In the last chapter, we discussed finding the right location for your store and how its interior design affects customer behavior. Now, we’re moving on to another critical aspect of building a retail business — Product Sourcing.

By the end of 2023, experts at eMarketer predict that retail sales worldwide will reach a staggering $29.7 trillion, reflecting a 5.5% increase from previous levels. To ensure your business succeeds in this vast market, business owners must be wise and learn from the past. We’ve got to be ready for whatever might happen.

Looking back on the COVID-19 pandemic, we can’t deny that it posed a challenge to numerous businesses. There were issues with delays, shortages, and rising prices. It was equally frustrating for customers who had to deal with empty shelves and the uncertainty of when their beloved products would be back in stock.

This chapter will teach you about product sourcing and discover various methods to acquire the required products. Additionally, we will provide you with six straightforward steps to ensure everything runs smoothly. We want to ensure that you always have sufficient stock on your shelves, your customers are satisfied, and your business continues to thrive. 

What is product sourcing?

Let’s start by clarifying what product sourcing means. Product sourcing is the process of finding good-quality products to sell. You can acquire these products from trustworthy suppliers and manufacturers at reasonable rates.

Elements involved in product sourcing. Research, pricing, working with suppliers, and method choice are tasks in this business strategy.

To simplify, when you’re sourcing products, you’re doing a few key tasks:

  1. Research: You’re looking for products and suppliers that work for your business.
  2. Pricing: You’re figuring out how much it’ll cost to get those products and how much you can sell them for.
  3. Working with Suppliers: You’re partnering with suppliers and negotiating to get good deals. At the same time, you’re vetting their reputation.
  4. Method Choice: You’re picking the best ways to get these products for your retail business.

The ultimate goal of product sourcing is to find top-notch inventory for your retail business at the best possible prices, with the potential for solid profit margins.

Read more: Choosing the Right Retail Location in 5 Steps

The importance of product sourcing in business

After defining product sourcing, it is essential to understand why it is crucial for your retail business. Your success depends on product availability, variety, flexibility, quality assurance, and competitiveness. Let’s take a closer look at why these elements matter.

Product availability

In October 2021, online shoppers encountered over 2 billion “out of stock” messages. This number represents a massive 250% increase from January 2020. This surge in out-of-stock messages is a significant issue in a world where customer demand keeps growing.

Having a reliable and consistent supply of products is crucial in solving this issue. It guarantees that you can fulfill customer demands and maintain a positive reputation. With a steady supply of products, your customers will trust your business more. Additionally, you can avoid situations where you run out of stock or face delays, resulting in lost sales and unsatisfied customers.

Product variety

Having a diverse range of products is a smart move for your business. Not only does it attract new customers, but it also provides opportunities to sell more to existing ones. 

For example, if your enterprise specializes in selling apparel, providing a wide range of styles, sizes, and colors can attract a more extensive customer base from diverse age groups and demographics. The capability to broaden your product range enables your business to remain flexible and more capable of adapting to shifts in consumer choices.

Flexibility to scale

As your business grows, being flexible in your sourcing strategy is crucial. Two common growth challenges are spending too much on supplies at the start and taking too long to make products by hand. To handle growth well, you need to be able to adapt. This adaptability means you should find new suppliers, increase your production capabilities, and improve your delivery system when dealing with larger quantities of products.

Sticking to a rigid sourcing approach that can’t change with your growth can hold you back. However, if you have a flexible sourcing strategy, it allows your supply chain to grow smoothly. This way, your business can grab more of the market and keep growing in the long run.

Quality assurance

Customers are wary of low-quality products and potential counterfeits in today’s market. To ensure you offer the best, establish strict quality checks, conduct thorough product inspections, and collaborate closely with your suppliers to meet your standards.

Maintaining consistent quality is vital for customer satisfaction and safeguarding your brand’s reputation. Subpar products lead to more returns, negative reviews, and damage to your online reputation. Consistent quality builds trust, loyalty, and referrals.

Competitive advantage

Efficient and intelligent product sourcing can give businesses a significant advantage. It means they can sell good products at reasonable prices and stand out. 

For example, when you get your products from a supplier in another country who keeps up with new ideas in the industry, it can give you a real leg up. You can beat your local competition by being the first to offer new things to customers, making them happy and surprised instead of choosing your competitors.

The different ways to source your products

Discovering how to source your products gives your business more options. Knowing each method’s good and bad sides, you can pick the one that suits you best. Below, we’ll look at six different ways on how you can obtain your products.

1. Do-it-yourself (DIY)

Example of DIY

This approach involves creating or making the products yourself. It’s common in craft businesses, handmade goods, and small-scale manufacturing. 


  • You have complete control over product quality and customization.
  • It has lower production costs, especially for small businesses.
  • You produce distinct products that are not available anywhere else.


  • DIY limits your scalability due to time and labor constraints.
  • You may require specialized skills or equipment.
  • The product may be inconsistent in quality.

2. Wholesalers

Example of a wholesaler

Choosing a wholesaler as your product source means buying many products at once. Wholesalers purchase products in large amounts from manufacturers and sell them to retailers for a lower price. They usually have a variety of popular products for retailers to choose from. However, remember that when you buy from wholesalers, you must store the products and handle order fulfillment independently.


