Learn how to choose a manufacturing partner for your e-commerce business.
When starting an e-commerce business, most startup founders have a tendency to focus on optimizing their websites and validating product value propositions.
Now, these are undeniably important tasks, and it's a big part of what I do as a marketer. But all too often, they are prioritized at the expense of other vital tasks for e-commerce stores that plan on selling a physical product: finding the right manufacturer.
Quite simply, it doesn't matter how good your idea is (to a certain extent). It doesn't matter if you have a quality online platform to sell with. I've seen many e-commerce startups fall flat simply because they chose the wrong manufacturer for their products.
The right manufacturer will influence everything from the overall quality of your product to your ability to deliver orders on time and replenish stock in a timely manner. It's one of the most important decisions you can make for influencing the future success of your e-commerce store. I personally have experienced the difficulties associated with hitting growth metrics and crafting quality customer experiences simply because of a sub-par manufacturer.
While this is an important decision, it's not one that you have to make blind. The following tips are key insights that I've gained while working with various e-commerce brands as both a founder and a marketer that can help you find the right manufacturer for your needs:
1. Study domestic vs. overseas manufacturing.
For most e-commerce stores, one of the first decisions that needs to be made is whether you will work with a domestic or overseas manufacturer. In my experience, both options have pros and cons, meaning the right selection will typically vary from brand to brand.
Generally speaking, overseas manufacturing is going to be less expensive. It can also be easier to place high-volume orders with an overseas factory, and there are manufacturers in almost every niche imaginable.
Of course, with these relationships, it can be harder to oversee production, and language barriers can present communication issues that lead to manufacturing errors or other costly delays. Some manufacturers aren't as stringent about quality, which can also present problems.
It should also be noted that you don't have to default to China as a manufacturing hub when going overseas. While China is the world's biggest manufacturer, with an output worth over $2 trillion, The Brookings Institution notes that Japan has an output of over $1.06 trillion per year, while Germany's output reaches $700 billion. There are plenty of options out there, and depending on what product you're producing, one of these other options might be better suited for your vision. For instance, I am currently working on a shoe brand in the luxury market. My co-founder and I immediately scoped out the Italian manufacturing market because of its long-standing tradition of quality shoe craftsmanship.
On the domestic side of things, you can enjoy greater oversight over manufacturing with a domestic manufacturer, as well as easier communication. You might even share the same time zone as your manufacturer! Shipping is much faster and less expensive, and more payment options are available. These are huge perks that should not go overlooked.
However, domestic manufacturers tend to be higher priced and many don't have the capacity to produce high-volume orders. They are often better suited for smaller, more specialized product orders.
2. Search based on production type.
While deciding between a domestic or overseas manufacturer will help narrow your search, you should then look into suppliers' production capabilities to find the right fit. Just because a business is a "manufacturer" doesn't mean it has the tools to manufacture your specific product. After all, the manufacturing needs for clothing are quite different from electronic products.
Online directories like ThomasNet or Oberlo are good places to start your search, as these tools allow you to search for manufacturers based on product category. This way, you'll only be looking at potential manufacturers that are actually relevant for your e-commerce brand.
You can also search for potential domestic manufacturers based on their North American Industry Classification System (NAICS) code. This system assigns codes to industries and products. Searching by code will make it easy to find someone who produces your type of products.
The sheer number of manufacturers out there can seem overwhelming at first. By going through these basic steps to eliminate irrelevant manufacturers, your search will be far more manageable.
3. Investigate supplier capabilities.
Even though a manufacturer may produce items within your niche, they still may not be a good fit based on your order needs. Each supplier has its own set of standards and business practices that it adheres to which can affect whether it is the right choice for you or not.
For example, each manufacturer will likely have its own standards for minimum order quantity. Even with a single supplier, minimum order quantities can vary by product. If you only need a relatively small order, this could eliminate certain suppliers that have a higher minimum order standard. On the opposite end of the spectrum, some suppliers may have maximum order limits due to their production capacities.
Of course, you'll also want to know what the manufacturer's production pricing and turnaround time are like. You must investigate both of these! I've seen e-commerce brands select a manufacturing partner who delivered discounted prices for bulk orders, but then had issues because the turnaround time was longer than anticipated. Be mindful that the required lead-time will likely vary based on product type and order size.
While many manufacturers will have this information readily available on their website, others will require that you request a quote to learn more. Keep emails concise and to the point to ensure that you get a response.
4. Dig deep to validate credibility.
Online tools can be a great starting point for determining whether a manufacturer is any good, but Google or Facebook reviews are far from the only resource you should use to guide your selection.
For domestic manufacturers, searching Better Business Bureau listings can help you more accurately gauge the company's standing – including if there are outstanding complaints that have been filed against the manufacturer.
While this resource isn't available for international suppliers, you can still evaluate other aspects of their online presence. Reputable manufacturers will have professional certifications, and many will be listed on B2B platforms. A higher number of transactions, more years in business or previous work for well-known brands can also give you greater peace of mind.
Asking for references should be a core part of your evaluation of potential manufacturing candidates. Reach out to current and former clients for an honest perspective of what it is like to work with a particular manufacturer – both the pros and cons. Be wary of manufacturers who are unwilling to provide references.
A key way to determine if a potential manufacturing partner would be a good fit is to order a sample product. This will give you a completed, tangible product that you can examine for yourself to see if it lives up to your expectations. While some manufacturers will send free sample products, most will charge either the full retail price or send the product at a slightly discounted rate to cover their manufacturing and shipping expenses.
Of course, to ensure that your product sample will help you reliably gauge a manufacturer's abilities, you'll have to send the right documentation for your product. Detailed documents covering everything from dimensions and color to the smell or feel of the product will help the manufacturer deliver the desired result.
5. Schedule a factory visit.
One task that is often overlooked when vetting a potential manufacturing partner is scheduling a factory visit. While this might seem like an unnecessary burden (particularly when working with an overseas manufacturer), outsourcing experts consistently recommend that e-commerce brands and others take the time for this step. I cannot stress this enough.
In an interview with Entrepreneur, Global Sourcing Specialists founder Ashton Udall explained that an in-person visit gives you the ability to better gauge a manufacturer's services and overall quality. It gives you a chance to see its quality control and engineering processes up close. Even small details, like a factory's cleanliness and organization, can help you determine if the manufacturer will live up to your expectations.
If visiting a factory yourself is out of the question, you can hire an agent who can vet the factory on your behalf (though I would be cautious when vetting such agents). As with choosing a manufacturer, you should do your due diligence to choose an experienced agent with a good industry reputation. Their expert analysis of the potential manufacturing partner could help you avoid making a costly mistake.
Evaluating prospective manufacturers for your e-commerce store will require a fair amount of research, but it is well worth the effort. By putting in the time in advance, you can form reliable partnerships that enable you to meet the expectations of your customers and maximize your sales plan's potential.
Don't be afraid to consistently reevaluate your manufacturing partnerships, either. The first supplier or manufacturer you choose to work with may help you turn a profit, but they may not be suitable for your long-term needs. Going through some trial and error is a perfectly normal part of the process as you fine-tune your supply chain.