ll likely be paying the highest per-item costs of all the suppliers. (Convenience comes at a cost!)
There are different kinds of dropshippers: Some are “true” dropshippers who will simply process and ship a single item, if and when you make a sale.
Others require you to pre-purchase the goods. Pre-purchasing doesn’t mean you need to receive and hold the item yourself — the dropshipper will still do all of that. It simply means that the next $X worth of inventory you’ve paid for will be automatically shipped out when a customer orders it.
Regardless of which type of dropshipper you use, they need to be reliable: They'll be responsible for shipping goods directly to your customers. If they are slow, or if their packaging is insufficient, it's YOUR reputation that will take a hammering from your customers.
Liquidators, or closeout sales, are a way for businesses to quickly “liquidate their assets”. This is just fancy business speak for selling their stuff for quick cash. Have you ever been to a store closing sale? Same concept, but on a business level rather than for consumers.
You might occasionally find supplies of goods from liquidators, but it’s kind of like finding a couple of bucks on the street: Great when you find it, but not really something to build a consistent business around!
Which supplier is right for you will depend largely on your goals and who you’re able to find that sells the product you want to sell. In general, I would recommend starting with a dropshipper if possible, because they have the lowest startup costs and take less effort on your part.
Now that you understand the kinds of suppliers, it’s time to start looking! There are tons of ways to find a supplier, but here are the best ways I know of.
Obviously, you can go to Google and search for “Cat Toy Supplier”. You’ll find over a million results to search through, but somewhere in there are your 2-4 ideal suppliers. (Remember, you want to have at least 2-4 supplier options in case one of them can’t fulfil your orders for some reason, or raises prices on you without warning.)
The main benefit to searching on Google is that it’s totally free and you can do it right now.
But (and this is a big “but”), it is very time-consuming. You might have to crawl through hundreds of results to find anything decent. There’s a fairly high chance you’ll run into quite a few scammers.
It’s not a pleasant time.
Check out the “How to Avoid Scams” section below to help you maneuver around the Google results. I'll give you a few warning signs as well as what you should expect on a legitimate supplier’s website.
Trade shows can be a great way to break into a new niche. It’s a way to quickly locate some of the best suppliers, while also making great connections and learning the latest information about the product you plan on selling.
The downside is they aren’t held every day, and there’s no guarantee one will ever be in your area. You may have to book in in advance and do some traveling. Also, they may have an entry fee.
Manufacturing trade sites are sort of like Amazon for business owners. Basically, suppliers list their products online for other business owners to look at and purchase.
They can be great for finding dropshippers, as you can often order single products and have them shipped straight to your customer. They also have some incredibly low prices, which means more profit for you. These sites are one of the easiest and most affordable ways to get into eCommerce.
The problem with these trade sites is the language barrier and long shipping times. Most of the suppliers featured on these sites are located in China or India, so the suppliers might not speak English very well and you might have occasional issues communicating.
You’ll also probably find that shipments can take anywhere from 2-4 weeks to arrive (and sometimes even longer).
Additionally, the items can potentially be low-quality (not all of them, but some of them).
Some of the best manufacturing trade sites include:
Supplier directories can be an easier (and safer) alternative to searching for a supplier yourself.
Directories (like SaleHoo) will find and categorize suppliers, so that you can easily find the kind of supplier you’re looking for without having to dig through the mess of search results in Google.
Good directories will also verify the legitimacy of suppliers, so you don’t get scammed by professional-looking fly-by-night suppliers (who might just run away with your money).
There is usually a membership charge for directories (SaleHoo is $67/year), but the cost is pretty negligible when you think about the amount of time (and potentially money) a good directory can save you. If you can avoid even one scam, you’ll have made your money back.
When contacting a supplier, don’t forget that the phone is your friend. As we mentioned in the getting started section, calling a supplier will help you determine the legitimacy of the supplier, as well as how they handle support calls.
That said, it can be a good idea to use email as a sort of “first wave” strategy to find the suppliers who are serious about doing business, then pick up the phone and call the ones who respond.
(If you’re a SaleHoo member you can email suppliers using one of our email templates.)
When first contacting a supplier, it may be better not to mention how new you are. It’s easier to find and get deals with suppliers if they take you seriously, and it can be harder to be taken seriously as a startup.
They will likely find out eventually, so be honest if they ask you about it. Just don’t use “Oh my, this is my first stock purchase!” as your opening line.
It’s a good idea to be prepared with with a list of questions to ask the supplier. This will not only help calm your nerves (if you’re nervous), but it will also show your supplier you’re a serious contender.
What are the payment terms? Are they negotiable?
Find out how much you’ll be paying. See if you can get them to lower it for you. (See the “How to Get the Best Deals” section.)
Are there any costs besides the direct cost of the product?
Possible other charges include delivery fees, fuel surcharges, restocking fees for returns, or duties on imported goods, to name a few.
Do you sell direct?
If the supplier sells directly to consumers, it could be a red flag. While some legitimate suppliers (particularly those on the manufacturer trade sites) do sell direct, it could mean they are misleading you by charging “wholesale” prices that are really regular retail prices with the wholesale term slapped on to attract more business.
Can I return unsold products?
If you’re holding inventory, there’s a chance it won’t all sell. Not all suppliers will take back unsold inventory, but some do.
