Dec 3, 202312 min
Updated: May 20
This post was last updated on December 3, 2023.
You've started your business and your idea is finally taking form. You thought of a great product to sell in your online store, and you’re ready to get started. But how do you actually make the physical product, and do it efficiently enough to make it profitable?
For many sellers, manufacturing is the key.
However, the harsh reality for small business owners is that finding the right business partner to manufacture a product can be difficult. To succeed, you must take a methodical approach and ensure that any relationship translates to high-quality—and profitable—products.
Before you start learning about how to find a manufacturer, it’s helpful to know exactly what they do. Simply put, a manufacturer uses a set process to make goods, usually in large quantities.
Most modern manufacturers use equipment and mechanized tools to make product development as efficient as possible. But a manufacturer can also be a single individual who creates items by hand, so long as the process is easily repeatable at scale—such as a baker creating large batches of uniform bread loaves.
By contrast, artisans are individuals who make one-of-a-kind goods, and almost always work by hand. Artisans also own the entire process of creating a product from start to finish, whereas manufacturers may make components of more complex products.
Whereas an artisan might produce different goods—say, ceramics and glassware—manufacturers typically specialize in making a single type of product, or even just one item, like a specific type of glass bead. Depending on your business model, you may opt to source items from multiple manufacturers to offer customers an ideal assortment of goods.
Learn more: Product sourcing
Once you’ve decided whether you want to make your product nearby or abroad, it’s time to evaluate potential manufacturers. The five major steps:
Do your research
Verify quality
Request a quote
Run the numbers
Negotiate terms and sign
To narrow down your choices, look for manufacturers with experience in your product category, the raw materials involved, and/or any special technology or tools needed to create your product.
There are plenty of sources to use in your search, including:
Online supplier directories - These information hubs list thousands of manufacturers, which are often vetted and reviewed for legitimacy. Some directories focus solely on domestic manufacturing, like Maker’s Row and ThomasNet.
Others include a wide range of international suppliers. The largest global directory of this sort is Alibaba, which offers a searchable supplier network complete with a certification program. Other options include Indiamart and Sourcify.
Google and “reverse lookup” using NAICS codes - Of course, anything can be found with a Google search these days. But finding manufacturers may prove to be more difficult, as many factories—especially overseas—have outdated websites or pages that haven’t been translated into SEO-friendly text. You may need to scroll through multiple pages of results to find realistic options.
One way to optimize your search is by using a product’s NAICS code. The North American Industry Classification System is the federal standard for business classification. Nearly every product in the U.S. has a NAICS code, and as an entrepreneur, you can use the NAICS directory to look up any product—or simply Google the NAICS code.
Forums and social media - If you have any connections in the field or someone in your professional network that may have some insight, don’t be afraid to approach them for recommendations.
If you lack the right connections, you can initiate conversations with other professionals via Linkedin or Facebook groups. Or, check forums such as the startups subreddit or The Manufacturer Community, in addition to trade publications and events.
When you’re manufacturing a new product, you’ll likely feel apprehensive about the credibility of a factory and/or the quality of the final product. This is entirely understandable, as working with a sub-par manufacturer can be very detrimental to business.
Once you’ve come up with a shortlist of suppliers, verify their credibility so that you feel confident about their reputation. Gather as much information as you can about each candidate, ask for references, and request proof of certification for meeting industry, environmental, and/or labor standards. Any red flag should disqualify the manufacturer.
To thoroughly vet for quality:
In North America, check the Better Business Bureau (BBB). The BBB’s mission is to build trust between buyers and sellers in North America through an accreditation system. The organization also maintains a repository of reported scams and complaints. Using the BBB website, you can search any business and see their rating and accreditation, customer reviews, and customer complaints.
Run the license number. Requesting a copy of your manufacturer’s business license will give you a few vital pieces of information. For one, you’ll be able to ensure that they’re a legitimate business with proper credentials. Secondly, most business licenses include a scope of operation, i.e., a range of activities the business is legally allowed to participate in. And finally, a business license will include additional information on the manufacturer, such as a license number. You can use this info to do some more in-depth research to see if there are any code violations or other recorded infractions to be aware of.
Check references. Once you make direct contact with manufacturers, inquire about their experience with products like yours, and make sure they understand your needs. Your suppliers should be able to refer you to satisfied customers; if they can’t, then you may want to think twice. References should also be relevant to your business in some way (perhaps they make a similar product or ship to the same region as you do, or their business is the same size as yours). Don’t be shy when it comes to asking questions and speak to as many people as possible to get the best idea of what the manufacturer is capable of.
Ask for product samples. Once you’ve identified reputable manufacturers whose capabilities seem to align with your needs, put them to the ultimate test: request a product sample. This will help you uncover any misunderstandings about the actual manufacturing process and gaps in your product design specifications. You’ll discover whether the factory takes liberties on design decisions or follows your instructions to a T, and you’ll have something to examine in person before ordering more.
