eCommerce: How to get the best out of suppliers, and profit from eBay

Jamie Hanton of SaleHoo spoke with Simon Slade, and offers advice on how all types of seller can profit from eBay

“At SaleHoo we've seen tens of thousands of people start eBay businesses and we've also seen a great many begin with unrealistic expectations of success. There seems to be a belief that buying wholesale goods and then selling them on eBay is a sort of ‘get rich quick’ scheme, where sellers can make enormous profits from very little investment or work.”

Slade says this misguided belief stems from the myth that finding a supplier with bargain basement prices is more important than developing a business strategy. The reality is that you need to invest time and thought into your eBay business.

Researching your intended market thoroughly is paramount to your success. Do you know how your market thinks? What problems do they have that you can solve? Which is a higher priority: price or quality? It is also crucial to spend time finding reliable suppliers and spend a bit of time thinking about which supply option will best suit your business: dropshippers, liquidators, and manufacturers as they each have pros and cons.

So before rushing off a huge order to the first supplier you find, stop a moment and make sure you’ve followed our steps to get the best out of your suppliers and make profits on eBay.

At the beginning: What are you going to sell?
Before you can start to look for a profitable supplier, you need to decide what to sell. Many people just look at what’s selling well in the market and go with that. This is certainly a potential strategy, but there is one major flaw: competitors. ‘Hot’ items are common knowledge and you’ll most likely be up against some heavy-weight competition – including Department Stores! Not surprisingly, competition this big can be ruinous to a small seller.

A better idea is to follow in the wise words of Confucius: “Do what you love and you’ll never work a day in your life.” Give your business a fighting chance by choosing something related to your interests. This strategy also has the advantage of immediately narrowing the field and restricting your options.  

Yet another wise individual once said that creativity is enhanced by a degree of restriction. If you give someone a choice of 5 business ideas and ask them to choose the one they like best, then they will probably be able to tell you within a couple of minutes - perhaps immediately. On the other hand, if you tell someone they can start a business in any area they wish, they will probably still be making their mind up two months later!

Selling something you love is not only motivating; it is also a lot easier. For example, let’s say you decide to sell designer fashion because, although you've never had a personal interest, you see it sells well. This might be fine at first, but just wait until problems arise and you have to think about fashion 24 hours a day to get them solved. At times like this, even the prospect of good money isn’t always motivating enough!

On the other hand, when you share your buyer’s knowledge and passion, you’ll find it a lot easier to make good business decisions because you already know your market and feel excited about what you do. Do you love fashion or movies? Perhaps you feel excited about the thought of new gadgets and technology? It’s likely that there are plenty of other people who also share your interest – giving you an instant audience for your product.

Jot down your interests and then make a list of products that are related to these interests then put this information into a business plan. I guarantee that the mere act of putting your business down on paper will give you a much clearer idea of where you are going and what you need to do to get there.

Got a product? Great! Is there a market for it?
The next step is to research your ideas. There is no point selling something that thousands of other people are already selling – nor is there any point trying to force people to buy some new invention they don’t want. However, all too many sellers just see the popularity of the item and dive in head first. Over-saturated markets mean a lot of work for very little in return. Throw big, established sellers into the mix and it's almost impossible to compete.

What you should be doing is looking for niche markets that have low competition and high demand – and be prepared to continually adjust your market as the demand changes. Things change so rapidly on the Internet that to be successful requires making constant tweaks and adjustments to your idea to fit changing demand.

Experimentation is essential! Always test a product idea with a sample lot first. Never, ever buy in bulk with the assumption that you’ll be able to sell it all – you might have a nasty surprise.

 
Instead, buy in small quantities and test 2 or 3 different products at a time. Try different pricing points and adding value. For example, rather than selling Frisbees individually, you could try making up a ‘Family Sports Pack’ with a Frisbee, tennis balls, hula hoop, and a jump rope. This is a great way of increasing value and attracting people looking for a good deal.

Finally, timing can be everything. A product that isn’t selling well now might suddenly become more popular in a couple of months time. For example, a couple of years ago the only people who counted knitting as a hobby had gray hair and wrinkles. These days it’s a different story. A few models were photographed knitting backstage, and now, everyone’s hunting for specialty wool and knitting patterns.

This highlights the importance of keeping up to date with current trends via the media. Again, if you are interested in your market this won’t be hard. A regular Vogue reader would quickly spot this trend – while a seller uninterested in fashion trends and related hobbies may not.. It’s amazing what niche opportunities you can stumble across if you go looking within your market.

Product – Check, Market – Check, Stock – Uhhh
Sourcing Your Product

Niche products are hard to find precisely because they aren't wanted by everybody. Thus, finding a supplier will take quite a bit of work on your behalf as these items usually can't be purchased from individual wholesalers. Instead, you'll have to contact large wholesalers, liquidators or even contact the manufacturer directly.

