If you've been reading about how to start a business, you may have brainstormed some ideas of your own. This is an interesting time for an entrepreneur, as momentum begins to build and excitement grows the more you think about your ideas.
However, time and time again, many entrepreneurs find themselves hitting a brick wall and losing momentum when it comes time to actually source products. Whether it be manufacturing your own product or finding suppliers to purchase wholesale from, they aren't always easy to find.
In this post, we're going to look at the basics of sourcing a supplier for your next project. We will look at some places to search, how you should approach them and what to ask.
Table of Contents
- The basics: What are you looking for?
- Domestic vs. overseas suppliers
- Where to begin your search for a manufacturer
- Other research tips
- Requesting a quote
- Negotiating minimum order quantities
- Have you found your supply partner?
The basics: What are you looking for?
For the purpose of this post, when we refer to suppliers, we’re referring to anyone who has the capability to provide you with products and inventory. This encompasses manufacturers, wholesalers and distributors.
There are a ton of helpful resources online which you can find on Google. But before you begin, there are a few things you should know and decide.
First, you should determine what type of supplier you're looking for. This will help determine the terminology you need to use in your research. Check out our post on Make, Manufacturer, Wholesale, or Dropship to help you get started. There are several options, the most common being:
- A manufacturer to produce your own product idea.
- A supplier (who may also be a manufacturer), wholesaler or distributor to purchase already-existing brands and products.
- A dropshipper to supply products and fulfill orders of already-existing brands and products.
Domestic vs. overseas suppliers
When looking for suppliers if you plan to manufacture or wholesale, you’ll need to decide whether you want to source domestically or from overseas. Overseas can refer to any location abroad.
Typically, and for the purpose of this post, overseas suppliers are located in Asian countries like China, India and Taiwan. That’s because it’s often cheaper to source your products overseas, especially in these countries. But there's a lot more to the decision than just the upfront investment and cost per unit.
Both domestic and overseas sourcing have their advantages and disadvantages:
- Higher manufacturing quality and labor standards.
- Easier communication with no language barrier.
- Marketing appeal of being made in North America.
- Easier to verify reputable manufacturers.
- Faster shipping time.
- High intellectual property right protection.
- Greater payment security and recourse.
- Higher manufacturing costs.
- Less product choice (there are many items that just aren’t made in North America anymore).
- Lower manufacturing costs.
- High number of manufacturers to choose from.
- One-stop services like Alibaba have made it easy to navigate suppliers.
- Lower perceived quality from customers.
- (Usually) lower manufacturing and labor standards.
- Little intellectual property protection.
- Language, communication and time zone barriers can be difficult to navigate.
- Difficult/costly to verify manufacturer and visit on-site.
- Longer shipping time.
- Cultural differences in business practices.
- Product importation and customs clearance.
- Less payment security and recourse.
Where to begin your search for a manufacturer
Now that you have a better idea of exactly what you're looking for, as well as the advantages and disadvantages of domestic vs. overseas sourcing, where do you begin your search? Naturally, the internet is the best place to start, but there are a few places in particular that can help with your search:
Some of the best sources are free online supplier directories. These directories contain profiles for hundreds or thousands of manufacturers, wholesalers and suppliers. Below, we’ve listed a few of the most popular ones for both domestic and overseas suppliers:
Online domestic directories
Online overseas directories
Over the last handful of years, we've become accustomed to being able to easily search Google and find what we're looking for in the first few search results. However, many suppliers haven’t kept pace with the internet or Google’s algorithm changes. Their websites are usually old, sparse on information and not search engine optimized.
So how do you find suppliers on Google? For possibly the first time ever, you’ll need to explore page two of Google search results and beyond. You'll also want to use a variety of search terms. For example, words like wholesale, wholesaler and distributor may be used interchangeably, so you should search for all of them.
It may help to make yourself familiar with Google's search shortcuts to improve the quality of your searches, thus the results.
You may also want to consider heading to your local library. Many libraries pay monthly subscription fees for online business and manufacturer directories that you normally wouldn't have access to, or you’d have to pay for. These directories contain profiles for many manufacturers, wholesalers and distributors in North America, depending on the exact directory.
Give your local library a call ahead of time and ask if they have access to these types of private directories. For larger libraries, you may need to chat with the business and technology department.
Some of the best leads can come from referrals. Don’t be afraid to ask connections in your professional networks if they have any recommendations, or if they know someone who might. Look for individuals who’ve found success in an area you’d like to pursue and see if they’re willing to share their contacts.
Social networks have made it much easier to get the word out so make sure to use these channels. Join Facebook groups and other online communities of ecommerce business owners and see if anyone there has a glowing review.
