What I Know Now: Sourcing, Part 1

Expert opens up about what he's learned—and what every seller must know—about sourcing.

by Brad and Debra Schepp
- Aug 02, 2013

This is the first article in our new series, "What I Know Now." For this series, Auctiva EDU will interview some of the best minds in e-commerce about the topics you need clear thinking on, from sourcing, to marketing, to successfully running your business, and more.

We spoke first with Brandon Dupsky about sourcing; something we can all agree is one of the most important, yet challenging things sellers have to do.

Dupsky has sold online successfully since the last century, is a former executive with the eCommerce Merchants Association, and most recently co-founded ICE: Internet Commerce Entrepreneurs, an industry trade and education group.

Dupsky is a smart guy with a lot to say, so his interview spans two articles. In this one, he discusses how he got started, what every seller must know about sourcing, and where he gets ideas for new products and international sourcing. In part two, Dupsky will share even more hard-earned insights about sourcing.

Old school eBay

Schepp: When did you first begin selling online, what did you sell and how did you source it?

I learned that dealing with the original factories is far more profitable than anything else, and it's usually easier than most people think

Dupsky: I began selling on eBay in 1998 before Meg Whitman joined the company, when there were fewer than 1 million total users. It was a fun time—truly like the Wild West for e-commerce. I began like most people, selling stuff out of my house to learn the ropes.

I had a collection of records I no longer wanted, so I graded them for quality, took photos and quickly learned how to market, sell and ship fragile items. Back then there were no software or automated processes to help sellers control all the moving parts. So I took my operations background and developed a process to track each sale—from posting the item, then when sold, paid, shipped and lastly feedback sent. I also tracked profitability on a transactional level with eBay and check/cash, including processing fees.

As I ran out of records, I went to thrift stores and garage sales to find more profitable products to sell. At first, I had a lot of luck with board games and toys. I would spend my weekends filling the car up, then filling my basement shelves up, and spend the rest of the week emptying them as best I could. Stuff I couldn't sell for a profit I donated back to the thrift stores and considered it a learning expense.

After a while of doing this, I was frustrated with the need to always find more products, and all the necessary time to take a photo, build a description and sell each product. It was not very scalable, so I changed strategy to pursue repeatable products I could source and buy from wholesalers and distributors.

Lessons learned

Schepp: What have you learned about product sourcing since then that you wish you knew earlier on?

Dupsky: I learned that dealing with the original factories is far more profitable than anything else, most of the time, and it's usually easier than most people think. While logically this makes sense, it seems that most people have a fear of dealing with the factories (much like I did in the beginning).

The best time to jump onto a product is after it has been proven but still early on the steep end of the lifecycle curve

I thought my orders would not be large enough; I would not be able to get the "additional attention" I can get from distributors and so on. For the most part, these fears were artificial roadblocks to growing my profits. I wish I would have overcome these fears sooner.

Schepp: What's the most important thing for merchants to know about how to source successfully?

Dupsky: Selecting the best product to sell can become the factor that's most critical to your e-commerce success. What I mean by this is there are millions of products you can source and sell, but there are far fewer products you can source and sell profitably in a sustainable fashion. Products follow a lifecycle curve. Once a product is hot in the market, it is most likely too late on the lifecycle curve for you to enter and capture a large enough market share to justify your efforts.

The best time to jump onto a product is after the product has been proven but still on the early side of the steep end of the lifecycle curve. That's where you can enter the market, become a recognized brand name in that market and own a larger share of the market. You can establish a product for which you have a reputation later on as the product continues to gain popularity and others try to enter your category.

A similar approach can be the leap-frog strategy. This occurs when you enter a more mature product category that occasionally grows as new products are introduced. You can enter this kind of market by starting off with the newest, latest and greatest gadget as it's just coming out. You can enter the space as the expert in this new product—basically leap-frogging over the rest of the competition who are focused on selling the older models.

Choose the right products

Schepp: When it comes to new products, where do you get your inspiration?

When sales of my products slow down, instead of lowering my prices and margins, I like to raise my prices and increase my margins

Dupsky: I like to work less and make more. I've done the opposite in my early e-commerce days. I now feel that the front of the learning curve works better for me as I strive to profit from my time. My inspiration comes from products that I can brand with my own brand name, I can capture and own 30 percent or more market share online for this product, and I can focus on quality and profits, rather than low price and higher volume.

When sales of my products slow down, instead of lowering my prices and margins, I like to raise my prices and increase my margins. That way I don't find myself falling down the slippery slope of the high-volume, low-margin e-commerce hamster wheel many sellers find themselves in.

Don't let international sourcing intimidate you

Schepp: You have sourced internationally for years. What advice do you have for e-merchants who may be tentative about doing this?

Dupsky: It's not as difficult as it looks. Most international sources have English-speaking sales reps and have experience selling to U.S.-based merchants who can help walk you through your initial orders.

Schepp: Do you recommend traveling internationally to visit prospective or current manufacturers?

Dupsky: Yes! Many international cultures have a higher importance on the "relationship" side of the equation, and going to meet people face to face is how solid relationships are built. Once they see you, take the time to know you and realize you are just another human being looking to support your family, they will most likely treat you better than if you're just a number or voice on the other end of the phone.

Schepp: Thanks, Brandon Dupsky. We're looking forward to part two of our interview with you.

Read Part 2 of this interview here.

About the Author

Brad and Debra Schepp are the authors of 20 books, including eBay PowerSeller Secrets and The Official Alibaba.com Success Guide: Insider Tips and Strategies for Sourcing Products from the World's Largest B2B Marketplace. Their most recent book, which Deb co-authored with John Lawson, Kick Ass Social Commerce for E-preneurs: It's Not About Likes—It's About Sales, was recently named the 2015 Small Business Book of the Year in the social media category.

For further information, visit Brad and Deb's website, bradanddeb.com.

Opinions expressed here may not be shared by Auctiva Corp. and/or its principals.

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