Product Sourcing: Find a Product to Sell so You Can Start Making Money on the Internet

Product Sourcing for Internet Entrepreneurs

Anyone hoping to start making money on the internet by selling physical products needs to learn about product sourcing, or how to obtain a product to sell. Naturally, you want to buy at a wholesale price and then promote the item so you can resell for a profit. This is true whether you plan to sell through online auction sites such as eBay, market within Amazon, or set up your own ecommerce sites so you can start making money on the internet.

Product Sourcing Obstacles for New Internet Entrepreneurs

Once you have identified a market to target and have an idea of what product to sell, then you have to figure out how to get it at a good wholesale price. As a new internet entrepreneur you face a two primary obstacles in product sourcing. First, you lack the bulk purchasing power of established retailers. Second, you will generally not be able to secure exclusive distribution rights to products. (We assume, of course, that you are marketing and selling products made by others rather than marketing your own products.)

Lack of bulk purchasing power means that when you are starting out you cannot buy a few units of products like new digital cameras at the same per unit cost that a major seller like Wal-Mart or Amazon can negotiate. This is important, obviously, since the idea is to find a product to sell profitably rather than having to sell at cost or, worse, take losses. Some markets may be hard to penetrate without bulk purchasing power, but there are enough others around for you to make a profitable business.

Lack of exclusive distribution rights to a product means that other people can try to source your product and sell it as well. Some eBay sellers have experienced success with selling a product, but later seen their profit margins get eroded by newer sellers jumping on board and trying to undersell them. This is otherwise known as market value destruction. If you specialize in a niche and become known as a reliable seller and an authority about products in this niche, you may be able to succeed selling things at higher prices. When you are new and just starting out, though, you do not have this reputation to fall back on and it will be hard to sell successfully if your prices are not competitive.

Despite the two above problems, it is certainly possible for sole proprietors to start successful businesses selling online. Here are a few general methods that sole proprietors have used successfully to find products to sell profitably:

Method 1: Get a Dropshipper for Your Product to Sell

One obvious option for product sourcing is to approach the manufacturer and try to obtain the product from them directly. However, they may require you to buy in bulk or to also have a physical storefront. Here, we assume you don't have the resources to make bulk purchases so this would not really be an option. A wholesale distributor may be willing to arrange single item dropshipping for you. In dropshipping, you secure the sale and then arrange for the item to be delivered to the customer from your dropship supplier. The dropshipping business model appeals to many new internet entrepreneurs since it allows them to avoid maintaining, and paying for, mass inventory. Dropshipping does have its drawbacks, though.

One disadvantage of dropshipping is that, as we discussed before, it can be hard to obtain items at a low enough price that you can resell them for a profit. In a few markets, you may have a very hard time finding a suitable supplier. Or, you may face stiff competition from other sellers. Occasionally a business trying make a splash in a market will sell some products at cost to record some sales and attract customers into a store to upsell them on accessories or other related products. Their plan, of course, is to profit from the upsells. Many people trying to jump into selling new brand name consumer electronics items through dropshipping wholesalers have run into all of these problems. If you are hot for electronics as a product area, then I suggest you investigate lesser known brands and/or used electronics items that cannot easily be sourced through a major, known dropshipper.

Another disadvantage applies specifically to online auction sites such as eBay. eBay sellers generally need to ship products to buyers within a week of receiving cleared payment. More than one eBay seller has listed an item to be supplied by a dropshipper believing it to be in stock, only to wind up refunding buyers because in the meantime the item had sold out from the distributor. Delays in dropship delivery can be a real problem if they occur during the height of the Christmas shopping season and I know at least one eBay seller had some negative feedback to contend with over this issue in Dec. 2009.

Method 2: Clearance Sales and After Christmas Blowouts

Another strategy for product sourcing is to scope for items in clearance or closeout sales. You can find these in your local area by monitoring newspaper listings throughout the year. If a business in your vicinity is closing, this is bad news for the owner but you can probably get some excellent deals on leftover merchandise. Some people hunt through police or government surplus auctions as well.

After Christmas sales can also be good places to find a product to sell. The extra shopping duty may interrupt your vacation plans, but if you can get a few things at great prices it will pay off for you later. Even if you do not celebrate Christmas, it is still a good time to find merchandise at reduced costs.

This method is most efficient if you focus on finding items in the niche area or two that you are working in to start your business. If you try to select a scatter shot of different items-whatever is on closeout this week-and want to list them on eBay, then you will have lots of extra work to do researching prices in the new markets plus creating different auction listings for everything. If you sell through a niche ecommerce store, you face an additional hurdle: people will first have to be able to find your website through the search engines before they can buy anything. (If you are too poor to make bulk purchases for products, you are probably also too poor to afford multiple paid advertising campaigns.) Your website will most likely be ranked under keywords relevant for one niche. How will people looking for goods in some other niche you now have a product for ever be able to locate your webstore? You can always open a new niche webstore, but it will take time to set it up and get it ranked in search engines.

Focusing your efforts more into one or two niches initially will also help you become known as an expert and a reliable seller in that area. A sterling reputation can help protect you from price competition created by newer sellers trying to penetrate your market. Moreover, if you start dealing in larger volume amounts of a few products you will be able to negotiate discount pricing from suppliers to stave off some of that price competition in the first place.

Method 3: The Sneaky Approach to Product Sourcing

Resourceful entrepreneurs have discovered a sneaky approach to product sourcing that can be powerful when it works: look for products listed at online auction sites where the name of the product has been misspelled. Misspelled product listings are less likely to be found by buyers and, therefore, are bound to attract less bids and sell for lower prices. Sellers absolutely have exploited this to buy items from eBay on the cheap and resell them at higher prices either on eBay itself or through Amazon.

Unfortunately, this won't provide a consistent way to get any one specific product to sell, but if you have a little spare time one day you might take a look around and see what you can find. It can be a relatively easy way of making money on the internet when you can find the right products. Here is a free tool to help you find such listings on any of the eBay sites.

This technique, as with Method 2, works best if you keep focused into one or two niche areas for your business vs. taking a grab bag of various products.

Better Sources for Finding Products to Sell

There are lots of general e-books and print books (and free blog posts!) about selling on websites or at auctions that provide general advice such as to be sure to use a photo with your product listing or how to time online auctions to get the most bidders for your item, but there actually isn't much material that really focuses on the nuts and bolts details of how to handle product sourcing. Also, while the three methods listed above can work they all do have their limits. Since product sourcing is obviously such a critical issue that must be tackled by every new entrepreneur in this business, it would be nice to find a useful guide devoted to just this topic. As luck would have it Chris Bernard, who worked for over a decade in the wholesale supply industry, has just the thing for us: the Better Sources Guide. (Yes, that is an affiliate link.) This is ideal for sellers who don't have much money to invest upfront in their business. It is indeed a guide for product sourcing, rather than a rote listing of wholesale suppliers and dropshippers-although it certainly does include some wholesale distributors and dropshipping companies.

Better Sources is also nice to have if you are thinking about importing goods for a business, since it includes tips specifically about how to import goods at the best prices. When people think of importing in the context of this reselling business, they think this mostly means to import simply to try to get cheap goods. However, importing may also give you a way to source an uncommon product to add unique value to your internet business.