What Sourcing Option is Right for Me?

Not sure whether you should be using a manufacturer or a drop shipper? We asked Simon Slade from SaleHoo Product Sourcing to explain why each supplier type suits different needs.

Drop shipping

Cost up front: None – you only pay for what you sell.

“This is the easiest option by far for new sellers with little start-up capital,” says Slade. “But at the same time, you need to understand that while you’ll make some money, drop shipping probably won’t make you a millionaire – at least, not on eBay anyway – because the margins are too small. Drop shipping is more expensive that buying in bulk, but it’s a great way to get your foot in the door. You just need to be vigilant about checking up on your drop shipper regularly and making sure they are doing a good job. And do make sure you invest the proceeds back into your business so you can eventually move up to bulk buying!”

Buying eBay wholesale lots

Cost up front: Whatever you can afford to spend

According to SaleHoo, buying small wholesale lots from eBay is another excellent, but often overlooked, option for new sellers. Wholesalers will frequently liquidize stock on eBay and between-seasons can be a great time to pick up product at unbeatable prices. “Wholesale lots tend to be smaller on eBay,” Simon confides, “so it’s much more affordable for those just starting out. You can get a small lot for $50 no problem!”

Wholesale

Cost up front: $200+

Wholesale is best for eBay sellers in niche markets, as the ‘hot’ products on eBay frequently sell at prices below wholesale. It’s also a great option for people with their own websites. SaleHoo advises that the secret to the best wholesale prices is to build a good relationship with your supplier over time. “If the wholesaler knows you are going to be a regular and reliable customer, they’ll be much more flexible with their prices,” says Slade.

Liquidation

Cost up front: $500-$5000+ per pallet

“Buying liquidation is essential for anyone wanting to sell in popular eBay categories such as clothing, footwear and electronics,” Simon reveals. “As we tell our members repeatedly on the SaleHoo forum, prices in these categories are so competitive that you have to be able to buy items at below wholesale to make a profit. Liquidation is fantastic because you can pick up brand-name clothing for a few dollars per piece, which gives you plenty of room for a good margin – even on eBay!”

Manufacturer

Cost up front: $2000+

SaleHoo says that going to the manufacturer is generally only an option for established sellers. “This is the cheapest way to purchase but you also need to be able to buy in large quantities to make it worth the manufacturer’s while,” Simon explains. “You need have an established niche for your business so you can be confident that such a big investment will be worth the risk.”