What is your return policy?
It’s inevitable - something will eventually arrive to the customer late, broken, or not at all. You want to know how your supplier will handle these situations.
What is my expected gross margin?
Gross margin is a fancy term for the amount of money you make after you sell something minus the item’s cost to you (also called the gross profit margin). Unless you’re selling brand name items, the price you can sell the goods for is usually under your control, so your supplier might not know the answer to this question.
When might prices change?
A supplier might spring a price change on you in the middle of nowhere. Take note of when and why they might do this so you know when to expect it.
What are your bulk discount rates? Do you offer a volume rebate?
Suppliers will often give you lower per-item rates when you buy in bulk. Ask them how much they will give you. Similarly, if you commit to purchase a certain amount of supply over a number of days and reach your goal, some suppliers will give you a money back rebate.
What kind of warranty or guarantee does the product have?
You want to know if you have time to inspect the product and ensure there are no damages or mishaps once you receive it.
Can your service representatives answer my product questions?
Hopefully your supplier’s employees are well-versed within your product niche, and should help you answer complicated questions. For example, let’s say you sell a customer asks you if your charger is compatible with their phone. If it’s a phone you’ve never heard of, you might have to ask your supplier, and they should be able to help you.
While these are the top ten questions, here are two additional questions you may want to ask depending on your store size and future plans:
Do you have a data feed?
A data feed is a file that automatically updates the product listings on your store (such as pictures, prices, SKUs, etc.). This is good if you’re going to be selling a lot of products. For example, you might have found a supplier for one specific product, but they sell a whole line of related products. With a data feed, you can easily upload them all to your sales channels with the click of a button.
Can you manufacture custom items?
If you’re planning on creating your own custom items for your own unique brand, this is a question you’ll want to ask them. For example, if you want to create a custom computer mouse, you should find a mouse supplier and see if they can create a custom designed mouse for you to sell.
If you’re still not 100% certain of your supplier, check out our ultimate guide of questions to ask your supplier to make sure you’ve covered all your bases.
When you call a vendor, it’s just a regular person with a job picking up the phone. You shouldn’t feel intimidated by them. (In fact, if you do feel intimidated, it’s probably not the right vendor for you anyway.)
Most vendors are going to be fairly friendly and answer all your questions. If they seem rude or won’t give you the time of day, don’t bother with them.
Overall, the phone call should feel pretty normal. They’ll give you the information you ask for, tell you the next steps, and you’ll come away knowing most of what you need to know (hopefully).
Once you find a few good suppliers (remember to have at least 2, if not 3-4, in case one can’t deliver your products, shuts down, raises their prices, etc.), it’s time to negotiate a price and deal.
There are a few things you can do to get a better deal with your supplier.
It's an unfortunate fact that there are more than just a few scammy suppliers out there in the world.
The internet makes it incredibly easy for a scammer to set up a professional-looking front, and since we're often buying in bulk, there are large sums of money at stake.
When checking out and contacting suppliers, keep an eye out for the following warning signs. While these may not be a definite deal-breaker, they warrant a more thorough investigation of the supplier.
Selling to the public at “wholesale” prices: Some retailers advertise their prices as "wholesale" prices, but really they're just retail prices. They use the word "wholesale" as a simple sales gimmick to make people feel like they're getting a great deal.
This isn't so much of a "scam" — just something to be aware of. If you find a supplier who is selling directly to the public through their website, and their prices don't seem particularly great, then there's a good chance they're not real wholesale prices.
The exception to this is a supplier found through a manufacturer trade site (like Alibaba): Keep in mind most of these suppliers on the manufacturer trade sites do sell direct to the public, but they are actual wholesale prices.
Of course, you should do your math before you ditch a supplier completely: If you can still make a decent profit selling those goods, even when you’re purchasing at “retail” price, it could still work for you (and you should contact the supplier to see if you can negotiate a better price).
And while we're here, let's look at some things that are NOT necessarily a warning sign:
Charging a monthly fee: While it isn't common, there are some legitimate suppliers that will charge you a monthly admin or management fee. Just because you see a monthly fee, it doesn't necessarily mean the supplier is a scammer — especially if all the other evidence suggests that they're legit. Take a look at the other signs and see if it all adds up.
Website looks terrible / like it's from the 90s / I mean really, REALLY terrible: You might think this is a good sign that a supplier isn't legitimate, but it's actually not. A great many fantastic suppliers are really, truly terrible at marketing and web design.Often it's because they don't need a great website to do business: They have established relationships and other marketing channels. So if you're thinking of ditching a supplier because their website is a time capsule to the 90s — think again.
Now that you know what to watch out for, here are some practical steps to to take to check if a supplier is legitimate, or a fraud.
If you're looking for cheap goods to sell online, there's a strong possibility you're going to spend some time looking at international suppliers, particularly from countries like China or India.
There are pros and cons to sourcing from overseas:
Overall, using international suppliers can be particularly lucrative if done right. I have my own business which sources products from China, and it’s doing fairly well for me.
You now (hopefully) have a better understanding of what it takes to find, question, and commit to a supplier for your chosen product(s). It’s been a tough ride so far, but we’re almost to the fun part - actually making sales!
Head to our next section, “Selling on Amazon and eBay” to get started setting up your shop and making your first sales as an official business!