  • You gain access to a wide variety of products.
  • Buying items in large quantities saves money.
  • Wholesalers are a reliable and well-established channel.


  • The minimum order quantities (MOQs) may be high.
  • Wholesalers do not deliver directly to customers; you may need to invest in a storage facility.
  • You may face competition from other retailers buying from the same wholesaler.
  • If you purchase products from the same wholesaler as other retailers, you might sell the same things they do.

Read more: What is a Wholesaler? Definition, Benefits, and 4 Challenges

3. Manufacturers

Example of a textile manufacturer

Businesses with unique ideas or proven variations of existing products should consider manufacturing a good option. Manufacturers are companies that create products from raw materials or components. 

With this approach, you can design your private-label products and even have a say in selecting the raw materials. The manufacturer takes care of actually making the product. Once it’s ready, they’ll ship it to you, and you can store and sell these products.


  • Complete control over product design, quality, and branding.
  • Potential for cost savings through bulk production.
  • Greater customization options.


  • High upfront investment in production facilities and equipment.
  • Complex supply chain management.
  • Identifying a manufacturer that aligns with your requirements can be a demanding task.

4. Distributors

Storage warehouse for a distributor.

Distributors are middlemen between manufacturers and retailers. They supply products to retailers in a particular area. Distributors are independent agents who agree to sell another company’s products but can’t use the manufacturer’s name in their business name. Depending on the agreement, a distributor may sell only one company’s products or multiple product lines from different companies. 


  • Distributors simplify getting products to retailers, making it more efficient.
  • You gain access to a diverse range of products.
  • Distributors can reduce the burden of warehousing and inventory management.


  • There is limited control over pricing and product availability.
  • There will be a reliance on distributor relationships.
  • May have less direct communication with manufacturers.

Read more: What is a distributor? Definition & 5 factors to consider

5. Dropshipping

Example of how drop shippers deliver directly to the customer.

Dropshipping is a way to sell products without holding any inventory. You team up with suppliers who send products directly to your customers when someone buys from your store. You don’t have to deal with stocking or shipping the items yourself. Your job is to find customers and make sales. 

The suppliers handle making the products and shipping them out. You pay the supplier the wholesale cost for the item plus a small fee for shipping, and they take care of the rest, sending the product right to your customer.


  • You don’t need much money upfront, and you won’t have a surplus of products in storage.
  • No warehouses or order packing hassles — the supplier ships directly to your customers.
  • You can offer a wide variety of products in your online store.


  • Profits might be smaller because you can’t mark up prices as much.
  • You have less say in the quality of products and when they get shipped.
  • You might face issues with suppliers or products running out of stock.

6. Trade shows

Example of a gathering within a trade show. Sellers, manufacturers, distributors connect with one another on events such as this.

Trade shows are gatherings where sellers, like manufacturers, wholesalers, and suppliers, display their products. They’re a way for businesses to find new things to sell and new suppliers to work with. 

You can meet dropshippers, wholesalers, and manufacturers at trade shows in one spot. It’s a place where businesses and buyers can talk about and check out the newest products for buying and selling.


  • There are opportunities to see and touch products in person.
  • You can meet potential suppliers face-to-face, making it easier to build relationships.
  • You gain access to industry trends and innovations.


  • Attending trade shows can be expensive, with travel and registration fees adding up.
  • You’re only exposed to the suppliers and products present at the event, limiting your options.
  • It is time-consuming, primarily if your business is far from trade show locations.

6 steps to conduct product sourcing

Product sourcing is vital for business success, especially in e-commerce or retail. Here’s a straightforward guide to help you find products and suppliers:

1. Research what you want to sell

To begin sourcing products from suppliers, research the market and decide what you want to sell. Without proper research, your sourcing efforts may not work out. Your market research should cover various aspects, including demand, competition, pricing, and your target customers. This research will help you pick the right products that match your business goals.

Read more: Market Research for Retail: 5 Reasons Why It’s Important

2. Finding suppliers for the product

The next step is finding suppliers once you know what you want to sell. Before contacting them, ensure you understand what you need from them. As we mentioned, this means doing your homework on the product and understanding your goals for getting the supplier. Are you looking for information, samples, or specific products?

You can find suppliers in different ways. As we’ve listed earlier in our guide, there are six various sources to obtain your product. You can attend trade shows, contact manufacturers, distributors, wholesalers, dropshippers, and distributors, and even create your products yourself.

The big question for you is what to look for in a supplier. Here are three things to consider:

Business licence

Make sure the supplier has a valid business license. A permit shows they’re legitimate and follow the rules. Dealing with a licensed agent reduces the risk of encountering fraudulent or untrustworthy agents. Plus, you can use their license number to find and talk to them if anything goes wrong. It’s like an extra shield for your business.

Handling experience

When selecting a sourcing agent, finding someone with experience in the specific areas you need assistance with is essential. Look for a sourcing agent with a proven track record in product sourcing, negotiation, quality control, and logistics. This experience can significantly impact the success of your sourcing endeavors.

