How to Negotiate with China Suppliers to Get a Better Price?

By justchinait
 / 
November 24, 2020
 / 

Regarding how to negotiate prices with China suppliers, the first thing I want to say is: we will never know the supplier’s floor price or cost accurately because this number is constantly changing according to market conditions. So we don’t have to care too much about whether we get the lowest price in the market, but we should negotiate with China suppliers to get the best price.

If you deal with a dishonest Chinese supplier, they may not give you the best price. The best price is not the same as the lowest price because when you desperately try to squeeze the price, the quality of the product offered by the Chinese supplier may lack a guarantee.
Therefore, it is essential that you become a well-prepared person. You need to know what the Chinese supplier will ask and how to respond when the Chinese supplier is unreasonable.

What is the best price?

1. If there is a target price, the price given by the China supplier is close to the target price or lower than the target price, which can be regarded as the best price.

2. If there is no target price, after a round of price comparison between different suppliers, the one with the most advantageous price and the closest product quality can be judged as the best price.

How can I get the best price?

1. Have a target price

Before discussing the price with the China wholesale supplier. We have to ask for a target price in our minds and deduct the profit we deserve according to the quotation given to our customers (the specific profit is based on market conditions). Then the rest is money to the China wholesale supplier. First of all, we have to understand the approximate price of suppliers of the same size in the market.

2. Make corresponding negotiation strategies based on the factory operation status

Before the negotiation, we should first understand some of the current orders of the supplier, and see whether the current order volume of this supplier can meet the daily production needs. If the current order volume of this supplier cannot meet the production demand of the factory, the price is relatively easy to talk about. You can directly tell him how many orders you have in a year and you are currently cooperating with other suppliers. At this time, the =supplier will definitely ask you what price the previous supplier gave you. If the previous supplier’s quotation is lower than the current supplier’s quotation, you can boldly state the price (it is better to reduce the unit price of the original supplier’s quotation by 3% -5%).

If the other party’s order volume is sufficient, the factory needs to work overtime to complete the order. Then you can tell him that your one-year orders are relatively stable, and hope to find a long-term cooperation with a supplier with a reasonable price and no problem in quality and delivery. At this time, you have to press on the supplier step by step and test the supplier’s bottom line. Suppliers will definitely consider the price because a large number of orders this year does not mean that there will be many orders next year. If there are long-term customers, they definitely want to cooperate.

3. Familiar with the product and understand the cost composition

It is important to understand that cost does not only refer to the unit price of the product. If the supplier does a better job in product quality and delivery time, it is also reducing costs for you.

Case:

Once we went to talk about a new China supplier, a product with no technical requirements, as long as the surface treatment was okay. After I went to their factory, I looked at the products they were making and found that there was no problem with quality, so I talked about the unit price. We started to take the initiative. I first told him a price from other China suppliers (I deliberately reduced it by 5% when I quoted it), and then said that there is nothing wrong with your product. Although the price is a little higher than the others, it is acceptable. (Actually, I compared the prices of the two suppliers, there is no difference in prices.) Then we asked him about the delivery time and quality, and he promised to do it according to my requirements. He asked me, how do you pay? At this time, I knew that the price must be negotiable. (Because most China wholesale suppliers all want to find customers who pay cash to buy spot goods. If you are a customer who likes to delay the payment, the risk is high, in case the company goes bankrupt or cannot find someone to be squandered, these situations are all.

Some China wholesale suppliers have to go to the bank to apply for loans due to a lack of capital turnover. Because the customers are owed too much. Then the interest generated by the loan is also part of the production cost. The advantage of customers who pay on time is that the China wholesale supplier can receive the payment after the goods are finished and the quality is OKay, the capital flow is fast, and the cost and risk are reduced. ) So I told him directly, the first time I cooperate with you, there is no need to owe you money. As long as the goods are good and the quality is good, there is no problem with the cash. The China supplier saw us so readily and took the initiative to say: Since you pay cash, Then I will reduce the unit price by 3% to you.

What do we need to do before looking for a quotation from a China supplier?

1. Understand market conditions (including the rise and fall of raw materials).

If you are looking for a new China supplier, you need to understand the price differences between similar products in different regions.

2. Before negotiating the price, you must first shop around, combine the quotations of other China wholesale suppliers, and calculate a target price yourself. The cost is mainly composed of price, quality assurance, payment method, delivery period, and after-sales service.

3. Develop a Plan B. When the price cannot be negotiated, we can change our thinking and guide the China supplier in other content such as payment methods to achieve the effect of cost control.

How to increase your negotiating leverage with China suppliers

The essence of negotiating with Chinese suppliers is to exchange chips. In other words, you have what your negotiating partner wants, and the Chinese wholesale supplier has what you want, and both sides exchange “stuff” (bargaining chips) in the negotiation process. Therefore, mastering the bargaining chips of China wholesale vendors is an essential condition to win the negotiation.
Before negotiating with China wholesale vendors, you need to examine the leverage of both sides and classify these leverage.
What is Must, you must do it yourself;
Which ones are Want, if you want them or not, we use them in exchange for other people’s things;
Which ones are Gives and can be sent out as favors.
After sorting, go to the negotiating table to exchange chips with the negotiating opponent. Therefore, before negotiating, you must examine yourself: What bargaining chip do you have? Which chips can attract each other? Which bargaining chips can make the other party give in?

Buy in bulk like Chinese wholesalers

Buying in bulk is the most direct way to get the best price – the more you buy, the lower your unit price. However, many importers tend to order the products they need separately from different Chinese wholesalers, thus reducing the amount they can purchase from each supplier. This is an unwise decision.

Try to book ocean freight instead of air freight

Although the Chinese supplier does not determine shipping costs, many importers tend to waste money on less cost-effective shipping. Sea freight is usually much cheaper than air freight, which can significantly impact unit prices. The courier company determines the courier cost in China, and there is nothing the Chinese supplier can do to reduce the courier cost, so we have to figure out what to do with the major courier companies and the courier cost.
First of all, sea freight is not as fast as air freight. It takes about 30 to 40 working days (not including weekends) to reach most European and North American ports.
It is not uncommon for importers to end up wasting profits on expensive last-minute air freight bookings because they “simply can’t wait 35 days” for the shipment to arrive.
That’s what I suggest you do.
Place your order at least 3 months before you expect to run out of stock.
Ask your Chinese supplier to quote you a DAP price that includes all modes of transportation to the final destination.

Understanding raw material costs

You don’t want to give china wholesale suppliers the impression that you are gullible. When you hire a Chinese supplier, you should be slightly aware of the current prices of goods and raw materials.
This will effectively cripple situations where Chinese suppliers offer higher prices or raise prices between orders.

The accepting China supplier must also receive an appropriate profit

Few importers are aware of the (significantly) low margins that most Chinese suppliers face. They cannot offer a 10 to 20 percent price reduction unless they are costly, to begin with. By asking Chinese suppliers to reduce their prices by more than 3% to 5%, we ask them not to lose money on your orders. Because a Chinese wholesale supplier does not only consume the cost of an item with you, he also has various expenses to cover.
However, many importers are obsessed with bargaining and trying to force the Chinese supplier to lose money.
If you are lucky, the Chinese supplier will tell you that the deal is off. If you are not so fortunate, they may actually cave in and lower themselves to your (unrealistic) target price – and adjust the quality of the product accordingly, which may come as a nasty surprise in the future. Chinese manufacturers can use various quality standards, materials, and components to make their products. So the lowest price is sometimes not the best price. That’s because a low-quality product may cost you more in lost profits.

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