Product Sourcing – What is it and how does it affect you?Admin
Almost every business is involved in product sourcing. Product sourcing is simply buying an item or items that you will sell through your business. A clothing store has sourced clothes. Chiropractors often source some sort of supplement or back brace. Even a law firm will buy promotional pens, which means they sourced that product from somewhere. Your business is probably going to obtain product to sell to someone. The beauty of product sourcing is that the lower cost and the higher quality, the better profit margins there are for you.
There are numerous ways to buy the product that you are planning on selling. Due to an abundance of middlemen today, the original price of the item more than doubles, often triples, and sometimes quadruples from start to finish. Follow the basic breakdown below in order to see why that original price will double.
This is the person, or more often company, that makes the product. They buy the raw or basic material, hire manual labor, and then the product is made by them. Depending on the product, this could involve massive machines and significant investment in a factory. When they finish with the product, it has a basic cost. That basic cost is how much it cost them to make it from the materials plus labor and includes the manufacturers profit margin.
A wholesaler has gone to the manufacture and often has shipped the product into the country it will be sold. They buy bulk amounts of the product at a low price, and then sell them at a discounted price compared to what they should be at normal market value. Obviously there is a profit margin built into their selling price. There will also included shipping and customs into the price of the product. When you go to “Market”, you are attending a giant gathering of wholesalers. There are multiple markets throughout the country. You show up with a registered pass which allows you to shop at the wholesale market. Often manufacturers are not at market.
Business to Consumer
Also called B2C. This is the last spot where a consumer or customer is walking into the store and buying the product off the shelf. That would include buying it off the screen at an online store. The business has a profit margin that they build into the product as well. A majority of business fall into this category for at least some sort of product.
There are many other positions for middlemen to be in the chain. A sourcing agent often helps a business skip the wholesaler and buy straight from the manufacturer. A customs agent is another middle man that just makes sure paperwork is correct. A general expectation though is that each person or link in the chain has their specific job and goal. For example, a business selling to the consumer may or may not care if the product was sourced ethically. They could just care about the cost they are getting it for, which would allow them to have a higher profit margin. A wholesaler will care way more about the relationship, trust, consistency, and timeliness of a manufacturer than the final business ever will know about. You will source product from somewhere. Almost every business does product sourcing. As you investigate the pros and cons of where and how you will source your product, you will quickly find almost limitless options. Hopefully this article helps understand the basics of product sourcing, an operation you will almost certain be a part of no matter what business venture you are in.