1.                  Create a free account for your business.

2.                  Search for your product of interest. Expect to find many companies as Alibaba has a huge database.

3.                  Contact the factory. Full contact information including phone number, address, website, and e-mail address is available.

You should be familiar with some of the most common sourcing terminology for contacting factories.

MOQ (Minimum Order Quantity) - As you contact a manufacturer, ask about their MOQ. Some factories are only interested in selling you at least one container of product. Others are happy with smaller orders. Contact multiple factories simultaneously, so you can connect with the right one faster. 

FOB (Free On Board) - FOB price means, the buyer pays for freight to the port of shipment, plus loading costs. Expect to pay for freight, insurance, unloading costs and transportation from the factory to the port of origin to port of destination to your location. If you are quoted FOB Ningbo (Ningbo is a large port located in China.) $5000 for 500 units of product, you have to consider the additional ocean freight charges.

CIF (Cost, Insurance, Freight) - CIF, unlike FOB, includes freight and insurance charges. If you have no experience importing, CIF might be a better option than FOB. The price per unit will be higher with this option than with the FOB option, but it requires less work on your part. If you want to see the difference between FOB and CIF price, be sure to ask for both in your inquiry. 

Dim Weight (Dimensional Weight) - If you choose the FOB option, you will need hire a forwarder for your order. Note: A forwarder is a fancy word for a shipping company. Forwarders ask for port of origin, port of destination, and dimensional weight.

BOL or B/L (Bill of Lading) – A document issued by the shipping company, acknowledging that the shipment has been received on board as cargo for transport to a named place, usually a port of destination, for delivery to the consignee whom is the business buying the product.

An online sourcing directory is the 21^st century entrepreneur’s best friend.  It is a resource that eliminates the need for a middleman from your supply chain. Businesses can connect with manufacturers through sourcing directories. My favorite directory is Alibaba, an English language sourcing directory. It specializes in business-to-business trades, especially for international buyers trying to make contact with Chinese sellers.

            Alibaba offers a searchable database of manufacturers of almost any product you can imagine. It is a free resource for buyers from over 200 countries and territories. They claim to be “the number one destination for businesses to find volume buyers and suppliers from around the world.” Think of Alibaba as the great connector of manufacturers and corporate buyers.

Trade organizations connect the movers and shakers of industry. They maintain a list of members that is usually available online. The websites are a great resource for learning about the industry. You can read about the latest industry trends through reports and articles. Association board members know the key players, trade events, and concerns affecting the industry. Introduce yourself and use them as a resource.

            Their primary goal is to match up buyers and sellers. So how do you find the right trade organization?

Check out these resources for help in locating the proper channels:

• The Marketing Resource Center marketingsourcedotcom/associations
• Encyclopedia of Associations by Thomson Gale galegroupdotcom
• National Trade and Professional Associations of the United States Columbia Books Inc Publishers

Before you purchase any of the above directories, be sure to check for a copy at your local library.

Every significant industry has some trade publications targeted manufacturers, wholesalers, distributors, and retailers. They are packed with sales advice, industry trends, business profiles, and advertisements. Many offer business directories that list suppliers and other key players. You’ll find information about industry events such as trade shows and conferences.

            They are an inexpensive way to learn about your industry. Reading through them, you will find companies with which you want to correspond. Keep an eye out for companies that might offer the products you are looking for. Most trade magazines now offer online versions of their magazines. In addition, they provide a searchable database of archived articles. Libraries usually have a nice cross section of trade publications. Visit your local library browse through what they have to offer and subscribe to the best ones. Regardless of your industry, trade magazines can help you improve your chances of success.

Trade shows offer multiple opportunities for you to spot upcoming trends, network with manufacturers, importers, and wholesalers. A trade show can be a great resource for finding the right products for your business. There is a trade show for every industry. If you haven’t found one for you’re your industry, you haven’t looked hard enough. New York, Los Angeles, Chicago, Las Vegas, are among the most popular destinations for trade shows.

The most effective ways to locate the right trade show for you is to check with professional associations, trade publications, and convention centers. Trade shows can connect you with hundreds, or thousands, of potential product sources. Attending a trade show gives you the opportunity to demonstrate you mean business. By being there, you establish yourself as a player in your industry. The attendees commit time and money to participate in trade shows that qualifies them as serious buyers. As you meet with key manufacturers you get a chance to compare prices. Being there in person, you have an opportunity to study product quality.

            Be ready for sensory overload. Trade shows are fun, but they can be overwhelming. Prior to the show, make a plan and stick to it. Don’t wonder around aimless. Select your top priority vendors prior to your arrival. All trade shows have websites listing the exhibitors. Research the product offerings of all, and have list of must visit booth numbers. Arrive with your trade show plan in hand. As an attendee on a mission, you will come away with a better understanding of the market.

Trade shows are a great way to meet manufacturers, touch and feel their products first hand, and place orders on the spot. Traveling to trade shows is a significant investment, but you can deduct the cost of your trip from the business. Trade shows are excellent for networking and learning from others in your industry.

Most business owners only visit trade shows within the U.S. If you are interested in placing large orders, look into trade shows overseas. China has become the factory of the world in the past few decades. Trade shows in various parts of China are becoming larger and more popular every year. The Canton Fair is one of the largest trade shows in mainland China with hundreds of thousands of attendees and tens of thousands of exhibitors. It is such a huge show that it has two phases, each one week long.

Manufacturers at Chinese trade shows expect larger orders than exhibitors at U.S. based trade shows. A huge international trade show is an exhilarating experience. It may be your best option to find an inexpensive manufacturer for your products. Be careful about protecting your product. Patent it before you take it to China for manufacturing. Make sure the factory understands that you have a protected product, and they are not permitted to make the same product for any other company. Taking the manufacturing of your product to an inexpensive overseas factory is risky business, so consider it carefully. 

