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Product Sourcing on a Shoestring

How to make the most of your inventory budget

The cost of acquiring inventory is one of the largest business expenses both startups and established sellers incur. In the past few years, due to tightened credit and less cash-flow, many online sellers have struggled to keep their shelves stocked with the inventory needed to grow their sales.

It’s because of this that merchants are eagerly looking for creative ways to stretch their inventory dollar as far as possible.

The good news is that there is more opportunity than ever to find great deals on inventory! And third-party sellers have a definite advantage over big-box retailers, as they can be more nimble when sourcing products buyers want. What they don’t often have are the deep pockets required to get the volume discounts the “big guys” get.

Still, there are many ways to source products that don’t require deep pockets. It all starts with restructuring your sourcing strategies.

Being in the position of having to make your inventory dollar go farther will force you to hone your sourcing skills

Rethinking the way you source

The first change to make when product sourcing on a shoestring is a mindset change. You must rethink the way you source products and not limit yourself to one or two sourcing channels. Being open to multiple methods of acquiring inventory will put you in the enviable position of being able to capitalize on deals your competitors will never get.

There was a time when sellers who sourced products from wholesale suppliers wouldn’t even consider sourcing products from other channels. But today, smart sellers know that multi-channel sourcing is the key to getting the best inventory at great prices.

You also need to become what I call a “deal scout.” A deal scout is always out there looking for a great deal on inventory. They’re always looking, listening and networking. Some of the best inventory scores happen through word of mouth.

It’s also important not to look at product sourcing on a shoestring as a disadvantage. Being in the position of having to make your inventory dollar go farther will force you to hone your sourcing skills and require you to think twice before making an uninformed inventory buy.

It also requires that you learn to do something that many people are a bit afraid to do: negotiate prices! Often the only difference between the e-tailer who doesn’t get a good deal and the one who does is that the one who got the great deal simply asked.

How to source on a shoestring

There are many ways to source inventory on a shoestring. You likely already know about purchasing inventory from yard sales, thrift stores, estate sales and the like.

Below we’ll explore a variety of other options for low-cost product sourcing. These are inventory acquisition channels that will work for you no matter what you sell or where you sell it. All merchants can benefit from these sourcing avenues regardless of your business’ size or inventory budget.

Online arbitrage

Online arbitrage is a term I coined to describe one of the hottest sourcing opportunities there is. Arbitrage means buying product in one market with the intent to sell it for a profit in another.

You can buy on eBay to resell on Amazon or vice versa. Many eBay sellers source and resell the same products on eBay.

Note: When sourcing via online arbitrage, always use a separate buying account.

With an excess of “daily deal” sites, flash sales, couponing and online promotions, you can often find your inventory cheaper by buying it from a retail Web site than if you buy it directly from your wholesale supplier.

This also gives you the advantage of being able to purchase in smaller quantities and not be subject to large minimum orders.

Online arbitrage is also a great way to buy sample inventory for test marketing in your store. Rather than test marketing new products by placing a minimum order with a supplier, you can source one or two units on a shoestring and test market them. Once the product sells and it’s a “proven product,” you can take the next step and pursue sourcing the product wholesale.

The opportunities for online arbitrage are limitless. And this is where being a deal scout really works in your favor. Deal scouts love the thrill of the hunt, and are handsomely rewarded for their efforts.

Combine sales with special coupons and you can source in-demand merchandise at below wholesale

Retail resale

Retail resale is essentially offline arbitrage. It involves sourcing products from local retail stores when they’re on sale or deeply discounted. Combine these sales with special door-buster coupons and you can source in-demand merchandise at below wholesale costs.

Retail resale is also a great way to purchase seasonal inventory when local availability is high and then list it online as regional stock dwindles. Each year, my clients generate thousands of dollars in additional revenue streams by using this arbitrage approach.

To be successful at retail resale, you have to know the merchandise in your niche very well, or hone your skills as a deal scout. Just because something is on sale doesn’t mean it’s a profitable inventory candidate for your online store! Make sure you do your pricing research before committing to buy the inventory.

Closeout/liquidation suppliers

Closeout and liquidation pallets can be a great way to acquire inventory for pennies on the dollar. You can buy this inventory by the pallet or in smaller quantities, depending on the supplier. If you sell in a niche, and you know your merchandise well, you can pick up some great end-of-season products from closeout and liquidation dealers.