After narrowing your list to two or three contenders, it’s time to request formal price quotes. Have your manufacturer provide details like:
The minimum order quantity - You may think the price is the most critical piece of information you need. But, in fact, it’s often much more important to know the minimum order quantity. This number varies from manufacturer to manufacturer and you may find some factories’ minimum order to be too large for you.
Price per unit - This is the basis of all your manufacturing expenses, and it has a huge impact on your pricing strategy and profit margins. Inquire about prices for different order sizes as well, as many manufacturers offer discounts for large bulk batches.
Turnaround time - This concerns the time it takes to manufacture your order. Make sure to ask about the duration for different bulk sizes as well. Knowing this will help you with inventory management, especially during high selling seasons.
Payment terms - Make sure you know how and when your manufacturers expect to be paid in full. Often, you’ll only start generating income after your products have arrived. Some manufacturers will allow you to pay in increments, while others require full payment upfront.
After all is said and done, your business needs to be able to turn a profit. The best way to ensure profitability is by crunching some numbers before choosing your manufacturer.
Make these calculations before finalizing your decision:
Compare quotes. See how manufacturers’ quotes measure up to each other. Keep in mind that a quote far below the range of others might be a red flag. Make sure that there aren’t any misunderstandings about pricing, or that a lower quote doesn't come at the cost of product quality. Payment terms and minimum quantities should additionally factor into your decision; you’re looking for the bid that’s the right number and offers the right degree of flexibility for your business.
Calculate manufacturing and shipping costs. Calculate every single cost associated with the manufacturing process, including shipping, handling, insurance, and customs tax. If you’re working with designers, engineers, or regional intermediaries for overseas manufacturing, factor in their costs as well.
Determine your product’s market price. If you’ve done your homework, you probably already have an idea of what potential income your new product might generate. Now, it’s time to calculate specifics. Research the average market price of similar items, forecast your audience size, and gauge the number of units you’ll be able to sell over time.
Calculate your profit margins. Once you’ve determined your costs and your potential revenue, you can derive your potential profit margin—that is, the percentage remaining from your revenue after deducting all costs—for a unit of your product. Learn how to diagnose your eCommerce profit margins. Note: Profit margin is often used to evaluate the financial health of a business as well.
It’s not uncommon for new entrepreneurs to struggle with negotiation. Many feel that they lack the experience and track record to make counter-offers or propose alternatives to contract terms.
But negotiating is a routine part of business relationships. Don’t be afraid to ask questions and request changes. At worst, the manufacturer will decline your suggestions. More often, they’ll respond with a counter-offer that’s an improvement on the original quote.
Once the terms are acceptable to you, it’s wise to have a lawyer review the final contract before you sign on the dotted line.
No, a manufacturer is not a supplier. A supplier is a company that provides goods or services to other companies, while a manufacturer is a company that produces goods from raw materials. On top of that, manufacturers typically sell their products to wholesalers and distributors, while suppliers sell to manufacturers, wholesalers, distributors and retailers.
In some cases, a company may be both a manufacturer and a supplier. For example, a company that manufactures cars may also supply parts to other car manufacturers. However, these are two distinct roles, and it's important to understand the difference between them.
To avoid confusion, it’s further worth mentioning that not all suppliers are manufacturers, though they’re often grouped together. This is especially true when searching for overseas manufacturing. Let’s break down some of the most common terms to make sure we’re on the same page.
Factories focus solely on making products. By working directly with a factory, you can potentially get the lowest manufacturing price. However, the drawback is that it’s often harder to work with factories, especially if you’re considering overseas production, as they aren’t necessarily equipped to negotiate deals directly with independent retailers, and there may be communication and cultural barriers.
Wholesalers don’t manufacture products. They buy products in bulk from factories and resell them. Dealing with a wholesaler instead of a factory has several advantages. For starters, you’ll likely be able to deal with a domestic company, making communication much simpler and giving you legal recourse if things go wrong. They may also have local warehousing, so shipping may be faster and cheaper.
But the downsides of wholesale are also substantial. The price per unit is bound to be higher because the wholesaler takes a cut. And, most importantly, your product options are limited to a wholesaler’s pre-existing catalog. If your goal is to create a new product from scratch, wholesalers aren’t a good fit.
Trading companies are similar to wholesalers, but typically deal in smaller quantities and a larger variety of products. This is their greatest advantage. Like wholesalers, trading companies are middlemen, which drives up your cost per unit. The biggest downside, however, is the lack of responsibility these companies carry. Often, trading companies aren’t responsible for defective products. You likely won’t know who the actual manufacturer is in this case either, reducing accountability and reliability.
Dropshippers not only offer products; they also store inventory and handle fulfillment and shipping directly to consumers. Manufacturers and wholesalers may offer dropshipping in addition to their other services, while other companies specialize in dropshipping items from a catalog of producers.
Dropshipping can be especially useful for new businesses. You can start out with fewer overhead costs and investments because you won’t need to worry about storage space. All you need is a good product idea, an online store for taking orders, and a marketing budget for promotion.
