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Sourcing from Retail Wholesale Suppliers, Part 2

Expert shares ins and out of working with drop shippers, selecting partners.
retail wholesale suppliers

This is the second of our two-part interview with Jason Prescott, whose forthcoming book Wholesale 101: A Guide to Product Sourcing for Entrepreneurs and Small Business Owners will be published by McGraw-Hill later this year.

Prescott manages TopTenWholesale.com and Manufacturer.com, global trade platforms for manufacturers, wholesalers, retailers, importers, discounters and auctioneers.

In part one of this series on retail wholesale suppliers, Prescott discussed trends in product sourcing, suggesting that sellers work directly with manufacturers by making product requests through trade platforms.

He also discussed the importance of a multipronged approach to sourcing even if that means stepping out of your comfort zone or “silo.” Finally, he discussed best practices for sourcing and strategies for using the sites he oversees.

“If you are going to succeed at drop shipping, seek unique items and work with suppliers who don’t have a lot of other people drop shipping their goods online”

Here, Prescott gives some tips for working with drop shippers, vetting potential partners and working with trading companies. He also discusses some of the factors that should go into deciding whether to source locally or globally.

Working with drop shippers

Schepp: What are the pros and cons of working with drop shippers?

Prescott: The pros of working with drop shippers are:

  • You don’t take on the risks and costs associated with warehousing.
  • You can do it from your home.
  • You can represent an unlimited product base by using feeds and channel syndications.

The cons are:

  • [There are] very low margins.
  • It’s ultra-competitive.
  • Everyone is drop shipping the same stuff.

If you are going to succeed at drop shipping, seek unique items and work with suppliers who don’t have a lot of other people drop shipping their goods online. Mix and match certain items, and make sure to seek new places—they advertise all the time.

“When a company is spending money to advertise to the public, it can be seen as a sign of their willingness to bark loud and maintain a market presence”

Schepp: What steps should resellers take to vet potential trading partners?

Prescott: Vetting suppliers is probably one of the more critical steps any importer or reseller has to take as part of their selection process.

While the vetting process can be rather iterative for larger retailers sourcing overseas, or for importers choosing overseas suppliers, some basic steps an online merchant should take when choosing a wholesaler would include:

  • Search the supplier’s company name on Google and see what reviews can be found.
  • Ask suppliers what tradeshows they attend.
  • Is their business license in good standing?
  • Ask for references. Many suppliers may be hesitant to give out customer names, but it never hurts to ask.
  • Note whether the supplier advertises on B2B wholesale product trade platforms like TopTenWholesale.com.
      • When a company is spending money to advertise to the public, it can be seen as a sign of their willingness to bark loud and maintain a market presence.
      • TopTenWholesale.com has a vetting process, called Supplier Pass®, where over 15 elements of their business are verified.
  • Professional communication and timely response [are key].

Trading companies essential to global trade

Schepp: What are trading companies, and at what point should resellers consider working with them?

Prescott: Trading companies are intermediaries essential for global trade. They have deep rolodexes of manufacturers and suppliers, and sophisticated systems in place to help route specific product requests from buyers.

“Tradeshows play a huge role in sourcing and meeting new suppliers. Nothing can replace face time and establishing a relationship”

They help bridge challenging language and cultural barriers. For newbies, I almost always recommend working with a trading company until they have the resources and buying capabilities to work direct with manufacturers.

Schepp: Under what circumstances should you have backup vendors?

Prescott: Under every circumstance. Suppliers come and go. Suppliers could have business issues with their suppliers. Sudden price increases could force you to seek alternate sources. It is not uncommon to receive damaged goods or misrepresented items.

Any savvy reseller always has alternate supply chain solutions.

Source locally or globally?

Schepp: What factors enter into the decision to source locally or globally?

Prescott: By far, the most important component to this decision will be buying order. When your MOQs (minimum order quantities) get to a point where the cost of goods would decrease with volumes sourced direct from the factory, and you’re set up to handle communication, make the switch.

However, keep in mind that some importers are working direct with the factory, and it may make sense to pay a small premium to have them handle all the headaches involved in working with factories.

Schepp: You’re a big proponent of going to tradeshows. What are the most important shows for general merchandise, and how can sellers learn more about shows where they can source niche products?

Prescott: There is no question that tradeshows play a huge role in sourcing and meeting new suppliers. Nothing can replace face time and establishing a relationship with the business owner or staff you work with.

“Stay focused, maintain goals and set revenue forecasts. Surround yourself with honest and trustworthy people”

More importantly, you’ll also find back up suppliers and plenty of product diversification. The top general merchandise tradeshow in the USA is by far the ASD Tradeshow. Other tradeshows that must also be attended would include:

You also need to know plenty of ecommerce strategies. The top show for gaining this knowledge is the Internet Retailers Conference and Internet Retailer’s related trade publications.

Don’t get too excited

Schepp: What other advice do you have for people sourcing products for resale online?

Prescott: Don’t fall victim to getting over excited. Deals are a dime a dozen. Suppliers are a dime a dozen. The buyer is the most important asset.

Too many new business-owners hop around from idea to idea and fail to execute their initial plans. Stay focused, maintain goals and set revenue forecasts. Surround yourself with honest and trustworthy people. The second you sense trickery, walk away. Use your instincts.

Product sourcing and reselling takes tribal knowledge and some street smarts. Safeguard your intellectual property—and remember—just about everything you do that generates income is proprietary to you. There are a lot of opportunists out there. Don’t let them get the best of you.

Schepp: Thanks, Jason. Best of luck with your forthcoming book.

About the author

Brad & Debra Schepp
Brad and Debra Schepp are the authors of 20 books, including eBay PowerSeller Secrets and The Official Alibaba.com Success Guide: Insider Tips and Strategies for Sourcing Products from the World's Largest B2B Marketplace. Their most recent book is How to Find a Job on LinkedIn, Facebook, Twitter and Google+. Brad is also a literary agent for Waterside Productions. For further information, visit the couple's website, bradanddeb.com. Opinions expressed here may not be shared by The Online Seller and/or its principals.

  • Nick Spence

    Great article! Keep them coming!

  • John Kushmerick

    Very insightful and in-depth information! I’ve been considering starting to source goods myself for a while now and this 2 part series covers the majority of the questions and concerns I had, and also points out several trade aggregator sites that look to be useful to find suppliers.

    • http://www.facebook.com/brad.schepp Brad Schepp

      Thank you John. I’m happy to hear you found the article useful!