You can also get stuck with a lot of junk. Literally. Large pallets can be packed around the outside with good merchandise and filled with unsellable items (ripe for the dumpster) in the middle.

If at all possible, go to the warehouse to look at the pallet before purchasing it. Depending on where you live, this may not always be possible. Some sellers will do what’s called a “fly and buy.” Rather than making a trip to a wholesale trade show, they’ll make their buying trip to a liquidation warehouse.

And of course, once you find a closeout dealer that you like, put effort into building a relationship with a company representative. Then you’ll get the first call when new merchandise arrives that is perfect for your store.

Import in small quantities

Importing used to require a large investment of capital as well as incurring the risks and headaches associated with bringing large containers of product into the country. It was a challenge for even the most experienced sellers. Today, thanks to sites like AliExpress, online businesses of all sizes can start importing by buying products in small quantities.

You absolutely must do your due diligence before deciding to sell an imported product. And keep in mind that you won’t be able to import authentic name-brand, designer products like Nike, Coach, etc., that are familiar to Western buyers.

But importing does offer the opportunity to source generic niche products at low prices. When you find popular products, you can even look into branding them with your own brand for an exclusive line of products in your store.

Negotiate price and terms with your supplier

If you’re going to run an online store, you need to put on your “big business britches,” and be willing to initiate the conversation about price and terms with your supplier.

In many cases, the stated price on the price list is open to negotiation. And if not, you can often get deals on shipping or better terms, all of which lower your overall product cost.

Yet many people are afraid to ask because they’re nervous about broaching the subject of discounts. Keep in mind that your supplier is motivated to keep you as a customer—especially if you are moving their merchandise. But they aren’t going to offer a deal on in-season merchandise unless you ask for it. As the old saying goes, the worst thing that can happen is they say no.

Don’t just look for everyday products. There are millions of products to buy and sell online

Be flexible with your suppliers

Right alongside initiating negotiations with your suppliers is being flexible. Being willing to accept a less than full case of products, delayed delivery or replacement inventory for out-of-stock items can result in getting some great deals on in-season merchandise. If you work cooperatively with your suppliers, they’ll reward you with good deals.

Local businesses

Some of the best sources for great inventory can be right in your own backyard. Many local businesses don’t have a channel for end-of-season inventory, and you can fill that need for them by taking excess inventory off their hands at deeply discounted prices.

When looking to the local business market, don’t look only at traditional retail shops for inventory. Here’s another time when it pays to think out of the box. A client of mine set up a partnership with a local recycled building materials company. They collect the inventory and he takes the things they don’t want to stock in their store and resells them online. It’s a great partnership and they both benefit.

Craigslist

Craigslist is often called “the new eBay” because many people who used to sell as a hobby on eBay have now moved their hobby to Craigslist. Sourcing on Craigslist gives you an opportunity to source some great inventory at good prices and bring it back online to resell to a global marketplace.

The key to scoring great inventory deals on Craigslist is to, again, think out of the box. A friend of mine sourced a load of rain collection barrels locally for $5 a piece, made a slight modification to the barrels to improve rain collection, and resold them individually on eBay for up to $90 each.

Don’t limit yourself to a narrow local area. Widen your Craigslist search and see what products are available 50 to 100 miles away. Then treat it as an inventory buying trip.

And don’t just look for everyday products. There are millions of products to buy and sell online. There are more than 17,500 product categories and sub-categories on eBay alone!

People are buying all sorts of things online. Your job is to dig in and find out what else there is to sell!

When it comes to product sourcing on a shoestring, creativity is the key! You have to get out of the “product sourcing box,” flatten it out and put it in the recycling bin. Then get out there in your global sourcing playground and keep your eyes peeled for great inventory buys in multiple channels!

About the author

Lisa Suttora
Lisa Suttora is an internationally known e-commerce expert, internet marketing strategist and veteran trend spotter. As founder and CEO of WhatDoISell.com, Suttora has helped thousands of enterprising entrepreneurs build successful, niche-based online businesses. Since 2004, WhatDoISell.com has provided premier education and a global community for online retailers. To get the latest on hot product niches and trends, subscribe to Suttora's free trend sheet Hot Trend Alerts. Suttora also has a 15-day e-course to help sellers make money on today's eBay. Opinions expressed here may not be shared by The Online Seller and/or its principals.



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