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Price Negotiation with China Suppliers
This is a complete guide to price negotiating with China suppliers in 2022.
So if you’re looking for:
How to get your target price
How to get prepared before price negotiation
Then you’ll love the actionable advice.
Let’s get started.
Chapter #1 What you must know before price negotiating with China suppliers?
Price negotiating happens when you and your chosen China manufacturers need to meet a point. If both of you have opposing wants, you need to agree.
Negotiation is vital for your business, and for sure, it is twice important with your chosen China vendors. It is why possessing negotiation skills, and knowledge is your power.
Before price negotiating, you must first consider these things to understand the risk, skills, and importance. Keep reading to know more about negotiating with your Chinese vendors to get the best deals.
What is the objective of price negotiation with China suppliers?
When it comes to objectives, there are a few which you must keep in mind. These are the product’s prices, product quality, and excellent deals. You should also note the shipment and delivery time, long-term partnership, and the services.
As mentioned above, your goal should start before price negotiating with your Chinese suppliers. So, the first thing you need to do is make a China manufacturer list. Also, listing your China manufacturing products is essential to sort out what you’re looking for.
In addition, the most crucial part of making this objective is to figure out what you want and need to happen. You should also be ready for adjustment and see what your China supplier wants. By doing so, you can work the negotiation to arrive at the best terms.
Why is price negotiating with Chinese suppliers Important?
Price negotiation can lead to the success of your company and business. It is why having good price negotiations skills can assist you in your long-term goals. Along the way, it can help you build a strong relationship with your China suppliers.
Negotiation is also essential if you and your chosen China manufacturers don’t meet the same goals. In short, it can polish any dispute and avoid future issues.
By negotiating, you can meet your goals and reap exceptional benefits. Keep in mind, if the negotiation is thriving, both you and your China vendors will be happy and eager to do business again.
How to understand manufacturing companies in China?
Understanding your potential China suppliers is as much easy as you think. There are steps and things you need to follow and do this right.
First things first, you need to do basic research on them. There are many Chinese suppliers online to whom you can reach out and have details to look at. If you know what they want and their needs, you can approach them positively.
Another thing is that there are different types of China wholesale suppliers you can choose from. For example, the China vendors you find are new in business; they are most likely to agree with a low starting price.
Suppose you find China manufacturers and suppliers who have many competitors. In that case, you should expect that they will give you attractive prices.
But sometimes, Chinese suppliers may agree with the price negotiation since they need your help to get outdated and old stocks. Nevertheless, you still need to learn more about your China wholesale vendors.
Chapter #2 The best prices solution
Price is one of the main factors you have when negotiating. When you properly deal with your China manufacturers, there is a higher chance that you will get a competitive price and prevent price increase.
Here are some things you can do to prepare and fight off the price with your China suppliers.
Have a pricing goal
What is my price goal?
How much am I willing to pay for the price?
Would I spend that much on shipping?
You need to ask yourself the price you want and what you’re willing to spend. But, keep your costs realistic and negotiable. It is the first thing you need to establish before you negotiate.
Your price goal will assist you in communicating with your China suppliers. For example, you will contact as many suppliers for quotes, and during those processes, you need to give them a price range.
In the same way, your Chinese vendors will need your requirements and the target price in different areas. Sometimes, they may even ask you these questions before giving you a quote.
Be familiar with the cost China materials supplies
When speaking with manufacturing companies in China and China material suppliers, you don’t want to give off the idea that you don’t know what’s going on. So, you must research and learn about China manufacturing products and China material supplies needed to make them.
When you know the price for the raw materials, you can use them in making your price goals. In this way, suppliers cannot offer higher prices or raise the fees in your negotiation.
You can look for the material cost on your Chinese supplier website, or you can Infomine.com and Indexmundi.com.
Cost of shipping
Chinese wholesale suppliers may add shipping costs. There are different shipping methods that you can use when transporting your products. These are air freight, sea freight, air express, regular post, and courier.
However, we recommend sea freight as your shipping method since it is cheap. Compared to other shipping methods, you can save a lot of money with this type of transportation.
The only problem is, it takes about 30-40 days for your products to arrive at your location. If your area is in North America or Europe, you need to wait patiently.
