Not every product-seller is also a manufacturer. Therefore, you need to know the basics of getting your product ready from a trustworthy supplier who has a history of providing a great quality product.

Finding a reliable supplier is the key to your successful business. A supplier gets your product manufactured and most of the time gets the order delivered to your warehouse.

The source can be a drop shipping company, a wholesaler, or a manufacturer.

A successful product is what makes a good profit, not merely revenue. You need to focus on all those strategies that will increase your profit margin. Sourcing done right can maximize your profit margin by minimizing your landing cost. It also converts that extra money, you were spending on sourcing, to your profit.

How to Source Products to Sell on Amazon

Amazon is a giant e-commerce platform. You cannot jumps into this fierce competition by randomly selecting a product. This is injurious financially even to the very competitive and smart sellers. You need to do a prospect analysis, and marketplace trend analysis and see the customer preferences before hitting your golden product.

Now the question is where to start.

Before starting your online business, you need to find a product that has

• Fair profit margins
• Low seasonality
• Good reviews
• Feasible Retail price
• Good performance and has the potential to continue its performance

For that reason, you have to know the basics. This will help you find a feasible product that will make your online business journey great.

A product having a profit margin of 25% or more is a product that can give you a handsome sum of profit. Some costs need to be optimized to reach the profit margin of the desired level.

Factors That Affect Your Profit Margins While Sourcing

Some factors that decide your profit margins are:

• Rate from your supplier
• Mode of shipping and shipping cost
• Taxes
• Packaging (Weight and Dimension)
• Custom packaging
• Minimum Order Quantity
• Marketplace
• Country from where the product is being shipped to you

Let’s discuss these factors one by one to enlighten you more about effective sourcing.

Getting Rates from Suppliers:

The most important step while sourcing is getting a quotation from several different suppliers. This is where you convert your sourcing budget into your profit and cut the cost of manufacturing.

Your bargaining skills really matter and you will have to choose the supplier who offers you the best rates.

For example, if you are sourcing from Alibaba.com, you have to contact at least 8-10 suppliers who are delivering products exactly like yours or at least in your niche.

Before finalizing, you need to have full confidence in your supplier. For that purpose, you will need to see any certifications that he might have, how many years he has been providing the service or any reviews that his previous customers have left.

Get Samples

Many manufacturers are willing to provide you with free samples so do not hesitate while check them. These samples help you in understanding the quality and provide feedback. It is very important to check the product before ordering so you can be sure of what you are actually bidding on.

Negotiation is healthy in business

Most of the manufacturers and wholesalers are open to negotiation. After doing an economic analysis of your product, if you feel this product will cost you more, then it is better to negotiate. Work on your budget and give them an offer they cannot refuse.

Mode of Shipping:

You select a mode of shipping depending on how fast you need to have your product arrive at the Amazon warehouse. The different modes of shipping are,

• Air
• Sea
• Cargo Train
• Truck

Air shipping is the most expensive one that will cost you much and decrease your profit margins by a major amount. All the other three modes of shipping are much cheaper than air shipping and usually are the preferred choices as they give you the advantage of the rise in profit margins.

Taxes:

As a best practice ask your supplier for the DDP (delivery duty paid) cost, which includes all the taxes paid and you just have to pay the supplier instead of dealing with the things separately.

Moreover, in your calculations, you will include the Value-Added Tax also which accounts for almost 7.5% after having crossed a sale of 85,000 pounds. In the UK market, you have to collect VAT from the customer in the selling price of our product and hence is excluded from the profit margin.

If your customer does not give you DDP rates then you will need to find a freight forwarder that will get your job done, as many companies are providing trustworthy services.

Packaging (Weight and Dimensions):

It is one of the most important aspects of your sourcing as packaging can decrease your cost to a minimum if done right. Amazon charges you a storage cost that depends on the weight and packaging dimensions of your product, which can be reduced to the minimum by just optimizing your packaging and decreasing the dimensions.

A product with less weight and an optimal packaging design will boost your profit margins. Therefore, you have to ask your supplier to keep the packaging dimensions to a minimum.

Custom packaging will cost you more. For example, if you want the supplier to put your company’s logo or any other modifications in the packaging such as bubble wrap for delicate products. It will definitely thin out your profit margins.

Minimum Order Quantity:

The greater the number of units ordered the lesser would be the price. Always start bargaining with a low MOQ and gradually increase the MOQ until you reach a fair price that is affordable for you.

Marketplace:

Market place matters a lot when it comes to the shipping cost.  Your supplier might be offering a different rate for UK and US.

Country for your product manufacturing and shipping

Country from where you are sourcing play a major role in your costs. The distance matter as well as the cost of production in the country matters. For example, in China, the cost of production is quite low as there are several industries. Therefore, they offer you a reasonable price and can even decrease it after bargaining.

OUTSOURCE MORE:

Sourcing is detailed work that requires experience and in-depth knowledge of how things are actually working. If you don’t have enough knowledge, then let an expert have this done for you as your whole online business depends on sourcing.

The Bottom Line

Although, finding a product is a new product is the first step of becoming an amazon supplier but never take it lightly by rushing into getting over it. Your partnership with a reliable supplier must be a key aspect of your business strategy. As your supplier will affect your profit, product quality, return and delivery time, and much more.

Fortunately, we are now in the market with directories and reliable tools backed by years of experience. Do not hesitate to ask for professional opinions and recommendations.