How do Ecommerce Sites Source Inventory? — Complete Guide

It is known without saying that more and more products are being sold online than ever before, especially during and after the COVID-19 wave. Today, ecommerce platforms are no longer considered secondary to the brick and mortar stores. In fact, it has become a prerequisite for ensuring the success of the ecommerce business. In 2019, the global retail ecommerce sales accounted to be above $3.5 trillion. This value is increasing year after year.

Has it ever occurred to you that your consumers abandoned your store just because they found their shortlisted product(s) out of stock? Or have you managed the products’ returns and exchanges from the consumers? If the answer to both the above questions were yes, then probably you are underrating the importance of inventory management for your ecommerce store.

Since you have landed on this page, we believe that you have already found your niche products to sell online that have higher market viability, match all the legal aspects, got a competitive edge, and last but most importantly, an active targeted audience. The next step, as you all know, is to figure out a way to source your products.

Many businesses often overlook spending their time managing the source of inventory, which is crucial for laying the business foundation as well as leading the everyday activities of the business. No, we are not showing you one right way to source your inventory (because there is no ‘One Way’). Instead, in this blog, we will be showing you how ecommerce sites out there, source their inventory!

What is Inventory Management, after all?

Before diving into the ways ecommerce sites source their inventories, let us first get to know a bit about inventory management; shall we?

Inventory management, in simple words, is the sourcing, storing, and selling of stocks, i.e. inventory. It helps you determine how much stock you have; at what price must they be sold, where should it be stored, and how long they must be stored.

Understanding the ways for inventory management is vital for ecommerce businesses of all kinds. It helps businesses prevent wastage, save their expenses, as well as help them save time.

Ways Ecommerce Sites Source Inventory

Product sourcing can be defined as the process by which businesses attain the products they wish to sell online in their ecommerce store.

Online retailers majorly have four options when it comes to sourcing their products. Some ecommerce merchants work with manufacturers directly, while others purchase from the wholesalers. Also, there are a few retailers who manufacture their products themselves and a few who opt for dropshipping. Below is a detailed look into all four options:

Working with Manufacturers Directly

Working with manufacturers such as factories directly helps retailers eliminate the need for middlemen (for instance: wholesalers). However, building such work-relations is not as easy as it seems to be. As you might know, manufacturers need Minimum Order Quantities (MOQs), based on the type of products to be manufactured. Therefore, the majority of the manufacturers would prefer working with retailers placing large-scale orders that include hundreds or even thousands of units. This implies the fact that, if there is no large-scale order to place, there are no chances of building business relations directly with manufacturers.

Working with manufacturers provides you with the highest possible authority over the products you wish to get sourced. You can rightly influence the product prices, the quality, as well as the branding of the manufactured products. However, starting up with this method can be quite slow as well as expensive. Also, if you choose this way to source your products, you’ll have to generate the entire product idea by yourself.

Purchasing from the Wholesalers

Wholesalers purchase goods on a large-scale from the manufacturers, store them and sell them to retailers like you. Wholesalers take care of all the burdens associated with importing, warehousing, shipping customs, etc. All that a retailer must do is place orders.

If you are opting to sell products that already exist in the market, seeking wholesalers to source inventory can be a great idea. However, there is one layer of complexity as you need to carefully manage your inventory within the huge supply chain. Also, with this sourcing, you’ll be having a comparatively lesser influence on the pricing of the sourcing if inventory and the margins with this method will be low as in manufacturing the products on your own.

Manufacturing Products Themselves

Manufacturing products is something that is quite rare, especially among the medium and large scale businesses as it becomes hard for them to keep up with the demands. However, it is indeed doable if you have chosen the right business niche and are having your team to help you with meeting the demands with high-quality products. If you decide to manufacture your products, you’ll need to determine the source of your materials as well as define the time that will take in manufacturing each product you aim to sell in your ecommerce store.

Dropshipping

Dropshipping is a process wherein retailers purchase products from vendors and lists them on their online store. The retailers here do not need to deal with any aspects of online selling such as inventory, packaging, or order fulfillment. The vendor charges the retailers for the products and ships them to the consumers on their behalf. This method can either be used when starting an online business or when you wish to enhance the product catalog of your ecommerce store.

Factors to Consider for Sourcing your Inventory

As you know the options that ecommerce sites use to source their inventory, you might want to plunge into choosing the right method that is suitable for your business. However, here’s something you would want to know. There are a few factors you need to consider when sourcing your inventory, they are:

  1. Determine your minimum order value.

Apart from these pointers, you must also make sure to ask about the costs that will be charged and the terms for those charges to the ones who are sourcing your inventory.

Conclusion

Selling online successfully partially implies never being satisfied with the existing products that are sold online or the vendors who are providing you with the products. Ecommerce is a huge market in itself; in order to thrive in this ocean, you need to have a competitive edge — Always! And, for that, you must constantly look for ideas as well as product suppliers that can help you keep fresh and trending merchandise. It’s not too late; grab every opportunity and start adding great new products into your ecommerce site by sourcing inventory, the right way, or better say, your way!

Read more: https://www.builderfly.com/how-do-ecommerce-sites-source-inventory-complete-guide

Builderfly is the best Ecommerce platform to build an online store for web and mobile. I work as Business Development Executive at www.builderfly.com

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