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16 
How to Bootstrap Product Sourcing for Your Online Retail Store
Retailing is one of the hardest hit industries in today’s recession. However, retailing plays an important role as one of the driving factors in economic recovery.
Whether you start your retail store off line, online, or both, you need to have a long list of products for sale, as retailing strength is in product variants.
However, the costs related to off line retailing are very high, these days. Today, the key word in retailing is bootstrap.
Probably the best way to bootstrap is by moving your retail store operation online.
Online retailing – that is, selling products through web stores – thrives. I have heard several success stories that involve closing retail stores and opeing web stores.
The best thing about web stores is no store set up costs and sales assistant salaries. Web stores can be accessed 24/7 – something that their off line counterpart can’t do.
The key in staying lean and, if possible, stock-less retailing is the different product sourcing of online retail stores compared to the conventional brick-and-mortar retail stores.
How to source for products
There are many options you can consider to source your products. Here are some of the options, with things to consider if you decided to choose one:
Make your own product
On the upside, making your own product to sell is probably the most profitable of all – unique product lines always appeal customers. On the downside, however, not many can create outstanding and unique products to sell, so this is probably not ideal for most online retailers.
Dropshipping
Thanks to eBay, dropshipping has becoming a mainstream in e-commerce. The good – Dropshipping is basically allowing you to process your orders without the need for you to have inventory whatsoever. The bad – Relatively high pricing of dropshippers will cut your profit margin considerably, compared to the regular wholesaling.
Affiliate marketing
Affiliate marketing has been hot for years, and the right venue to go if you want to super-boostrap your online retail store. The plus, you don’t need any money to start – Joining network, such as Zlio.com allows you to open online retail store at no cost. The minus, competition is cut-throat.
Wholesale purchasing
The most common of all, especially in off line retailing. Basically, you are given a certain amount of discount to purchase products in bulk, such as Wholesale Clothing. There are generally two types of wholesaler: small and large volume wholesaler – Small or light bulk wholesaler allows you order a small amount of items in bulk, while large volume wholesaler only allows you to order in a large amount of items, quite often container-full. The pro: High-margin profit for you. The con: You need a storage or warehouse ready.
Product liquidation
Occasionally, wholesalers have excess inventory that need to be cleared of their warehouses at very-low prices. If you are serious about online retailing, securing a liquidation can make your online store very, very profitable. Just like the other bulk purchasing, the bad thing about this is the spaces needed to store the items.
How to bootstrap your product sourcing
You see, there are numerous ways to source for product.
If you want to start small and maximise your bootstrapping effort, I suggest you to try affiliate marketing and dropshipping. Both are usually can be done with minimal investment, even for free.
When you feel that your online retail store is growing well, you can budget from the profit to acquire more products at lower prices through wholesaling, starting from light bulk, moving up to liquidations.
Like everything in life, there is no easy money – you need to work your way up if you want to succeed in the online retailing game.
Remember, almost all entrepreneurs bootstrap their startup, including Michael Dell, Bill Gates, and the likes. Why don’t you bootstrap yours, too?
Ivan Widjaya
Bootstrap product sourcing
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“If you want to start small and maximise your bootstrapping effort, I suggest you to try affiliate marketing and dropshipping. Both are usually can be done with minimal investment, even for free.”
The suggestion for affiliate marketing is a good one. I think that it is probably the only way to go if you are not familiar with dropshipping, or buying wholesale, surplus, or overstock merchandise for resale.
Dropshipping, unfortunately, in some cases, has all but lost it’s profitability on Ebay. Your best bet with Dropshipping is a stand alone website.
Others will differ I am sure, but it is hard to find a reliable dropshipper that won’t send your negative feedback ratings through the roof if you don’t deliver the product on time to your customers.
But even then, you better have picked the right product, for the right market, followed up with a profitable outcome. The fees and processing costs can eat away at your bottom line.
Buying bulk from wholesalers and some surplus dealers is the way to go in terms of pricing. However, you need to be cautious before you buy from either.
