Introduction - Cut e-commerce costs
Much of success in e-commerce comes down to whether you have an edge over the competition, and slicing your costs in every area can add up to a significant edge. Increasing your margins piece by piece is possible if you do the research. This post will look at two major areas where you can cut e-commerce costs – your suppliers, and in shipping process.
Finding the Right Suppliers
Go to the Source
First up, one of the best ways to find great wholesale products is to do research on the ground. That’s right, not all online business is done online. Look around your city and region for opportunities to source products. If you are based in Asia, having China at your doorstep is a potential goldmine. Instead of buying items on Alibaba sight unseen, set up meetings with the manufacturer and go to the source. Often the best deals bar none are done this way. Other parts of the world will also present their own opportunities. For example, through research and old-fashioned phone calls, an entrepreneur even located somewhere like Mexico City or Australia – far away from major world markets and manufacturing centers – might be able to source used electronic parts at prices low enough to resell them online for a very successful business.
Compare Dropshipping Alternatives
Dropshipping is a very popular e-commerce model and for a good reason. It offers the entrepreneur a huge range of options and suppliers. Since in this business model no inventory is held, start-up costs are low and newcomers to e-commerce can test the market for a particular product. However, the competition is fierce and margins are tight. If you are entering this arena, sign up for a variety of dropshipping suppliers and compare their products and pricing. Make sure you check the quality of any goods you decide to ship using dropshipping by getting a sample – poor quality goods do not do well in today’s marketplace and returns and bad reviews will catch up with you quickly. Another caveat with dropshipping is that you will need some means of differentiating your product in the marketplace from similar items. This can be done through your graphic design, branding and labelling, and more innovative solutions such as bundling products.
Here are two lists of dropshipping resources to get you started. We do not endorse any of these service providers, but they will show you some of the huge range available.
The Big Fish – Alibaba
Sourcing from direct contact with manufacturers is great, and there are many dropshipping suppliers, but one of the biggest resources in e-commerce supply is undoubtedly Chinese giant Alibaba. Anyone seriously looking to source products internationally needs to check it out. The prices can be very low, but there are things to be wary of as well.
Advantages of sourcing from Alibaba include:
- Direct access to the world’s largest manufacturing hub, China
- Around a millions (yes, a millions) supplier
- Possibility of buying in smaller batches (though not individual items)
- Highly competitive marketplace bringing low prices
- Relatively good interface/portal
Disadvantages of Alibaba:
- Quality can be highly variable
- Not all suppliers are reputable
- Shipping options from China to your international location can also be variable and sometimes slow
- Possible language barriers
- You will need to be familiar with customs and importation duties and processes
Overall, you can do well on Alibaba as many other have, but it may require trial and error to find a product that meets your requirements and a supplier that you are happy to do business with. Fortunately, many exporters in China are competing to sell to you, so great opportunities are there to be found.
A little research will uncover a number of alternatives to Alibaba, including supplier directories which are not so heavily focused on China. Depending on your niche, you can uncover good value. Ultimately these marketplaces are merely ways to put you in contact with manufacturers and suppliers, and you will have to do your due diligence in each case. For individual purchases, AliExpress can be helpful as you are able to purchase small quantities to test the market.
Shipping and Logistics
If you are not dropshipping, after you have found your niche, product and supplier, you will need to find a logistics solution, including shipping and warehousing. These costs have a way of creeping up and eating into your profit margin, so make sure you are clear about them. Purchasing in larger lots can bring better prices, but then you may have increased inventory costs to worry about. Not only volume, but distance from suppliers, desired speed and type of packaging are all important factors.
The FBA Solution and Online Shipping Alternatives
There is no doubt that FBA (Fulfilled By Amazon) has changed the game for many Amazon sellers. Simply ship your wholesale goods to Amazon’s fulfilment centre and they will handle all aspects of fulfilment for purchases of the items from Amazon, including returns. It can be a very convenient and profitable service, although you will again need to educate yourself about their fees.
If you are shipping your goods direct from a supplier, such as one on Alibaba, you will need to make sure that the products conform to Amazon’s standards for labelling and packaging.
Of course, there is a catch for playing with the USA’s biggest online store: you have to play by their rules. FBA does simplify things, but you will be selling on Amazon, paying Amazon’s fees, and building Amazon’s brand. In the long term, many e-commerce sellers have found that the way to the greatest profitability and sustainability is through having their business on their own platform. That way, you stand apart from the crowd of hungry competitors seeking an entry point on Amazon, frequently through cut-throat pricing. Amazon has a role and may be right for where your business is, but it’s not the only game in town.
There are a number of ways of reducing costs all the way down the process of your e-commerce business. Supply and shipping solutions need to be compared and weighed according to your business strategy. With care, there are many profitable opportunities still waiting to be found.
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