Direct cooperation with factories is one of the channels for e-commerce companies to find sources of goods. The advantages of this channel include low factory prices, large profit margins, sufficient and stable supply, and return and exchange services. Therefore, e-commerce companies can cooperate with factories in two main ways.

(1) Directly obtain goods from factories

Some factories themselves do OEM and consignment sales for big brands, and are considered to be relatively high-end wholesalers. If an e-commerce company wants to cooperate with a factory, it can negotiate with the factory directly and purchase goods from the factory. In this way, it can not only obtain genuine brand goods, but also reduce the number of intermediate links, reduce costs, and increase profit margins. Of course, e-commerce companies need to communicate with the brand owners in advance and obtain their approval.

Generally speaking, it is more reliable to purchase goods directly from factories because the supply is complete and the styles are novel, which are easily sought after by buyers. The production model of factories is often mass production, and they will require e-commerce companies to purchase goods in full boxes and batches. At this time, e-commerce companies need to communicate with the factory. For example, agree to purchase 10,000 products from the factory, but the style needs to be determined by themselves, because the same series of products often have multiple styles and specifications to choose from.

(2) Cooperative production with factories

Cooperative production means directly letting the factory produce products for you, such as producing 20,000 pieces of a certain product. In this case, the e-commerce company can sign a contract with the factory, and the style and price of the product should be based on sales. The advantage of cooperating with the factory is that after the buyer submits the order, the e-commerce company will ship the goods directly from the factory. This not only allows you to earn the price difference, but also maximizes zero backlog and zero inventory; the disadvantage is that the e-commerce company cannot monitor production in real time. If the order quantity is relatively small, the factory may be unwilling to open a separate production line for it

Getting goods directly from the factory seems to be a good idea, but if the cost is not controlled well, it will greatly reduce the profit margin of the e-commerce company. Moreover, the factory often requires large-scale purchases. If the e-commerce company cannot meet this condition, it must communicate with the factory skillfully and strive to purchase at the lowest price.

Tips

The supply issue is a key to the success or failure of an e-commerce company’s business. E-commerce companies must consider it carefully and strive to ensure a balance between sales and inventory.