Protecting your purchases and visiting overstock dealers before you buy – is the key to not getting burned. Some surplus dealers – if you are not careful – can sell unsuspecting buyers junk merchandise.
The articles below can explain, in depth, all things that I have mentioned here. “How To Avoid The Wholesale List Scam” will show you how to find wholesalers free by doing a little library research.
“The Ten Tenets Of The Surplus And Salvage Industry” goes through a checklist of do’s and dont’s when it comes to buying product from surplus or overstock dealers.
The article entitled: “The Downside Of Using Dropshippers In The Ebay Auction Arena”, presents some points to ponder before you decide to use dropshippers as a source of supply for the auction giant.
Ten Tenets Of The Surplus And Salvage Industry
http://www.productsforresale.com/articles/TenTenetsOfSurplusAndSalvageIndustry.html
The Downside Of Using Dropshippers In The Ebay Auction Arena
http://www.productsforresale.com/articles/DownsideOfUsingDropshippers.html
How To Avoid The Wholesale List Scam
http://www.productsforresale.com/articles/wholesalelistscam.html
Hope this helps..
Robert C – The Wholesale Products Guy
Robert,
Yours is one of the best comment so far on Noobpreneur.com :)
Anyhow, like you said, dropshipping is indeed in downturn more. Your articles are very useful, too.
Thanks for commenting!
Hey “Noob”..
Thanks, I appreciate it. ..
I have bought and sold scrap textile, truckline auction salvage, in addition to visiting more then a few surplus dealers to know that the “devil is always in the details”.
What people say, is not always what they will sell you. I want people to be profitable and find good sources, but I cannot overlook the realities of these types of purchasing.
Respectfully..
Robert C – The Wholesale Products Guy
Robert,
This might interest my readers and I: If I may asked you, how can you find such surplus dealers? From the media, word of mouth?
Thanks :)
Wow Noob!
Talk about your low hanging softball that I can hit out of the park, this is an easy one! (LOL!)..
Let me just say that before I suggest any surplus dealer resources that purchasing surplus and salvage product can be a risk.
Especially any electronic item. Most are broken, or need repair.
In addition, no matter what the product, expect to receive a certain amount of throw away with any order.
That is just the nature of the business. You should expect to have about 10 to 20 percent of the product you receive to be throw away.
Anymore then that, and you are getting more junk, then resalable product.
For a stark example of what can happen to you if you decide to purchase blindly, or based on the word of a particular dealer.
This is a post from the “The Good, The Bad, And The Ugly” section of Surplus.cc (a free forum anyone can join and learn about the surplus business) a surplus forum I am a member of – under the username: “Robitthehobit”.
This post (below – B&D Salvage) is what can go wrong if you are not careful. The GBU section of the Surplus.cc website is littered with information about bad sellers.
B&D Salvage
http://www.surplus.cc/Board/forum_posts.asp?TID=1631
If you are going to purchase anything from an independent surplus or salvage dealer in large quantities, then please, go and physically inspect the merchandise. Make sure you know what you are getting.
I still see too many horror stories about folks who just hand over their money blindly, on the basis of a telephone conversation and the promise of a great deal..
Also…
——————————————————————————–
Never wire transfer money to any independent dealer unless you know what you are buying..
Always use a credit card with buyers protection..
——————————————————————————-
Ok, with that being said, the following resources are for educational purposes only.
Please heed my warnings, and read my article entitled “The Ten Tenets Of The Surplus And Salvage Industry” also included in this post..
First..
Surplus.net
http://www.surplus.net/
Surplus.net lists all the surplus dealers around the country. You can also get on their mailing list and have deals sent to your e-mail box from various surplus dealers, via the Surplus-Liquidation Mailing List.
When you get to the homepage just go to the top right hand side
where it sez: “FREE product leads. Get on the MAILING LIST”.
Just put in your e-mail address and about every month you will get a listing of surplus products deals.
Once again – be careful here. This is surplus and salvage..
The Closeout News
http://www.thecloseoutnews.com/
The Closeout news is the leading publication for the surplus industry. It is basically a newspaper print publication that is littered with ad’s for surplus dealers. I don’t know of any other publication of it’s kind.
