Product Sourcing: Learn How to Find and Vet Suppliers in Less Than 5 Minutes

Why Product Sourcing Matters

Many entrepreneurs who sell products online don’t manufacture their inventory — they may not ever lay their hands on it. Thanks to the abundance of cheap factories overseas and the convenience of drop shipping, many online sellers are significantly distanced from production and distribution. They must, therefore, invest in their supply chain to appropriately fulfill their orders, keep their customers happy and turn a profit.

When sellers neglect their supply chains, they introduce risk at every step of fulfillment. After all, the product supplier is mainly responsible for getting a product into the customers’ hands. A poor supplier might allow damaged items to ship or disappear altogether after collecting the seller’s payment; these scenarios are terrible customer reviews just waiting to happen. On the other hand, a shoddy product supplier might directly exploit sellers with scammy fees and shady practices. Furthermore, Amazon is always on the lookout for supply chain issues and will hold sellers accountable for suspected fraud, quality issues or damaged products. An illustration of this is seen in how online sellers must comply with the platform’s rigorous invoice verification process; those unable to provide acceptable invoices from suppliers could have their account suspended, even if the seller isn’t at fault.

Overall, you should treat product sourcing like any other critical aspect of your business. Invest in communicative, beneficial relationships with suppliers and go to the trouble of ensuring every part of operations meets Amazon’s strict standards.

The only obstacle left is deciding how to choose a supplier. Below we provide a five-minute overview of the steps you’ll take to find and appropriately vet a product supplier

Consider Your Sourcing Options

You’ll first need to choose a sourcing method depending on the product you sell, where your customers are, and your fulfillment plan. What kind of supply model will best suit your financial situation and your level of hands-on investment?

One of the first decisions you can make is whether to source your products domestically or overseas. Consider your budget and your desired profit margins and think about your customers’ expectations for quality; domestic products have a higher perceived value than internationally produced items. That said, overseas products are significantly more affordable, more diverse and more numerous. They can help boost your profits in less time.

Once you’ve narrowed down your ideal supplier’s general location, you should do a cursory evaluation of your fulfillment plan. For instance, you’ll need to ensure you have the storage space for inventory if you plan on selecting Fulfillment by Merchant (FBM). If, on the other hand, you’ll run your store through Fulfillment by Amazon (FBA), or if you plan on dropshipping your products, you won’t need as much square footage for storing your merchandise.

Then, decide what kind of supplier you want to work with. You could strike a deal with a wholesaler for a value purchase of stock, but you’ll typically need to place a large initial order and provide lots of up-front capital. Alternatively, you could source from a manufacturer directly. This option could allow you to personalize the products, lower the per-unit cost of inventory and develop a working relationship with a factory. That said, you might not be able to negotiate order size. Other sourcing options include liquidators, trading companies and dropship suppliers; you just need to decide how comfortable you are with the middleman.

Find Available Product Suppliers

You’ve decided on your supply method; now it’s time to meet suppliers. As mentioned earlier, many suppliers are located outside of the United States, so how do you go about finding, vetting and working with a supplier that’s so far away?

One convenient way to find suppliers remotely is through an online supplier directory, such as Alibaba or ThomasNet. Simply search for the product you want to sell, and the directory will show you hundreds to thousands of companies manufacturing that product. This is an effective way to meet suppliers, but it will require some investigation to weed out scams or incompetencies (more on that later).

Another more traditional approach is to attend a trade show in your industry. As it happens, since most in-person events have been pushed online due to COVID-19, now is the perfect time to attend a virtual expo or seminar. Trade shows allow you to appraise many suppliers at once; you can have direct conversations with multiple supplier reps, comparing the perks and drawbacks of each manufacturer or wholesaler. 

You could also employ a product sourcing agent. Agencies facilitate communications with suppliers, which can be useful if you don’t speak the same language or cannot visit the factory in person. An agent can also help protect you against fraudulent suppliers. These resources can be costly, but they will save you enormous time and effort.

Finally, one low-cost way of finding suppliers is through simple engagement in your industry. Subscribe to trade publications, participate in online discussions, and investigate where competitors’ products are coming from. Getting in touch with your field will only ever help you make better supply decisions.

Look for Supplier Verification

Depending on which of the above avenues you took to meet potential suppliers, you’ll have a few different ways of verifying their legitimacy and quality. What kinds of verification should you look for?

Online directories should provide you with plentiful information for each supplier. This information could include badges of product quality, customer satisfaction and operations management — several third-party certificates indicate high-quality, reliable production. The verification of product sourcing for Amazon may be different for Shopify, so be sure to learn what each badge or certificate means on your chosen platform.

For instance, Alibaba advises you to choose Trade Assurance suppliers; this means you’ll be covered if product quality or shipping dates are not met as agreed. Alibaba will also tell you if a manufacturer is a Gold Supplier (where the supplier paid Alibaba a premium to be promoted as a quality source) or a Verified Supplier (which means the supplier has successfully undergone numerous third-party quality assessments). You should look for either of these badges when product sourcing for Amazon.

Aside from such certifications, look for suppliers operating for at least a few years; you probably don’t want to launch your brand-new business using a brand-new supplier. Essentially, an experienced supplier should safeguard you against any rookie mistakes. 

Also, look up each supplier’s name on the Web. Often, other online sellers will write reviews based on their experiences with a supplier. Try typing in the supplier’s name, plus “bad experience,” in your search engine. If anything suspicious comes up, stop pursuing that supplier.

Finally, verify that your supplier candidates are still in operation today. This can be as simple as scheduling a Skype or Zoom call with someone in the company or requesting a photo of an employee at the factory with today’s newspaper in their hands. We’ll touch on communication methods in a moment, but for now, ensure you can at least establish a reliable, prompt back-and-forth with a real person from the supplier.