In the past, choosing a manufacturer typically involved a straightforward calculation of costs versus potential sales income. But increasingly, consumers expect producers and sellers to take a more principled approach.
Environmental sustainability, social justice, and labor conditions in manufacturing facilities are increasingly in the spotlight, and shoppers expect businesses to be a force for good: 83% of consumers say companies should actively shape environmental, social, and governance (ESG) best practices, according to PwC.
These factors come into play when you choose where to manufacture your products, whether in the United States or abroad. Currently, the vast majority of manufacturing occurs outside the U.S., with domestic manufacturing making up just 8% of the nation’s employment, according to McKinsey.
But the supply chain headaches and labor shortages triggered by the pandemic, as well as the mounting pressure to lead on ESG initiatives, have reshuffled priorities.
Other countries in Asia, including Vietnam and Malaysia, are cutting into China’s manufacturing lead abroad, CNBC has reported. At the same time, companies from Apple to Levi’s Dockers are “reshoring” to avoid future bottlenecks caused by war, climate change, or other unforeseen disasters; the Reshoring Initiative estimates that more than 300,000 jobs returned to the U.S. in 2022 alone.
Ultimately, the deciding factors will likely be specific to your product; your choices will be limited by which factories have the the right manufacturing expertise and where you can find the raw materials you need at a cost you can afford.
When possible, though, weigh the following considerations:
Cost vs. transparency. Overseas manufacturing often comes at a much lower cost than at factories in the U.S. This is due, in part, to competition. There are simply many more factories abroad vying for your business that have learned how to maximize efficiency and produce items cheaply.
However, you might find shortcuts that are hard to justify. Among the potential trade-offs: Lower-quality materials, lower wages for factory workers, and/or sub-par environmental standards that wouldn’t make the grade in the U.S.
In order to monitor production and ensure it’s up to your standards, you may need to hire a local production manager or plan frequent site visits, both of which can add costs back to the bottom line. You may additionally want to consider committing to local environmental and sustainability initiatives to offset manufacturing impacts, which would require an additional investment.
More options vs. closer options. The large number of factories overseas means that you’ll likely find a factory that can produce what you have in mind. In the U.S., your options are limited, and you may have trouble locating a plant with the expertise or equipment to do the job. The learning curve for a domestic manufacturer could be costly both in terms of time and money.
On the other hand, the sheer distance involved in using overseas factories can be expensive, due to costs accrued while navigating import regulations, cargo and freight fees, and additional time needed for delivery.
Cultural and language barriers can make overseas manufacturing more costly, too, if misunderstandings arise. In a worst-case scenario, crossing borders can muddy the legalities of patent ownership or responsibility for defective products.
Approaching a manufacturer can be daunting if you’ve never done it. Some suppliers may provide generic responses or fail to respond at all.
To make sure the factory you’re contacting takes you seriously, be as professional as possible. Let them understand that you mean business. You can do this by having a professional eCommerce website already set up for them to browse through (explore eCommerce website templates to help you get started).
Keep any emails concise and direct. Describe the product you want to manufacture, including materials and dimensions. Your request should be simple and easy to understand. You’ll also want to ask for pricing for several different quantities that are relevant to your business. Avoid requesting quotes for batches that are too small to be credible, but at the same time, don’t commit to more than you can handle.
A good contract is essential for covering foreseeable problems (such as product defects or supply chain delays), plus can include a catch-all provision for working through unknown scenarios. The contract should outline who covers the direct costs of making extra products if needed, as well as the indirect costs of higher shipping fees or increased customer churn.
The short answer is the maddening “It depends.”
The expectation for companies to source products ethically is definitely growing, driven in large part by Gen Z consumers. Not only do these shoppers spend according to their beliefs; a growing body of research shows that they convince their elders to follow suit. More than seven in 10 parents say teenagers and college-aged people influence what they buy, according to Edelman.
At the same time, younger consumers who are just starting their careers are more price-sensitive than others. During the 2022 inflation surge, a Harris Poll/Morning Brew study found that 13% of Gen Z found American-made products too pricey, compared with 9% of Baby Boomers ages 57 and above. Overall, rising prices made 64% of consumers less likely to insist on American-made products, the study found.
Solving this particular conundrum will depend partly on the type of product you make and the price you want to offer it at. However, trends suggest that if you can build ethical sourcing into your business model from the start, you’ll be better positioned to earn the business of the rising generation of consumers.
While the process of researching and vetting manufacturers may seem daunting, it pays to carefully evaluate multiple candidates before formalizing a partnership. Investing time and research will ultimately benefit your customers and help your business thrive.
Allison Lee
Editor, Wix for eCommerce
Allison is the editor for the Wix eCommerce blog, with several years of experience reporting on eCommerce news, strategies, and founder stories.
Daniel Clinton
Managing Editor, Wix for eCommerce
Daniel is the Managing Editor at Wix for eCommerce, where he uses his experience as a merchant, journalist and marketer to create content that helps online businesses grow.