If you want to source physical products these are your options:
Create your own proprietary product
Resell a 3rd party product
Resell a 3rd party party product under your brand
Source Physical Products: Create Your Own Proprietary Product
If you want to sell your own products, you need to create a prototype or contract an engineering firm to create one for you then contract a manufacturer to manufacture it.
This option requires much more time, money, and business skills than the other options so I’m not going to spend time on it because I think it will be out of reach for most people in this course.
If you do want to know how to do this, let me know in the feedback section of the course and I’ll make a video about it.
Source Physical Products: Resell A 3rd Party Product
If you want to avoid building your own product you can source physical products.
If you want to resell third-party products, you just need to find the distributor of the product and apply to become a reseller.
This is the process:
1: Find resellers.
Just Google ‘distributor for
‘ in your state or country.
2: Reseller application. Distributors will usually have a reseller application on their website. Typically, you need to have a website and a corporate legal entity that is at least two years old. If you’re in the US, you will also require a reseller certificate.
3: Restrictions. Make sure you review any restrictions on your ability to resell these products. For example, you might not be allowed to set your own price and you might only be allowed to sell the product within a specific geographic region.
4: Shipping. It’s important to know whether the distributor is willing to ship the product directly to your customer or if they will only ship to your warehouse.
This issue alone can make or break your business idea because it’s obvious that receiving, warehousing and shipping products yourself will require a lot more time, money, and effort compared to a simple drop shipping arrangement.
If the distributor agrees to ship products directly to your customer, remember to check the packaging and shipping information.
You want your customer to know that this package looks like it has been sent from your business and not some other company that the customer has never heard of.
This is also important for your brand.
5: Warehouse. If you do require a warehouse and you’re just getting started, I recommend you consider using a 3rd party service rather than committing to a lease.
You can use “Fulfillment By Amazon” or just Google “fulfillment services” in your country to find other options.
The advantage of these services is that your upfront time and cost commitment will be very low and you can scale up and down when you have peaks and troughs in your business.
You will be able to pay for the services you use based on the number of products received, stored, and delivered.
And, of course, you will be able to free yourself of the stress involved with logistics and delivering products on time.
Note that you don’t have to sell your products on Amazon to use this service.
When your business becomes more stable, it will make sense to lease a warehouse.
5: MOQ & Volume Pricing. Many distributors have minimum order requirements (MOQ) as well as volume-based pricing.
Volume-based pricing just means that you will be paying less per unit as you increase the number of units you buy.
You need to review the MOQ and volume-based pricing and make judgment calls about how much product to buy.
If you’re just getting started, don’t fall into the trap of ordering a large quantity of product because you want to maximize profit.
At this early stage, you don’t know, for sure, if you will be able to sell all of the products.
In this case, it makes sense to buy the smallest number of units you can buy without making a loss then test your marketing and see if you can sell them.
If the answer is yes, you can justify taking advantage of the volume pricing in your next order. If the answer, is no, you minimized your losses.
6: Lead Time. Some products are not ready for shipping as soon as you place your order.
Make sure you ask your distributor about how much lead time is required so that you plan accordingly.
7: Payment Terms. Almost all distributors will provide payment terms. For example, you order today and pay in 30 days.
This is obviously beneficial to you because it will take an enormous amount of pressure off your internal cash flow.
However, these payment terms are not automatically available to everyone.
When you complete your reseller application form, you will usually need to answer questions about the financial creditworthiness of your business.
It’s also common for distributors to ask for the financial statements of your business and run credit checks on services like Dun & Bradstreet.
The distributors will use all of this information to give you a credit limit. For example, your credit limit might be 30 days & $100,000.
This means that you can order up to $100,000 of the product without paying up front and each individual invoice will be due within 30 days.
If your business is new or doesn’t meet the credit requirements of the distributor, the distributor could give you a lower credit limit and less time to pay or they might just require you to pay upfront for all of your products.
This is why it’s important to complete the simple steps in the legal and financial sections of this course.
If you just create a basic Shopify site and apply to be a reseller of major brand products with no financial information, most distributors will just laugh at you and ignore you.
Alibaba vs Ali Express
You can use Chinese marketplaces like Alibaba
where the manufacturers are used to dealing with resellers of all sizes.
Alibaba is a platform that allows you to search for Chinese suppliers of specific products.
The main difference between Alibaba vs AliExpress is: Alibaba is exclusively intended for B2B transactions, whereas AliExpress is open to consumers.
Alibaba helps businesses purchase large quantities of products directly from manufacturers at wholesale prices.
AliExpress offers products at competitive retail prices with no minimum order requirements.
Alibaba is best for businesses that want to import large quantities of wholesale products to resell online or in-store.
Alibaba does not offer drop shipping, and is best for established or growing businesses that have facilities to receive and store hundreds or thousands of wholesale items at a time.
AliExpress is an online marketplace where smaller businesses or consumers can make purchases from manufacturers and resellers with no minimum order requirements – but slightly higher prices than Alibaba.
Many sellers on AliExpress do offer drop shipping so this makes AliExpress the better choice for small or startup businesses that want to sell products online without having a warehouse.
Source Physical Products: Resell a 3rd party product under your brand
Selling a product under your own brand is always the best option and the simplest way to do this is to put your logo on a 3rd party product.
Alibaba is a great place for finding manufacturers that will agree to manufacture products with your logo or store name for a very low price because these branding items can be added during the manufacturing process.
There are also many suppliers on Alibaba that will manufacture products according to your custom design. This will allow you to sell a truly unique product.
Of course, this will likely require more time and money because there will be a one-time design setup, one-time tooling setup, a higher MOQ, and a longer lead time.
But, as always, this is a negotiation so don’t just accept the proposal from the manufacturer.
Source Physical Products: How To Optimize Your Results
People need to be clear about why they should buy from you and not your competitor.