Obtaining Sources To Stock Your Inventory...

If you are in the business of reselling items or are in any situation in which you will be obtaining products from other manufacturers, source acquisition will be key.  While resellers may argue over 'how many is too many' and whether or not 'service is more valuable than final cost', there is one bit of advice everybody will share with you: never reveal your sources to ANYBODY.

Revealing a source is asking for competition - something that is never welcomed.  Most inventory stocking companies go to great lengths to keep their sources confidential.  This includes shredding all documents/packaging labels affixed to boxes prior to dumping and maintaining source relationships at only the highest (and most trusted) levels of management.  If Company A hires away Company B's purchasing agent, you can be sure that the first question he will be asked will be related to what sources he was familiar with.

But while knowing exactly where your competitor is purchasing their items could be difficult information to come by, finding a distributor of a certain line can be as easy as visiting the manufacturer webpage or contacting a large 3rd-party supplier.  Availability is usually never a concern in sourcing.  Difficulties arise when your particular distributor's prices (or the price ranges offered by the slew of distributors you purchase from) don't allow you to compete in the marketplace.  If such is the case, you must move up the chain or accept your role.  And there is no higher place up the chain than the manufacturer of the product.

Contacting Manufacturers...

Manufacturers of products run businesses just like you do.  For those who feel that their time is best fit in manufacturing or those that find it more costly to maintain a sales staff for smaller resellers, product sales and distribution networks are outsourced to other companies.  The largest of these companies (as far as computers) are the Ingram Micro's and Tech Data's of the world.  These suppliers serve as central hubs between the reseller and the manufacturer and can be a great one-stop source for someone starting out.

It's no secret though that these companies tack on their own markups and pass these charges on to you.  When your relationship is first established with such distributors, you may be surprised at the pricing levels you are offered - levels comparable to what your customers would find walking into a consumer store (who's products/pricing are intended for end-users, not resellers).  Having to add on your own markup to your pricing level may make your items very difficult to sell.  Being placed in the lowest discount bracket will make it very difficult to stock inventory as well so bulk discounts will be even harder to obtain. 

This problem is compounded if all your business has going for it is cost or if you are in a cost-competitive field (such as electronics).  While other factors (being local, adding value, system integration, etc.) may ring in a few sales, every consumer market is becoming increasingly cost-sensitive and any business looking to make it must react accordingly.

One suggestion would be to start off direct.  While this at first may seem like an unattainable ideal, you may be surprised at how easy some manufacturers make it out to be.  By bypassing your distributor and going straight to the manufacturer you stand to receive the best pricing available (within your means) and are dealing with the maximum level of price flexibility.  Dealing direct also opens you up to the possibility of forming a healthy relationship with people who have a genuine interest in the items they are providing you.  These relationships will build up leverage over time and are invaluable to a reseller.  Other benefits may come in becoming an authorized partner for the manufacturer which will further establish your company name and generate leads through referrals.

But going direct can pose many problems you may not be equipped to handle.  Firstly, in some cases it may be not be possible.  Through distributorship agreements or channel pricing contracts, some manufacturers give away their rights to selling direct and are required to funnel their products through the 3rd parties they have agreements with.  If such is the case, your options would be to either purchase from the 3rd party or abandon the line.  If you choose to purchase from a 3rd party and several are available, try contacting the manufacturer for a recommendation - they usually are kind about letting you know which of their partners they have the best success with and which you may be able to obtain the best pricing though.

Another problem with going direct may come in the volume demands.  While it isn't true of all manufacturers, most do not have the time or resources to deal in small quantities.  Here it is important to understand that what is 'small' to them may be a great deal to you.  For many large motherboard companies they require purchasing contracts for anywhere from 3,000-10,000 units a month.  For IC companies like AMD you may have to do $40,000 or more in business with them for them to open up an account for you.  Manufacturers will be willing to go direct only if your demands interest them.  With that, it becomes increasingly more difficult to demand the interest of a large corporation.  The advice here would be to again, skip over the 'large corporations' that you would not be able to meet volume for and purchase their products through the 3rd parties.

What this leaves over are small-to-medium sized manufacturers and the list of these is endless.  A small manufacturer, much like a small reseller, will be looking to market their lines to anybody who is willing to purchase from them.  While dealing directly with end-users may be too difficult, dealing with smaller-sized resellers may not.  Their requirements may very well suit your need and be compatible with your business outlook.  With most small manufacturers, establishing themselves in the market and spreading their product reach (along with revenue generation) are very important to them.  Establishing an account with as many of these types of companies as possible will be very beneficial to your business. 

Oftentimes manufacturers that participate in direct transactions will have a section of their website dedicated to details on how one can go about setting up an account with them.  As a reseller it's wise to use these resources and obtain price listing whenever possible.  Even if you aren't entirely sure you will be establishing a relationship with a company, it can never hurt to shoot their sales staff an email asking for a price list. 

As with everything, the more volume you're able to show them the better your chances are of obtaining discounted rates.  Dealing direct may require a rethinking of your purchasing strategy to account for this.  If the volume constraints occupy a large percentage of your inventory capital, be sure to have an out-plan or buyback clause in place.  If you become too attached to a certain manufacturer you also run the risk of turning into a 'niche' store without knowing it.  Your heavy tie to them may also mean that your inventory supply can go stale if they aren't releasing new products over time and that fluctuations in their profitability can trickle down to you.  The worst thing that could happen would be tying yourself to one supplier and having that supplier go out of business.  Just as a stock broker would tell someone to diversify their portfolio, a purchaser should always have multiple sources for every product or line they sell.