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Finding Product Sources for Your Business

If you want your business on eBay to really take off, you've got to have reliable product sources first. Our sourcing secrets will put you well on your way to building your own empire.

Anyone can make a sale on eBay. But not everyone can make a business out of it. Today, more than 430,000 sellers are using eBay for a primary or significant source of their incomes. The ones that rise to the level of PowerSeller know success depends not just on how much you sell, but also how smart you buy.

Every business seeks the one product no one else has at the lowest price possible, for the greatest potential profit. Few companies will be so lucky. Instead, successful selling relies on choosing reliable suppliers able to offer quality goods at a fair price.

It's the source that counts, and eBay entrepreneurs face a plethora of choices to stock their businesses with anything from collectibles to industrial equipment. Suppliers may be located around the corner or around the globe. They may be someone you know or a factory owner overseas you'll never meet.

Where to Start

So where do you find a supplier? A good search engine can help you find hundreds of companies online using search terms like "wholesale merchandise," "drop-ship services," "closeout dealers," "job lot traders" or "liquidators." For sources in print, check the classifieds in newspapers, trade journals or your community penny-pincher newsletter (available free at supermarkets and drugstores). These publications list dealers specializing in closeouts and discontinued or irregular items, in addition to estate sales, which may include private collections of books and other items that would find eager buyers on eBay. Specialty publications such as Closeout News are also good sources.

Closeouts and job lots are quick, easy ways to get a business going. But when you've got neon-framed sunglasses one month, and you have fleece socks the next, it's hard to establish a niche business that will draw repeat customers. For companies looking to build a specialty, the better choice may be to contract directly with manufacturers or, more commonly, a manufacturer's rep (a salesperson hired by a manufacturer to promote distribution).

Trade shows offer the eBay retailer access to manufacturers and sales reps in one location, plus the benefit of meeting face to face to test the chemistry and assess product quality firsthand. Trade shows typically focus on a specific market segment, such as toys, novelties, military surplus or electronics, so determine what you want to sell before you go.

Making the most of a trade show requires some preliminary footwork to avoid wasting time and money, says Sam Bundy, group president at VNU Expositions, a trade show organizer with offices throughout North and South America. Business owners can check VNU's list of shows at www.merchandisegroup.comor their local convention and visitors' bureau, which usually has a calendar of such events. Make sure the show you choose is worth the admission price by contacting show management and asking about the number of exhibitors-not booths, since one company may have more than one booth-and what products will be represented. Look for shows where exhibitors are mostly small to midsize wholesalers and distributors as opposed to major manufacturers that are less likely to sell to a smaller operator.

Matching a supplier to your own interests or expertise can help move the process along, whether choosing from a trade show exhibitor or browsing vendors online. Jack Sheng got his start as an eBay entrepreneur because of his obsession with electronics, particularly cell phones and cell phone accessories. His hobby made him an expert on the industry's leading suppliers, a connection complemented by a friend who had links to potential trading partners. From there, Sheng, 29, studied the market by attending industry events and traveling to companies to understand how products were made. Today, with $12 million in annual sales, Sheng's Eforcity(eBay User ID: eforcity) in Temple City, California, is one of the largest eBay sellers (ranked by unique customer feedback and by the number of transactions).

After more than 30 years selling used restaurant equipment, A City Discount (eBay User ID: acitydiscount) knows its industry. So when the company, which had sales last year of $3.75 million, decided to expand its business on eBay to include new equipment, it knew which suppliers to avoid and which it could trust. "We picked those we knew had an inventory and would be able to supply the product," says John Stack, CEO of Peach Trader, the Atlanta company that owns A City Discount. The best source for vetting a manufacturer's reliability, Stack adds, is often the manufacturer's own representative. "A manufacturer's rep frequently will tell you if the manufacturer can fill orders on time," Stack, 53, says.

Perhaps the best source of well-priced goods is Asia, but contracting with suppliers out of the country presents challenges. The primary link to this market is through manufacturer's reps or importers in the United States who have connections to an overseas counterpart or to a factory. Every layer adds a surcharge, but the price of experts who know this complex market is worth it. "It's insurance, and you need to add as much insurance as you can," says Jason Sprong, a partner with Vital Sourcingin Boulder, Colorado, which specializes in sourcing and logistics in China. "You still save between 30 and 60 percent off the price of what you'd get in the [United] States," Sprong, 32, adds. A good rule of thumb for overseas as well as domestic orders is to aim for a total cost of acquisition at 80 percent of the selling price and warehouse and shipping expenses.

Sourcing can be an ongoing challenge for startup businesses, and entrepreneurs have to be alert to any way they can keep fresh stock coming. A City Discount stays in touch with suppliers such as national and regional restaurant chains so the company is ready when an opportunity presents itself. A menu change, for example, might make certain equipment obsolete, and A City Discount makes sure it's there to take the items off their hands. "These companies don't want to be in the equipment business," Stack says.

Sometimes, the source can be dozens or hundreds of individuals and small businesses. Med1Online(eBay User ID: med1online) specializes in new and used medical equipment, and some of its sources for used equipment are physicians upgrading to newer technology. When a doctor wants to buy new from Arvada, Colorado-based Med1Online, the company always asks what the plan is for the outgoing machine. "The people we're selling to are also the people we're buying from," says president Scott Carson, 41. The company anticipates sales of more than $10 million this year.

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