So, we suggest that you order for at least three months and calculate the amount before you run out of supplies. We also recommend requesting a DAP quote from your Chinese vendors, including all the transport papers.
The uniqueness of the product
If your product is unique or customized, you should expect that your Chinese wholesale suppliers will ask for extra fees. The reasons are; the labor needed, the cost of the material, and the other fees required to make the product.
As much as possible, stick to the standard design and avoid extreme or even minor changes with your plans. You should also note the materials and parts needed to make your products since the cost will add everything.
Exchange rate in USD and RMB
You should note that almost all China suppliers online accept payments in US dollars. Although the majority of other expenses are paid using RMB.
It is why you must do convert all the costs you will spend in both USD and RMB. To do this, you can use websites to help you.
Chapter #3 How to prices negotiate with China suppliers
Reduce your product quality requirements
Sometimes, many importers demand high standards that most Chinese vendors cannot meet. Some of the reasons this happens are the specification limits and product requirements.
These requirements are challenging to meet even by the manufacturer Chinese companies. Because of this, it results in inefficiency and losing suitable China suppliers. Or, sometimes, there can be a high price increase.
However, suppose you’re firm in choosing a made in China manufacturer to meet your demands. In that case, you should instead do these.
- Adjust to your Chinese vendors standard.
- Agree to a possible price increase.
- Look for other suppliers who meet your requirements.
Compare prices with other China suppliers
There are hundreds of China suppliers online, so obtaining information from each would be as easy as you think. You can now search through your China supplier website or ask them for price information.
But why is there a need to compare? Comparing can help you know and set your price goals and help with your negotiation.
When you have an idea of what other supplier and China wholesale vendors is proposing, you can have an option as to which ones to work with. At the same time, you will not get swayed when there’s an unacceptable price increase.
Buy wholesale products from china
When you buy wholesale products from China, you can save money. In short, a large number of products can equate to a great price — the more you purchase products, the cheaper it becomes.
However, there are two things you must avoid, first, over calculating the product volume with your China wholesale suppliers to have greater negotiation power. Second, buying from multiple Chinese wholesale suppliers.
Chapter #4 What should you do before approaching a Chinese vendor?
Make a china manufacturing companies list
The rule when it comes to negotiating is, “don’t start anything you’re not sure about.” It applies to this one since before you can contact and negotiate, you need to know whom and what you’re looking for.
Also, making a china manufacturer list helps narrow down your searches to arrive at the top best China suppliers you will get in touch with. So you are sure there is a 95% chance that you and your chosen China suppliers can pave the way in partnership.
To create a China manufacturing companies list, you need to align your goals to the China manufacturers and suppliers you are looking for. Some of these goals include price range, shipping cost, product availability, and more.
Compare different price
As mentioned above, prices vary from different China wholesale suppliers. Some offer high prices while others in low prices on the same products.
Suppose you are a beginner in importing and looking for manufacturing companies in China. In that case, we suggest that you should be aware of the different prices according to your manufacturer’s region.
So, comparing different prices can give you an idea of which China wholesale suppliers you will choose. It can also save you money and meet a cheaper option.
Chinese Have plan B
During your future talk with your chosen wholesale companies in China, a lot may happen. It is something that you should always expect.
In the worst-case scenario, you can’t negotiate the price anymore. But don’t worry since there are many angles that you can still work on. You can shift ideas to meet your Chinese supplier’s needs. Or you can choose a payment method that works for you and your China wholesale suppliers.
Work with a sourcing company
Working with a sourcing company is good for you and your business. For what reasons? It’s easy, convenient, and has a higher chance of successful negotiations.
Sourcing companies, like JUSTCHINAIT, can make your negotiation easy and successful since most of them have been working in this industry for many years. Rest assured that you will have no problem on your side.
So before you negotiate, you must make sure if you can do it alone or work with sourcing companies.
Look for Chinese suppliers online
Do your research. Negotiations may seem easy talking; however, it’s hard and challenging in reality.
You don’t want to appear overpowered and clueless about whom you’re dealing with. So, researching the wholesale manufacturer’s China can give you an idea of the industry you want to engage with.
You should also research the Chinese suppliers online through the China supplier website. You should also focus on China manufacturing products they offer or if it meets your product designs.
