Finance

Retail Sourcing: Stay Local or Go Far?

August 25, 2017 • 7 min read

As a small business in the United States, you have a lot of decisions to make about where to source the products you sell. Your options for retail sourcing are different depending on the identity of your small business: you might be a shop that curates a collection of other brands, or a private label retailer that needs reliable suppliers for your line. If you’re a local artisan, you might be the one manufacturing your own products, but you’ll still have to choose where to buy your materials.

Making supply chain decisions isn’t easy, and you won’t always have complete transparency with retail sourcing. But you can guide your decision-making by thinking about a few key areas before you start spending on inventory.

Do I source overseas, stay in the US, or keep it local?

Deciding whether you’re going to manufacture your goods overseas or closer to home is an important decision. Although cost is a valid concern, be wary of only considering the hard numbers. In retail, true cost can actually include things like losses from missing or low-quality inventory, delays along the supply chain, and lost sales from poorly forecasting demand. Even less tangible are the emotional costs of finding out your factory is exploiting workers to make your products, or the brand value derived from manufacturing in a certain region.

Understanding your supply chain

The farther away your products’ origin, the more intermediaries it passes through to get to you. Every touch point—the factory, a ship, customs, a truck, a warehouse—has potential to delay your shipment or bump up your cost of goods. While logistics networks are becoming more reliable thanks to giants like Amazon, there’s no telling when a supplier simply won’t have the product ready. When you choose a supplier who’s far abroad, you risk things like a labor shortage in a different country keeping you from stocking your shelves.

A more local supply chain is easier to manage. However, costs are likely to be higher from paying US wages, and you still need to be on the lookout for ethical practices like you would somewhere overseas. Here are some examples of where you might want to manufacture at home:

  • If you work in an industry where reliability and timeliness of deliveries is imperative, like weddings for example, it may be a better idea to minimize your risk of “death by bridezilla” by choosing a domestic supply chain.
  • If ethical manufacturing is your top priority, and you plan to visit your suppliers often to verify compliance with regulations that keep workers safe and fairly paid.
  • If “American-made” is part of your brand’s philosophy, you’ll have to put your money where your mouth is.
  • If your goal is to put money back into your local community, you’ll want to source from an even smaller radius. While often more expensive, indie suppliers may be more inclined to help you out when you need it.

Dealing with rules at customs

Small businesses owners can get excited at the prospect of selling interesting items, like food or cultural objects from other countries that they want to share with their home country. However, if they haven’t done their homework, shipments can spend weeks or even months in customs before being allowed through, by which time their customers have up and gone. If you’re going to source products from overseas, don’t underestimate how easily fees can rack up or paperwork can be forgotten. Get up to speed on what the latest developments in your industry are by doing your research with official organizations and using your small business community network to ask for advice.

What government regulations do I need to abide by?

The rules can actually work for you or against you depending on the circumstances. For example, goods manufactured on US soil are subject to strict intellectual property rights laws, meaning that your product cannot be copied and mass produced. On the other hand, there may be certain countries that can produce your product that offer lower taxes or less stringent requirements for international buyers, giving you more budget and breathing space to hustle in other parts of your business. Our advice: invest as much time as you can into collecting information about what could work well for your business and what could stop it in its tracks. Your business will thank you for it later.

What happens if my suppliers don’t deliver?

Every retailer who buys overseas should have a contingency plan. Make sure you have backup suppliers for when a crucial shipment is delayed, and use well-known logistics partners with a good tracking system to order your inventory. If you’re already in crisis mode, see if you can increase quantities from your other suppliers or go to another local business for help. You may be able to quickly purchase inventory from somewhere closer to home in a pinch.

What if these options for retail sourcing are too much of a hassle?

Manufacturing in the U.S. is expensive, doing it abroad is risky, and doing it by yourself takes up most of your time. If you’re unsure about how to proceed with retail sourcing, you can eliminate a lot of the unknown by purchasing established brands from a wholesaler to stock your store. They will take the manufacturing off your plate and offer inventory they’ve been successfully selling in the market elsewhere. This Shopify article dives deeper into some of the different ways to sell a retail product.

Whatever you choose, know that there is no magical formula for retail sourcing. Nobody knows your product and business goals better than you, so focus on what you do best and leave the rest to qualified partners and suppliers. As your business grows you’ll learn what’s working and where changes need to happen.

Belinda Teh is a Digital Marketing Executive at Sociabel. She’s passionate about working with start-ups and small businesses that are on a mission to create positive change.


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