What to Look for in Product Suppliers

A lot of people who are new to building online stores experience difficulty finding suppliers for the products they want to sell. For that reason, many would-be internet entrepreneurs tend to settle for using suppliers who aren't very easy to work with. For instance, I have found suppliers who add unreasonable drop-ship fees, who place restrictions on ordering terms (such as requiring that your first few orders be shipped directly to your main office instead of to your customers), and who generally make it apparent that, although you can ultimately sell their products, they're not interested in making it simple for you to sell their products without buying a large inventory. On the other hand, I have also found suppliers who have online ordering systems, complete with the ability to have orders shipped directly to customers. Most of the time, those kinds of suppliers are familiar with what's happening in the online retail industry, and they are very interested in having their product line in whatever stores (brick and mortar or internet-based) they can.

So what should you look for in a supplier to make your relationship work? First of all, you should find out whether the supplier charges a drop-ship fee to ship individual orders to your customers. If they do charge a drop-ship fee, how much is it? A supplier's policy of charging a reasonable drop-ship fee is not a deal-breaker, but it does say something about their attitude towards your business setup. It also determines whether it's practical for you to spend your time and energy promoting their products. If you are selling items for which your average profit margin on a single order is $10 and your supplier is charging you an eight-dollar drop-ship fee, it's not worth your time to even list that supplier's products on your site. If you are selling items that typically net $50 to $100 in profit per order, you can live with a $5.00 handling charge.

Here are some things to look for when searching for suppliers for your new online store:

• Profit margin: The best way to get higher profit margin products is purchasing direct from the manufacturer. Nobody (in most cases) sells a finished product for a cheaper price than the actual manufacturer. If you can get a useful drop-ship account with the manufacturer of a product, then you can be assured that the pricing you get is at least somewhat comparable to that of your competitors.
  Manufacturers typically distribute their products through distributors. Distributors are typically set up better than manufacturers (who tend to always sell their product in bulk to distributors) to do fulfillment one a per order basis, drop-shipping directly to your customers. If you want to find a distributor, you can normally contact a manufacturer and ask them who distributes their products.
  Often you'll find distributors that resale products made by other companies in addition to ones they've manufactured themselves. In all cases such as these, I have found that it is a lot easier to make decent profit margins on the items that a particular distributor manufactures rather than on item that it resells. This makes sense, since a distributor has to add its markup onto products it doesn't manufacture.
• Ease of Ordering/Tracking: Our suppliers' ordering structures include the following:
  
  1. Easy online ordering systems that allowed us to login to our account and easily place orders.
     
  2. Emailing order information to the supplier.
  3. Faxing order information to the supplier.
  4. Calling a supplier to place an order.
  
  
  These ordering methods are listed in order of convenience. The order also represents how much the suppliers focus on using modern technology for convenience. It's strange that even in the 21st century there are companies who don't use information technology to facilitate order placement and tracking, but that's the case many times.
  Most large clothing distributors give access for their customers to online ordering, tracking, and other pertinent information. Your customers will want tracking information, expedited shipping, and other perks. Unless you're shipping products from your own warehouse, you're limited in being able to meet your customers' needs by the customer service your suppliers provide to you.
  
• Return Policies: Returns are one of the worst parts of selling products online, but they are almost inevitable in most businesses. Selling digital products (downloads) is one of the only ways to avoid returns. Something you need to consider is your return policy and whether it will be supported by your supplier. Sometimes you can end up with a bunch of stuff you'll never be able to resell (like 3XL gold jackets), and you have to take a loss on it or find some other use for it if your supplier makes it difficult or impossible to return it to them.

Taking the time to apply these and other tests to sort out which suppliers you will use and which you will bypass will save you a lot of time. We occasionally found ourselves canceling accounts with suppliers and removing their products from our site after having spent hours and hours adding their products to our catalog. For those cases, it would have been nice to have sorted out those suppliers from the beginning.