As your business on eBay grows, you’re going to continue to wonder whether you can cut manufacturing costs. Finding a reputable factory to work with is one of the biggest challenges and if you can’t source products effectively, you’ll have difficulty scaling.
With that in mind, this article will provide you with some tips and tricks that should help to set the record straight and point you in the right direction when it comes to manufacturing. It hones in on the process used at Sourcify, a platform that helps thousands of companies manufacture products.
Before we dive into that, let’s first understand why most companies manufacture products abroad.
Economically speaking, it is always going to make sense to produce products abroad. This stems from the value of our currency, where the American Dollar is currently equal to 6.88 Chinese Yuan and 64.47 Indian Rupee.
You can understand why the labor costs are cheap when you know the Chinese factory worker is getting paid an average of $2 USD an hour compared to over $23 USD in America. The cost of living is also much cheaper in China and to exemplify that I often compare the price of bottled water in both countries: 25 cents in China versus 1+ dollar in America.
When you’re producing products that are labor intensive like bags, watches, or shoes, labor is your main cost outside of raw materials. The cost of labor is always going to be cheaper outside of America and often even more skilled. If you’re selling on eBay, maintaining and growing profits overtime will be a key to your success.
Faster lead times
People may question this note but when producing products through Sourcify, we’ve often found that lead times are faster overseas. Your lead time is the time it takes to get through a production run. In Asia, you have hundreds of factories that may focus on a certain aspect of a product. If they can fit your production run in, you often avoid cumbersome setup times that other factories may incur.
Better customer service
Though this depends on a factory by factory basis, most of the factories you deal with overseas who have been involved with international customers, know how to treat them. The big factories will have teams of sales reps that have a sole responsibility to land new clients. If you’re a hot lead, these sales reps are going to treat you well and go above and beyond to close the deal.
Option 1: Manufacturing
This first option is more suitable for eBay sellers who want to create original products for their customers or cut their unit costs. That is a fantastic idea if you have the imagination and creativity to design items that consumers will want to purchase. In most instances, you should try to come up with something fun and innovative. However, if you wish to make the highest profits; try to think of a product idea that will solve a problem or help your customers to save time in their lives.
Another reason to dive into manufacturing is to cut out the middleman. If you’re a eBay seller that buys through a wholesaler, that wholesaler is probably making a 30-50% margin. To increase your profit, find a factory source that you can work directly with. This will enable you to increase profits and have more control over your supply chain.
Finding a manufacturer willing to produce your products used to involve a lot of hard work, and so this option would not have made it onto our list a few years ago. However, thanks to innovative companies like Sourcify, it’s easier than ever to link up with some of the world’s most dedicated factory owners who are looking for products to produce. You just have to create an account, and then you benefit from getting the best information possible about companies you can contact to provide your items in a fast and cost-effective manner.
Exercising due diligence
It’s vital that all eBay sellers exercise due diligence when it comes to sourcing a manufacturing firm to create their product designs. You need to make sure you’re working with a reliable operation that will make sure all orders reach you on time. That will help you to protect your business and ensure you don’t encounter too many problems once you strike the deal.
Here are some manufacturing due diligence methods you could use to sort the wheat from the chaff and guarantee you’re making the right business decisions:
- Ask for financial statements – Reviewing the financial statements of a manufacturing company will assist you in gaining a better perspective on the profitability of the organization. You need to deal with companies that are not going to disappear overnight.
- Make a site visit – Some eBay sellers will not want to visit their manufacturing partners because they might work hundreds of miles away. However, if you plan to exercise manufacturing due diligence, conducting a site visit is one of the best ways to learn more about the operation and assess their machinery and capabilities.
- Using a lawyer – In some instances, eBay sellers might want to employ the services of an experienced legal advisor when selecting a manufacturing partner. That professional can review documents, laws, and regulations to ensure everything is above board. Of course, there is no need to go to these extreme lengths when you use a company like Sourcify because the factories listed on the website get vetted and checked.
The pros of manufacturing original products
- The potential for high profits – There are lots of benefits to designing and manufacturing original products for your customers. Firstly, you will become the only supplier in the world of those items, and so if they become a hit; you could make a small fortune.
- Complete control – While you’ll strike a deal with a factory owner who will produce the items on your behalf; you still keep full control over the entire process. If you’re not happy with an element of the design once you have a prototype; you can make changes as and when you see fit.
- Bulk orders and low prices – It’s impossible to ignore the fact that you will pay the lowest prices possible for the goods and products you create if you decide to go straight to a manufacturer. You can place bulk orders to reduce the cost of materials, and the factory should pass the savings onto you.
The cons of manufacturing original products
- The high cost of entry – Unfortunately, while Sourcify connects eBay sellers like you with manufacturers around the world, there is no getting away from the fact that you might have to invest some money initially to cover the first production costs. However, once you sell your first orders; you should have enough cash to fund the rest of your manufacturing endeavors.
