Acquiring your product

 

Acquiring your product:

 

Now we are getting to the more exciting part of starting a business… the next phase of our journey is to find the best way to acquire the product/s. Products can be acquired through different channels, such as manufacturers, craftspeople, wholesalers, self-make, liquidators, etc.

In this blog I will discuss a few methods of acquiring your product, along with the pros and cons of each. First establish the criteria a method needs to comply with before continuing with the research. In other words, what is required and how much will it cost to get the product to a consumer.

These criteria are related to your product’s specific needs, and include reliability of the supplier, quality of manufacturing and guarantee of production, along with supply terms.

 

Keep the following in mind when researching possible ways of acquiring your product:

-Find more than one way of obtaining your product (locally and internationally).

-When finding international manufacturers, make sure you know the import laws, licenses needed and taxes to be paid.

-Take note of the minimum order amount before transacting.

 

Below are the more popular methods to acquire a product.

Self manufacturing:

If your product is unique and there are no manufacturers that currently supply your product and you enjoy making things, this could be a viable option for you. This option, however, can consume more of your time than you initially anticipated and keep you tied down. This prevents you from running the aspects of the business that will help it grow.

Pros:

Cons:

 

Manufacturer:

This option is usually for entrepreneurs that have a unique idea or a variation of an existing product that has not been manufactured yet. This could be the best way to start up where a manufacturer (factory) already manufactures the product you want to resell and is willing to supply you with the product.

For this method you need a lot of confidence in the demand for your product, because of the upfront payment to have your product designed, the making of prototypes and the production of a minimum amount of products.

Pros:

Cons:

 

To find the best possible solution for manufacturing your product, make a list of the requirements to produce your product, including the necessary materials, cost, minimum order, etc. Validate your criteria with local manufacturers (within your country) and manufacturers outside of your country. It is advised to research more than one manufacturer, as you will need a backup in situations like strikes, when ordering larger quantities or when your manufacturer closes down.

 

Finding manufacturers can be done easily with a Google search, word of mouth or websites like alibaba.com. Make sure you use the right keywords when searching, for example the type of manufacturer, location, etc. Finding manufacturers will take some time, as you need to do a thorough search to validate potential companies against your required criteria to establish their feasibility.

 

When finding companies that potentially fit your product’s manufacturing criteria, contact them with your list of questions to further validate whether they are able to supply you, based on your needs. These questions should range from minim order quantity, materials used, quality, price, shipping, manufacturing and shipping process, etc. Enquire about their policy on selling to a retailer instead of to a registered wholesaler. If they require that you become a wholesaler, what is the process to become one?

 

Becoming a wholesaler usually involves filling out forms, providing banking history and, in certain cases, a letter or reference of your credit record. Becoming a wholesaler gives you the advantage of getting the product at a discounted rate.

 

Manufacturers include farmers, craftspeople and manufacturers’ agents. Deciding on whether to use a local manufacturer or a manufacturer outside your country really depends on your product criteria, the cost and the quality. This decision is also based on your target audience.

 

The different manufacturing options:

 

 

 

 

 

Use the following suggested requirements before considering a manufacturer as a prospect:

 

Wholesalers

Buying from a wholesaler is easier than the other methods of acquiring your product. This is normally the first option when you only have to acquire a large quantity of an existing product. Wholesalers generally stock a variety of products in large quantities, giving you the option to buy a variety of products at the same place.

When searching for wholesalers, you have to take note that in today’s time there are a lot of new online businesses that claim that they are wholesalers, but they are only discounted retailers. Wholesalers don’t sell to the general public and therefore they normally ask for a tax ID number before conducting business with a company. This is one way you can be certain that they are legitimate wholesalers.

Buying from a wholesaler is a straight forward process. The process normally consists of finding a potential wholesaler, contacting them, opening an account and then placing an order. I would suggest opening an account at more than one reliable wholesaler as a backup when needed. This puts you in a position to compare prices or make use of special offers.

Pros:

Cons:

 

Dropshipping

Dropshipping is a form of business where you do not own the products you sell, but instead you sell another business’s products on their behalf, in your company’s name. This type of business normally runs online where consumers can place an order on a website, the order is sent through to the dropship partner and they send the product to the consumer on behalf of your company.

Pros:

Cons:

 

Liquidators

Liquidators are cheaper than wholesalers, but the products they supply are limited and cannot be used as a constant supplier of the same product. You cannot build a good business relationship with liquidators as you would with a wholesaler. Liquidators usually get their stock from retailers with out-of-season goods, returns, slow-moving inventory, insurance companies disposing of damaged goods/recovered goods, bankrupt retailers, -wholesalers, -distributors and –manufacturers. This option can be used to save money on start up costs.

 

The following conclusions can be made in choosing a product acquisition method:

 

For non-existing products: Self manufacture or use a manufacturer.

Low start up money available: Dropship.

To sell other brands: Use wholesalers or a dropship model.

To produce a handmade product: Self manufacture or use a craft person.

For more leeway: Use a manufacturer.

Lowest risk: Dropship.

Highest risk: Manufacturer.

Medium risk: Self manufacture, craftsmen or wholesalers.

 

With one more blog left in our Innovation Guide blog series, you are now ready to start planning your business in more depth, looking at the start up costs needed along with a marketing strategy and where you want your business to be one day. Watch out for our next blog in this series for useful start-up tips.