Product Sourcing Is Dying. Here’s How To Adapt

Product Sourcing Is Dying. Here’s How To Adapt.

4 minute read time

In 2017, around the time ShowSourcing’s app was launching, people were still taking notes with pen and paper, frantically discussing products with their teams until all hours of the night, and their product pictures were jumbled in the photo albums of their phones. If this was the state of the industry in a modern age, we thought, it must not be moving very quickly.

But as we grew, we also watched the industry change.  

 

Amazon, Alibaba, and the rest of the ecommerce marketplaces began to drastically morph the way end consumers purchased their products. With an increasing product offer online it suddenly became very easy for buyers to compare products. In addition, today buyers are looking for products that match their personality.

As a result, suppliers proposing standard products have to fight to survive and started slashing prices for visibility and sales. Big retailers do not have the right organization and cost structures to compete in this new model. On the other side, Amazon, whose main objective is to increase their supply, made it easier to become a seller on its platform – creating thousands of new competitors practically overnight.

 

Amazon is winning.

 

So, where does that put us?  In a fight with the biggest online marketplaces in the world, who are growing at five times the rate of the traditional brick and mortar, and can kill you on price every time, you have only one direction – avoid the price war: How? You need to stand out from the crowd by creating unique products.  

 

Does that work?

 

Let’s use KingFisher as an example (just to note: KingFisher is not our client).  Even though KingFisher is, itself, one of those gigantic companies, their recent transformation paints a picture you can use.  With five separate brands and nearly 200,000 combined items for sale throughout their stores, KingFisher had a problem – their sourcing practices were killing their profit margins.  They were buying everything from suppliers – they had nothing unique to offer. So what did they do? They reduced the number of SKUs and suppliers they worked with by 80% and began building their own unique products to create a unified offer across all their brands..  And they expect £500 million for their effort. Not bad!

 

Here’s the punchline – The idea of focussing more on fewer products per category helped Kingfisher to better understand their client’s needs. Instead of investing resources in buying several products per category, they now hold back, invest time in truly understanding the client’s needs, and develop unique products that answer market demands. But reducing SKU’s could only be done by transforming their organization from within by optimizing their operations.

 

Ok, so Kingfisher did it, and that’s great.  But you’re much smaller than them. So how can you start developing your own products? It’s a totally different game from product sourcing … where do you start?

 

You need to start by optimizing what you already work on.  By finding areas of the sourcing process that you can improve to allow space for your creative processes to begin, you take the first step toward more unique products.  As for the rest, well, we’ll cover that in our next article.

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