- A lengthy process – If you select this option when you want to find suppliers for your eBay business; you’ll have to maintain some patience because it can take a while to get everything off the ground. You’ll want to check out the manufacturer before you spend money, and the factory owner will have to make adjustments, so their teams can produce your items.
Option 2: Drop-shipping
I’ve shared in the past how we found reliable dropshipping suppliers after learning the hard way that the supplier piece in dropshipping model is as crucial as anything else.
There are a lot of wholesale suppliers out there who offer drop-shipping services to retailers and sellers on eBay. That is a simple process, and it enables the seller to make a profit without ever having to touch the goods they supply to their customers. You have to find eBay suppliers offering that service, and then make an arrangement with them that benefits your business. In most instances, they will allow you to use their product photos to advertise the items in your store. People then place orders that get sent straight to the drop-shipping firm. As soon as they receive the request, they will pack and deliver the item to your customer. You make a commission on the sale without getting your hands dirty.
Becoming a good middle-person is essential if you want to succeed with your new eBay operation, and dropshipping is one of the best ways to make that happen. Still, there are both pros and cons to the idea, and we’re going to discuss them now in the hope of ensuring you understand all the ins and outs. You can then decide if drop-shipping is the best strategy or you need to look at an alternative.
The pros of drop-shipping
- The low cost of getting started – Compared to many other selling options, drop-shipping offers a low-cost method for getting hundreds or even thousands of products available on your eBay store without having to outlay funds to purchase the items. You don’t need to worry about renting a warehouse to store everything, and so it’s probably one of the cheapest solutions out there.
- No need to control inventory – You don’t need a warehouse to store the products, but that also means you don’t need to dedicate hours every day to manage your inventory. When you decide to drop-ship; you don’t have an inventory to manage because your supplier will deal with all those aspects.
- Flexibility – There is no getting away from the fact that drop-shipping offers lots of flexibility to eBay sellers. Firstly, you are not limited to a single drop-shipping company, and so you can deal with many different suppliers focusing on a broad range of products. Secondly, you can sell on almost any scale you desire.
The cons of drop-shipping
- Low-profit margins – As mentioned a moment ago, drop-shipping doesn’t require much investment to get started. However, you can’t ignore the fact that your profits per sale are going to be somewhat low. That is because you mostly only earn a small commission per product.
- Customer service – Keeping your customers happy can become challenging for eBay sellers who only deal with drop-shipping suppliers. If the company runs out of products, there is nothing you can do, and you will have to cancel your customer’s order.
- Quality control – If you use drop-shipping companies, it’s impossible to deal with any quality control issues. You don’t see the item before it arrives at your customer’s door, and so you have no way of checking for damage, etc.
Option 3: Real-world suppliers
Believe it or not, even though we live in the digital age, thousands of eBay sellers still source their products without sitting down with their laptops. That is because there are still many wholesale companies in the real world that don’t always focus their efforts online. Also, some small-scale suppliers might concentrate their efforts on only creating one product. You know the type. Maybe they’re custom celebration cardmakers who use their craft skills to design unique greetings products at home. There are also lots of people out there who make personalized novelty products from the comfort of their home as a side business.
There are many methods you might like to follow when it comes to finding eBay suppliers using that option. For example, some people might consider checking Facebook business pages to identify small, one or two person operations that produce stunning and innovative products. You would just have to contact the seller and try to strike a deal that would allow you to buy their items in bulk or drop-ship.
The pros of finding real-world suppliers
- Original products – As mentioned a moment ago, if you can find real people who create innovative and unique products; it’s possible that you could become one of the only stores on eBay providing those items. If there is a significant market and you select the right things; you could earn a fortune.
- Easier to make business connections – When you find eBay suppliers in the real world; you will often deal with the person who creates the products rather than a customer service team. That should make it easier to form long-standing business connections and iron out any kinks in your professional relationship.
- Offering something different – There are thousands of eBay sellers who all know about the same methods for sourcing suppliers. That means there is a lot of competition and everyone ends up with the same products in their stores. If you take the time to find small-scale suppliers in the real world; you might end up offering something different to your customers.
The cons of finding real-world suppliers
- No guarantees – Sadly, even if you try exceptionally hard, there is still a reasonable chance that you won’t identify suitable small-scale suppliers of innovative products. Also, the ones you meet might not have any interest in striking a deal because they might sell on eBay and similar sites themselves.
- Bulk isn’t always possible – Some small-scale suppliers in the real world don’t have the time or determination to produce their products in volume. That is especially the case if the individual only began creating and selling their items as a hobby. So, you need to find eBay suppliers that can meet your demands.
Finding suppliers for your eBay business is just the first step. Success comes hand in hand with persistence and nothing comes overnight (our story is a living proof). By thinking about each of the suggestions on this page, you can be off to the right start. If you decide that manufacturing is the best option, the team at Sourcify can help with every step of the process. As always, you’re welcome to leave comments below and I’ll be happy to assist.