The idea took root in your mind quite a while back ? or maybe just yesterday. But the step between having a idea for a business and getting to the point of selling merchandise to make a profit is a huge step. How on earth do you get a product to a customer when you don’t make this item yourself? As a retailer, you are the step in between wholesalers and consumers. Your profit margin, however, will depend greatly on the method of product sourcing you choose.

Profit margin is the dollar difference between money you spend on a product and the price for which you sell such product. In order to increase your profit margin on a given product, you can either increase the selling price or reduce the acquisition (or purchase) price you pay for the item. We won’t look at increasing the selling price of products here. What we will cover is a few of the methods of product sourcing in order to lower the price you pay per unit of product.

Product sourcing is the method in which you purchase your product. In order to become most flexible, your business should cover several different methods, never depending on just one method. Depending on the size of your investment, length of time in business and storage space, you?ll want to start out with one or all of the following product sourcing methods.

Drop shipping is a very powerful method to employ in order to find products which will sell well in your online store or business. In this method of selling, you will identify a genuine wholesaler who carries your desired product. This wholesaler will send you the needed information to advertise the product that you will then use to place in your store or auction. An order is received from a customer, you order the item from your wholesaler, and the wholesaler ships the item to your customer and charges you for the item and shipping. During this entire process, the retailer (you) will never touch the product, but your customer will receive the product including your store’s name on the packaging. Your profit here will be the difference between the price your wholesaler charges (plus the shipping charges) and the price you charge your customer. This is a great method to use when finding and testing products, however the profit margin is not high.

Bulk wholesaling is the next step in increasing your profit per unit. After identifying products that do relatively well for your chosen area of business, you may wish to buy in larger quantities, stocking these items and shipping these yourself. One downside of this method is the high upfront cost to the retailer (you). In order to lower these costs, some wholesalers will offer light bulk wholesale. Light bulk wholesale is defined as a minimum order of less than $500. This allows smaller businesses to take advantage of wholesaling discounts while keeping investment dollars low.

In this area of light bulk wholesaling, a bulk wholesaler will sell you multiple cases of product at a lower price than ordering a single unit through drop shipping. You will have a greater amount of hands-on time in this model, but your profit margin will be greater, due to the lower price per unit.

However, many wholesalers will have a minimum order of much greater than $500. This product sourcing method is called large volume wholesaling. Large volume wholesaling should be used only after identifying products that always sell well in your business. Your profit per unit will be greatest in using this method, however you will need a greater investment and have a larger risk with money in inventory.

Whether you decide to use drop shipping, light bulk wholesaling or large volume wholesaling in your business model, each method has strong benefits along with risks or weaknesses. Employing multiple product sourcing methods will strengthen your business model and allow you to test products while maximizing your profit per unit sold.