For instance, if you’re interested in sourcing electronic goods, seek an agent specializing in this niche. Ask them about their past experiences and successes in sourcing electronic products. They should be able to provide examples of their work, such as case studies or references from previous clients in the same industry.

Choosing a sourcing agent with expertise in your field increases the likelihood of a successful partnership. Their specialized knowledge and experience can help you navigate your industry’s unique challenges and requirements, ultimately leading to more effective and efficient sourcing efforts.


Good communication is essential when working with a product sourcing agent, especially with international suppliers. Your agent should be easy to reach and keep you updated on what they’re doing every step of the way. 

Bad communication, on the other hand, can cause problems. For instance, if your agent doesn’t respond to your messages or tell you what’s happening with your order, it can lead to misunderstandings and delays. So, ensure your agent is good at talking to you and understands your language. It will help you get your needs and solve issues while sourcing products.

3. Getting samples

Just like you wouldn’t buy a car without taking it for a test drive, when you’re getting products for your business, you should check them out first. Asking for product samples is essential in product sourcing. It lets you see how good the products are, how they look, and if they work well. 

This process is critical to ensure the products are up to your standards and what your customers expect. You might have to pay for these samples, and don’t be in a hurry during this step — sometimes, you’ll need to try a few models before you can make an intelligent choice.

4. Have a trial period with the supplier

If the samples you receive suit your business, start a trial period with the supplier. This period means you order a small number of products to test it. Pay attention to:

  • Quality: Is the product good enough?
  • Delivery: Does it arrive on time?
  • Communication: Are you able to talk easily with the supplier?
  • Issues: Keep an eye out for any problems.

For example, let’s say you run a chain of clothing stores. You find a new brand of jeans and want to try them out. You might order a few pairs for one store to see if customers like them. Or try them in a few stores first. You don’t have to buy all the jeans the brand offers—just the ones you want to test.

Make sure you decide how long the trial will last, what sales goals you want to meet, and what customers say about the product. It helps determine if keeping the product in your stores is worth it.

5. Evaluate your supplier

When deciding whether to continue working with a supplier, evaluating their performance during a trial period is essential. This evaluation should take into account several crucial factors:

  1. Product Performance: Did the product meet your expectations? Did it do better or worse than you hoped? How well did it sell in your stores?
  2. Communication and Timeliness: Think about how well the supplier communicated with you. Were they prompt and clear in their messages? Did they deliver your orders promptly and with the correct items and quantities?
  3. Product Condition: Were the products in good shape when they arrived at your store?
  4. Pricing: Did the supplier’s pricing match what they initially quoted you?

It’s important to understand that your information can significantly impact your business relationship with a supplier. Suppose you encounter issues and decide to terminate the partnership. In that case, providing honest and constructive feedback is essential so both parties understand why the collaboration didn’t succeed.

6. Keep other options open

It’s wise to stay flexible with your sourcing strategy, even if you’re happy with your current supplier. The market and supplier situations can change, so it’s essential to have backup suppliers or other options ready in case things go wrong. 

Keep an eye on the market for new chances and be ready to adapt to supply chain changes. Retailers should always keep their options open when it comes to suppliers. Having more than one supplier for a product ensures that both the retailer and consumers can get what they need.

Additional tips to know regarding product sourcing 

Regarding product sourcing, success often lies in the details and your approach. In addition to the steps to take regarding product sourcing, there are some additional tips to consider:

Do extra research

In addition to your first research, keep checking what’s happening in the market, what your competitors are doing, and if there are new suppliers you can work with. The business world changes a lot, so it’s essential to keep learning. Do surveys and studies to find new chances and see if people’s preferences change. This extra step helps you stay ahead.

Don’t shy away from a proven model

Copying a successful retailer’s product sourcing method is a smart move, not a setback. If you see that a particular process or supplier has consistently worked for others, try it. It’s an excellent strategy to follow what works but adjust it to fit your situation and the current market conditions.

Always have a plan b

In product sourcing, unexpected issues can pop up. So, it’s vital to be ready for different situations. Whether it’s a sudden supplier problem, a shift in what people want, or unexpected troubles like natural disasters, having backup plans can save the day.

Also, don’t focus solely on one product. Your business could struggle if it becomes super popular and suddenly isn’t. When picking your first product, think about another unique item you could sell alongside it. This way, you’ll be ready for changes in the market.


Product sourcing is crucial for your retail business to succeed. In a changing market where customer expectations keep changing, consistently getting good products is essential.

This article talks about why product sourcing is so important. It helps you keep enough products in stock, have different options for customers, stay flexible, make sure products are good quality, and compete well.

Following the six steps in this guide, you’ll be better at dealing with product sourcing problems better. It will help you have full shelves, happy customers, and a successful business.

In the next part, we’ll discuss another important thing in retail success: pricing. Setting the correct prices can be a big deal in a competitive market. We will explore various methods to set prices and maximize profits while maintaining customer satisfaction.

Impact Insight Team

Impact Insights Team is a group of professionals comprising individuals with expertise and experience in various aspects of business. Together, we are committed to providing in-depth insights and valuable understanding on a variety of business-related topics & industry trends to help companies achieve their goals.

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