As you do start to uncover suppliers, even if they aren't the right fit for you, be sure to ask them if they can point you in the right direction. Being in the industry means they’ll likely have great contacts and would be happy to refer you to an option that might be a better fit.
Other research tips
Another possible way to search for product suppliers is by searching for your products by their NAICS code.
NAICS is the North American Industry Classification System, and pretty much every single industry and product you can think of is attached to a NAICS code. Sometimes manufacturers and suppliers may list their products by the NAICS code which can make your product manufactures and suppliers easier to find, especially if you're using professional directories.
You’ll also want to make sure you properly vet your potential manufacturer. Once you’ve narrowed it down to a few possibilities, dig deeper in your research to make sure they’re credible.
Check the Better Business Bureau (BBB) to make sure there haven’t been any complaints filed, browse their Facebook page reviews, and use those Google search tricks to query the company name + reviews to see if any red flags come up.
Requesting a quote
Once you've found a suitable supplier, it’s time to approach them. The biggest question you’re going to have is “how much?” but before you hastily send the supplier your request for quotation (many times referred to as an RFQ), plan what you want to say and the questions you need to ask.
Planning your initial inquiry can increase your chances of receiving a response and the correct information. Here are a few important questions to consider for your email:
What is your minimum order quantity?
Also referred to as a MOQ, you want to make sure the minimum order quantity is manageable for you, and that you can afford them. This minimum order quantity can vary wildly depending on the product and the supplier, so it's important to ask upfront.
What is your sample pricing?
You'll likely want samples to inspect before making a full order. Sample pricing ranges, depending on the product and supplier. Some suppliers that receive many requests may charge the full retail pricing, others will offer you samples at a discounted rate, and some may even send you samples for free.
What is your production pricing?
One of the most important questions is how much your products will cost. You’ll probably want to ask for pricing for several quantities to get a sense of if and how they do discounted pricing for bulk orders.
What is your turnaround time?
Knowing how long it will take to produce your order is an important consideration. Depending your exact business, time can be critical.
What are your payment terms?
Many suppliers will require new businesses to pay for the full order upfront. This is important to know since inventory is a major cost for ecommerce startups. You may want to also ask if they provide payment terms on future orders.
Suppliers get bombarded with email quote requests all the time from flaky buyers that are just ‘kicking the tires’ so it's not unusual for many suppliers not to reply to every request. A lack of supplier responsiveness is a common complaint from new ecommerce entrepreneurs.
So how do you avoid being ignored? There are a few things that you should avoid when you reach out to suppliers for the first time:
- Long emails: Your first email to a manufacturer should be clear and concise. Avoid telling too much about your story and background. The first email should purely assess potential fit at a high level. Focus on what suppliers care about the most, like the details of what you’re trying to source.
- Asking for too much: Requests aren't always easy for the supplier to produce. It's important to ask for a few prices for multiple quantities, but avoid asking for too much or too many quotes. Stick to asking for what you absolutely need to assess fit between you and the supplier.
- Asking for too little: If you ask for a quote well below the supplier’s minimum order you risk being met with silence. If you’re unsure whether your request is too small, consider giving them a quick call or send a one-question email prior to ask what their minimum order is.
Finally, if you're contacting a supplier from overseas, keep in mind that in many cases, they may be using programs to translate your email as well as their reply. Keeping your emails short, concise, well-formatted and error-free will not only help the manufacturer but ultimately provide you with better replies and answers.
Also, when asking your questions, it's best to number them. This way, they can easily reply to each number, keeping the questions and communication clean and organized.
Negotiating minimum order quantities
If you’re looking for a supplier for the first time, you're going to quickly learn about minimum order quantities (MOQs). It’s not uncommon for a manufacturer to require a commitment to purchase hundreds or even thousands of units for your first order depending on the product and manufacturer.
MOQs make it difficult when you have limited funds or want to start small and test the market before making larger purchases. The good thing is that MOQs are almost always negotiable.
Before you negotiate, understand why the supplier has imposed a minimum. Is it because there’s a lot of work upfront? Or maybe it's because they prefer to work with larger buyers. Understanding the reasons behind the minimum will help you better understand their position and allow you to negotiate and propose to best counter offer.
After you have a better understanding of your supplier’s position, you can offer a lower order quantity. Compromises can include giving the supplier a deposit for a larger order, but just producing small amounts at a time or paying a higher price per unit.
Have you found your supply partner?
Sourcing suppliers and manufacturers is a unique process, and for many, a new experience. Trying to locate suppliers that are a good fit is a critical decision for your new business and aren't always easy to find.
It's easy to get frustrated when you hit dead ends or brick walls but in most cases, it just requires a little more patience and perseverance to find the perfect partner for your new business.