Manufacturer’s reps represent either importers, manufacturers, exporters, or any combination of the above. The companies they represent pay them a percentage, usually a percentage of the total order. The reps only get paid when they sell. The importance of reps has been diminished by the Internet era. More-and-more businesses are connecting with manufacturers through the Internet, eliminating the need for expensive reps.

            Manufacturers’ reps usually represent many companies. They specialize in industries such as gift, building materials, cosmetics, etc. A good rep can help you identify the hottest products, industry trends, and fashionable companies. Through one rep you may be able to connect with many companies, saving you time and legwork. 

            Many reps are doing more than selling. Some reps may train you or your employees the use of the products they sell. They can help you become an expert about the product they sell. Treat them as a resource not just another sales person.

For several reasons, drop shipping is one of the most popular options for many rookie online entrepreneurs.  The primary reason for its popularity is that it doesn’t require a huge startup capital because the drop shipper maintains the inventory. You don’t have to worry about fulfillment either because the product is shipped directly to your customer.

Note: Blind shipping is a common term in the drop shipping industry. It means that your customer will not know that the product was shipped from the drop shipper instead of your address. When your customer receives the package the sender address will show your address instead of the address of the drop shipper. The only disadvantage of blind shipping is that you will receive the returns.

Drop shippers may be factories, wholesalers, distributors, or importers. The advantage of working with a drop shipper is that they provide you with product images and item descriptions. The more sophisticated companies may offer a product feed that will save you time importing all the product images and descriptions into your e-commerce system.

The greatest disadvantage of working with drop shippers is lack of control.  Once you sell the product, they will take care of everything for you. At least, you hope so. Do your homework prior to committing to a drop shipper. Search online for reviews and comments about the company. Visit blogs and forums and try to find out as much as you can. It requires a lot of work to set up your site for a drop shipper. Make sure you only invest your time in a company that is reputable. If you run across a company nobody has ever heard of before look for another one. Let other resellers go through the growing pains with a new drop shipper. Check back with the company six months or a year later.

Your reputation rides on partnering with a drop shipper. You can only be as good as they are. If they have poor fulfillment, you have poor fulfillment. If they offer low quality products; slow service; inaccurate shipping; awful customer service, you will hear about it. Your customers have no idea that terrible shopping experience is not your fault. To them the drop shipper is invisible.

In addition to the lack of control, profit margins may be unattractive while working with a drop shipper. Because the barrier of entry is low, be ready for plenty of competition. There are a lot of people online who are quite happy with the low investment model of working with drop shippers. Consequently, many online businesses that solely rely on drop shippers finding themselves working forever-narrowing profit margins. When it’s all said and done, you may find yourself in a less than desirable situation with little or no profit after the sale.

Your best bet is to find a drop shipper that is the manufacturer. The more successfully you eliminate the middlemen from your supply chain the more success you will have. There are many of manufacturers who will drop-ship for you. A great place to start your search is in a business database such as the Thomas Register Directory. The listing is available online at thomasnetdotcom.

Building your business around drop shippers could prove to be risky business. Instead, consider making such suppliers just one dimension of your sourcing strategy. For example, if customers consistently ask for something related to your product line that you don’t carry; a drop-shipper may be a convenient option. This is a win-win situation for you and your customers. Working with drop shippers may help you test sell a product before making it part of your own inventory. If you can consistently sell a product through a drop shipper, it may be time to make it part of your in house inventory.

All wholesalers are not created equal. To be exact, there are wholesalers and there are wannabes. Unless you manufacture your own products, you are likely to buy from wholesalers. Many businesses call themselves wholesalers, yet they are ready to sell to the public. One of the tell tale signs of a wannabe wholesaler is that they sell directly to the public. You may do a search online for a wholesaler in your industry, but when you visit the site you find they are happy to sell to anyone. Wholesaling to such wannabes doesn’t have anything to do with what you knew to mean wholesale; it simply shows their desire to sell a lot to as many people as they can.

            A wholesaler with integrity will not sell to the public. Real wholesalers have an application process. They normally require resellers to sign up as a reseller. The application process includes a verification process such as faxing a business permit, or tax ID form to the wholesaler. Deal with real wholesalers, and ignore the wannabes.

Note: Wholesalers should never charge you to become a reseller. Remember, you are their customer. They have no legitimate reason to charge you a setup or initiation fee. If they try to charge you such a fee, walk.

The real power in sourcing is buying smart.  Your customers expect to get a good deal buying from you and so should you when sourcing for your business. One of the most important strategic decisions you make has to be about buying low. If you overpay for your products, you’ll price yourself out of the market. Nothing will hurt you sales more than a high price.

People shopping online will seldom purchase on the first site they visit. Expect them to shop around before making a purchase. If you are more expensive than your competitors, your sales will suffer. Just like your customers, research before you buy. Find out how much similar products sell for online. Don’t compare apples to oranges, and study online pricing rather than brick-and-mortar pricing. A product that sells for a couple of dollars online could easily sell for $9.95 in a mall shop.

Before you make your buying decision, be sure to determine what margins you need to succeed. Once you have done your homework, you can begin sourcing your products.

Product sourcing is one of the most exciting aspects of business. Think of it as treasure hunting. Sourcing includes some of the most important facets of business such as research, relationship building, negotiation, quality control, and more. Having a great idea is not enough to succeed in business. Your idea is the starting point for finding the source for your product.

You have several options. You could build the product yourself or hire a manufacturer to build large quantities for your; you could buy it from a wholesale company, or have a drop shipper ship it for you, you could import it from overseas. There are many possibilities, and your goal is to find the right solution for you.