Finding suppliers can be like looking for a needle in a haystack especially if you just use Google your product in the hope of finding a superstar supplier. Wading through thousands of results is not an efficient way of spending your research time. And then, once you find the suppliers how can you be sure that they are legitimate and reliable? Using a product sourcing directory is one step that buyers can take to ensure the suppliers they intend to use are the real deal. It's best to go with a web-based directory that updates its listings and provides reviews of the suppliers in its list. Online product sourcing directory SaleHoo.com provides information and reviews for all types of suppliers. If you would rather go straight to the source here are the main types of suppliers you're likely to come across and a recommended suggestion.

Wholesalers
Wholesalers buy stock in bulk from the manufacturer for a very low cost per unit. They then distribute it to retail stores and sellers. Buying wholesale is a great way of making medium level purchases. You can buy goods at a very low cost per unit from wholesalers, leaving plenty of room to profit. Once you have established an account with a wholesaler, you have a reliable, long-term supply.

And the cons? Wholesalers generally have minimum order requirements, usually around $100-$300US, designed to stop people from purchasing single units.

Here are some Wholesalers to try:

• Electronics Wholesaler: www.dbldistributing.com This supplier is a market leading wholesale distributor of consumer electronic accessories. With a diverse range of products and a stock count in excess of 17,000, they have the marketplace power to provide excellent prices. 
• Chinese Wholesaler: www.golbalsourcesdirect.com This supplier lets companies of all sizes buy products from original manufacturers in China at low factory prices and wholesale prices. Products range from consumer electronics and general merchandise, to premiums and DIY products. Keen to do business with anyone, they welcome small lot orders. 
• Computer Wholesaler: www.evertek.com This American wholesaler, established in 1990, is up to date, reliable and enthusiastic about selling products at low prices. They stock an immense range of electronic goods. Indeed virtually any consumer product that has a circuit in it can probably be found in their catalogue! Instead of just accepting a quoted price for something, with some products this wholesaler gives you the chance to make an offer of your own.
  

Liquidation Sales/Clearance
Liquidation sales occur when a store wishes to get rid of stock and liquidize assets for a move, or, when a company has gone bankrupt and assets are being liquidized to help repay debt. The main advantage of a liquidation sale is that good quality, near-new or new merchandise is sold off very cheaply. You can usually request an inventory of the sale before you go, so it’s reasonably straight forward to see whether there will be items of interest. The only difficulty with liquidation sales is that you can’t predict when they are going to be held, so they cannot provide a reliable, long-term supply of stock.

Clearance sales occur at the end of the season or the financial year when stores want to get rid of old stock, returns, and damaged goods. Like liquidation sales, clearance sales are designed to get rid of stock quickly, so prices are usually rock bottom. The difficulty with clearance sales is that you often have to buy by the pallet load – sometimes without knowing exactly what is inside. Occasionally, this can result in nasty surprises such as badly damaged items, worn clothing, or items that the store just couldn’t shift and will be difficult to sell.

Both liquidation and clearance sales can be wonderful sources, but they usually require spending $1,000+ and you may end up with stock that’s hard to shift. Try:

• Liquidation Auctions: www.liquidation.com This supplier has a wide variety of categories that include apparel, computers, electronics, housewares, industrial equipment and vehicles. Bulk lots are sold by the truckload, pallet, or small package and conditions range from new in a box to customer returns and used.
  

Manufacturers
Manufacturers produce the product and as the first link in the supply chain, they are able to give you the best prices. However, because distribution is not their primary concern, minimum orders are normally high. Typically you will need to order 1000+ units or by the container load, thus this is usually not a viable option for beginners. For established sellers, buying directly from the manufacturer is the most cost effective way of buying bulk merchandise.

Alternatively, some SaleHoo members use the forum to group together to buy a container load of merchandise, sharing the shipping costs across the group. This is not something SaleHoo is directly involved in and the responsibility of organizing these ventures rests on the members.

If you do end up with a bunch of stock you can’t sell, try listing it as a wholesale lot on eBay. Many sellers have successfully used this technique to get rid of dead stock!

• Chinese Manufacturer: www.gttoys.com/en/home.asp They are a China based company specializing in the manufacturing of toys including ride on toys and crafts. They have a new brand name that supplies hand held games and learning computers as well as remote controlled toys. They strive to offer the cheapest pricing available. 
  

Business is Personal
What to do once you've found a supplier

Email is a wonderful thing and it saves a lot of time but building up personal relationships with suppliers is absolutely essential for getting the best priced goods.

Making a phone call, starting up an email exchange, or having regular chats on a messenger service and getting to know the supplier are all great ideas. The time you spend building a relationship will not only mean you’re in a stronger position to get better prices, but, because you know your supplier, you’ll be more confident that things will go smoothly when you finally do place your order.

This is especially important if you're thinking about using suppliers that aren't located in your country. It is absolutely crucial that lines of communication are kept open when dealing with Chinese suppliers as negotiating is a key part of doing business with them. Prices and shipping costs can be reduced with a bit of haggling.  

eBay businesses are as varied as the bricks-and-mortar retailers on the High Street. Keep in mind that these strategies are guidelines and that each business will differ. Remember that if you invest enough time and effort into researching your market and finding quality reliable suppliers your eBay business is more likely to succeed.