7 things to must consider before sourcing a product.
Updated: Feb 9
If you are a retailer, then sourcing products and putting them on your shelves is the reason behind your store's success. If you don't have the right products, then the customers won't visit your store, and you won't generate any sales. Many retailers start a new business, but they fail because they don't invest their money in the right products. The second reason behind the failure of products is poor sourcing. Almost all retailers pay most of their attention is finding and sourcing products that will sell more in the marketplace. But, there are very few of them that make an effort to improve their sourcing process.
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Sourcing is an integral part of any retail business, whether it is small or large. You have to keep track of items that your company is bringing in, from where those products are coming, and how much do they cost. If you want your business to be running in the most right and efficient ways, then you have to focus on your sourcing process. Product sourcing may sound like a simple and easier process, but actually, it is very complex and full of challenges.
In this article, we are going to discuss the seven most important things that you have to consider before sourcing a product.
1. Finding A Right Supplier
If you want to start a sourcing business or source a product, finding the right supplier is crucial. The right supplier will deliver you high-quality products and services at affordable prices and at an appropriate time. Whenever you decide to source a product from another country, the first thing you have to do is to find a supplier for your product. There are different ways of finding suppliers. You can use the internet to search as there are many websites like Alibaba.com, where you can search for your product and find multiple suppliers for your product.
Let's try to understand this point with the help of a real-world example. Suppose you decided to source beauty products in your country. If you search the internet for beauty products suppliers, then you will mostly find Korean suppliers on the internet as Korea is the leading manufacturer of beauty products and cosmetics. You will get dozens of suppliers with their names, email addresses, and contact numbers for a particular product. Now, the challenging part starts here. You only have to choose one supplier from a whole list of suppliers. You will contact all suppliers, tell them your requirements, and then ask them for their quotes. You will choose the supplier who will give you the lowest quote. But one thing that you must know that money isn't everything you also have to ensure that the supplier will provide you with quality products. So, to select the right supplier, you will ask them for a sample of the product, and then you will compare those samples. In the end, you will be able to determine which supplier is right for you according to needs and requirements.
The second important thing that you have to consider before sourcing a product from another country is your country's rules and regulations. You must understand that every country has its own laws and legislations for sourcing products from other countries. In some countries, you need to take permission from your government to source any products from another country. If you don't take permission, then your products won't pass through the customs clearance, and you can face several legal issues. However, some countries don't have such rules, and their people are allowed to source all kinds of products from any country of their choice. So, before sourcing any products, you must go through these laws and legislations. It will help you to prevent any legal issues that may occur later.
As discussed earlier, in many countries, you have to take a permit from your government before you start sourcing any products. Many new businesses don't know about this, and they start sourcing products directly without taking permission from their government. Later, when their products arrive in their country, they are held in customs, and the person who imported those products has to face legal consequences whom he was not aware of before. So, whenever you plan to source a product, make sure to take a permit from your local government; otherwise, you will end up wasting a lot of time and money. If your country allows you to source products freely without any permit, then there is no problem.
This term might be new for you, but it plays an important role when you are sourcing a product from another country. Basically, incoterms are a set of international rules that define both buyers' and sellers' roles and responsibilities in the transactions of importing and exporting. You need to know your incoterms because it ensures a smooth transaction between buyers and sellers and avoids potentially costly mistakes. Make sure to use internationally recognized incoterms to clarify tasks, costs, and other things with your supplier. The incoterms clearly state that who will be responsible for paying, managing shipments, insurance, documentation, customs clearance, and other logistical activities that can occur in your transaction.
5. Payment term
Make sure to discuss the payment terms with your supplier in advance and ensure that both of you are agreed upon those terms. It will ensure that your business has smooth transactions and you are having a good relationship with your suppliers. Without proper payment terms, there might be a misunderstanding between your company and your supplier, and things can get worse for both of you. Typically every supplier would like to be paid in advance before he ships your products. But, if you want to make an exception, then make sure that it was written on the payment terms that you both agreed upon and signed at the starting of your deal.
6. Duties & Tax
If you want to set up a small or medium-sized business and want to source products from any other country, you must be aware of the duties and taxes that might apply to your country when your products arrive. You have to pay a specific amount that depends upon the total cost of your products. You can only receive your products after paying these taxes and duties; otherwise, your products will be held at the customs department until you clear your taxes and pay the duties. Every country has its own taxes and duties. If you are sourcing any product from another country, then you need to be sure about how much tax you will need to pay to get your products to pass the customs.
Bonus - Expect Delays
As you know, currently, the whole world is suffering from the COVID-19 pandemic. Things are pretty tight everywhere. The business was stopped, manufacturing industries were stopped, and even international flights are being delayed. Due to all these conditions, the business is affected heavily. Especially those people are most affected that were running their whole businesses on International sourcing. Although things are getting normal day by day, it will still take some time to normalize. So, if you have ordered any products online, then there is a fair chance that your products might get delivered late due to the limited availability of services and resources.
These are the seven important things that you need to know before sourcing a product. If you are a beginner who is just starting up or planning to start a sourcing business, these tips will be handy for you as you can save a lot of time and effort by paying attention to these points.