Subscription rates are as follows..
2 yr Closeout News – $104
1 yr Closeout News – $64
6 mos Closeout News – $45
3 mos Closeout News – $30
And again, be careful here, this is surplus and salvage..
If anyone has the means or the motivation, one of the best trade shows for surplus dealers and wholesalers is the Associated Surplus Dealers, and Associated Merchandise Dealers (ASD/AMD) show held in Vegas and New York.
Associated Surplus Dealers, and Associated
Merchandise Dealers (ASD/AMD) Trade Show
http://www.asdamd.com
ASD/AMD product portfolio connects sellers from manufacturing to wholesale distribution with Buyers from independent retailers to international chain stores. ASD/AMD – one smart choice, infinite business opportunities.
Here are some news stories about trading selling surplus from KTLA
in California..
Keep It Simple, Keep It Cheap: Trading and Selling Surplus
http://www.ktla.com/content_landing_page/?Keep-It-Simple-Keep-It-Cheap-Trading-and=1&blockID=176864&feedID=1395
Also – here is a video from the same news outlet that features Via Trading, a surplus and closeout dealer in Lynwood, California, in addition to quick mention about my guide – a very brief mention mind you..
Just remember folks – that when purchasing surplus, heed my warnings. Try to get first, or second quality overstock, closeouts, or shelf pulls. Stay away from customer returned goods at all cost.
Do not buy salvage electronics unless you are prepared to fix them, and have money to burn. There is more waste in surplus electronics then any other surplus product category, unless they are shelf- pulls, over first quality overstock.
Thats all I got for now..
Hope this helps..
Robert C – The Wholesale Products Guy
Oops..
Forgot to put in the link about the Video for Via Trading..
Via Trading – Overstock Clothing And Housewares For Sale..
http://www.ktla.com/video/?clipId=3306554&topVideoCatNo=undefined&c=&autoStart=true&activePane=info&LaunchPageAdTag=homepage&clipFormat=flv
Robert
Whoa, Robert…
A lot of information going on here – Very, very useful information and about the salvage electronics you mentioned, I experience the ‘burned money’ you mentioned :D I agree – when it comes to electronics, forget second-hand and salvage ones, unless for some reasons you are really really, must, have to, couldn’t live with, the electronic stuff ;)
Nice video, btw…
Thanks for the detailed information, Robert!
I want to start an on-line business out of my home where I would sell scooters, motorcycles, dirt bikes, atv’s etc. My question is this: I have already gotten a name and an EIN number do I need a state vehicle dealers license to sell in my state? I talked to someone at the dept of licensing and they told me that I could only do this in an office that is zoned commercial and I have to have a sign posted out front and hours too. This is my HOME for goodness sake! What can I do about this? Please help or send me somewhere where I can get some constructive help. Thanks.
Becky,
The best bet is to go to your local Chamber of Commerce and start from there. Each US state has its own dos and don’ts – So I can’t really tell you what to do. The dept. of licensing’s advice is by-the-book one. That what you should do, IF you display the scooters. Since this is an online business, I assume that you are not building any inventory – I’m not sure zoning is an issue here.
Again, visit your local Chamber of Commerce to clear things (otherwise the IRS will eye on you…)
Cheers!
Well, your post is the greatest on this deserving topic. I agree with your conclusions and anxiously await your upcoming updates. Just saying thank you will not be adequate, for the exceptional lucidity in your writing. I’ll immediately subscribe to your rss feed to stay abreast of any updates. Solid work and much success in your business efforts!
Cheers for the good words :)
I follow your website for quite a extended time and should tell that your articles usually prove to be of a high value and quality for readers.
So what else would I need to get started in a wholesale merchandise kind of business? I would like to start kind of small, because I don’t have a whole lot of extra space, but I have enough to give it a shot. What is the process for getting licensed and all of the legal kind of stuff?
Garfield,
To be honest with you, I can’t answer your question because I don’t have the capacity to do so. I do understand that no license is needed to run an online retail store by sourcing products to online store-friendly dropshippers and wholesalers.
I’m sure you know better than me ;)