Internet Retail Sourcing: The Chicken and the Egg
When sourcing products for internet retail most people are faced with a chicken and egg problem: initially they don’t do enough volume to get good pricing, but they are competing with retailers who do have better pricing and hence can’t compete on price.What’s a retailer to do? One creative way I have found around this is to call your supplier directly - distributors, by the way, are much less likely to work with you on pricing than the manufacturer’s themselves, but most large manufacturers go through distributors. It still doesn’t hurt to ask.Explain your problem and your strategy for growth over the next year. If you have impressive historical growth patterns share these with the supplier.Here is the trick - ask them for volume pricing and a reasonable time-frame to hit the required volume. For instance, you can say “I know I will get a significant discount if I buy 1K pieces of this product, but I can only purchase 100 today. If you give me the volume 1K pricing, however, and give me six months I will meet your volume requirements.”Not everybody will respond to this request, but you will be pleasantly surprised to find that a few suppliers actually will. In most cases the supplier wants to find a way to sell to you at a lower price point - they are constrained by distribution agreements with larger customers, however, and have a hard time around these. Limited-time discounts are a great way for them to work within their distribution agreements without risking a large account.
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