In this way, you and your Chinese suppliers will not waste time dealing with each other.
Chapter #5 Terminology for price negotiating with Chinese suppliers
In price negotiation, you must know which question to ask and how you reply. Why is it important? Because many China suppliers know which customer is new and which ones are skilled.
And if you encounter a dishonest one, they might take advantage of you. So, as much as possible, you should discuss some of these terms with your potential supplier during your interview.
Lead and shipment time
These two are some of the most important things needed in your business. So, you need to ask as many questions to your supplier so you can be sure. Some of these questions are;
Which months are the busiest for you?
When can you send the sample products?
When can you complete the and send the products?
You should also consider these two things when talking about lead and shipping time.
- If you’re dealing with a new manufacturer, you should keep in mind to adjust your expected time to at most 3-4 weeks. And if it’s already a long-term manufacturer, two weeks is enough. By doing so, you can compromise with any delays.
- You should be meticulous when asking and reminding your supplier about meeting the said deadlines. However, you should not pressure them to rush your orders since it will not be good.
Sometimes, replicating your products and reproducing them without your consent happens when you manufacture products in China. If that’s one of your concerns, you can’t avoid it from happening, but you can avoid them.
If you don’t want your China manufacturers and suppliers to betray you, you should remember some things.
Familiarize yourself with the standard legal procedures like trademarking your products in China. You should also make your supplier or manufacturer sign a Non-Disclosure Agreement (NNN). By doing these, it will protect you from possible harm. But, let’s get more profound as to what these agreements are.
Non-disclosure agreements would protect you from a possible breach of contract, specifically if it came from something illegal.
Non-use should also be in your agreement. It will make your products used solely for the agreed purpose. In short, it cannot be used nor utilized for anything.
You should also include non-circumvention in your agreement to ensure that your products are used only for you. It will prevent your manufacturer and supplier from giving out your product design.
You can also use non-legal tactics if you want more secured protection. For sure, you can ensure to prevent any IP hazards and build your supply network.
Before we dive deeper, let’s first define its meaning. Incoterms is a contract between you and your chosen Chinese suppliers. It explains the responsibility that both parties need to accomplish. By knowing which is which, you can know which cost you will shoulder.
The most popular type of incoterms among the importer is free on board (FOB).
When you use Free on Board as your shipment method, it means your chosen China vendors will cover the cost until it arrives in your selected port. After that, you will be responsible for all the costs and delivery to arrive at your location.
But, note that they will first deliver your products to a local warehouse before they are shipped. It may appear like a lot of work is needed, but you will cut costs with this one.
However, there are other incoterms that you can choose from, which are EXW and CIF.
Product Requirements and Quality Control
This term is the one you should focus on, especially before and during the negotiation, since it can affect the result of your product and your business.
You must remember two things about your product requirement and quality when dealing with manufacturing companies in China.
First, you need to be mindful of the cost of each product. When you demand a low price, your Chinese suppliers will expect that you will not be strict with the quality. So, you have to keep in mind that you should talk about the cost and clear your requirements to exceed your expectations.
Second, make sure that your Chinese wholesale vendors comply with the country’s law or location where you will sell the products. In this case, you must give your China supplier and manufacturer every information they need to meet.
Credentials and requirements with wholesale companies China
Many wholesale companies in China are legit and trustworthy; But, there are some which you should avoid. You need to do things to prevent falling into scammers and having future disasters.
So, what are those things you can do to prevent this from happening?
You need to be sure that your chosen China wholesale vendors comply with all requirements and documents confirmed by the Chinese government. So, during your negotiation, they must send you these important papers for your confirmation.
You should also confirm that your production will happen to your supplier and manufacturer in the approved facility. To be sure about this, you can do the inspection yourself or hire third-party companies like JUSTCHINAIT to do all the work for you.
Modes of payment
There are different payment terms that you can do as agreed with your supplier or manufacturer. However, it’s wise to pay high fees in return for good payment terms.
You can also make half-and-half payments or divide the expenses into three, for example, 30% before manufacturing, 50% after shipment, and 20% after arrival in your location.
You can also use a letter of credit to inform the suppliers and manufacturers about your mode of payment. It is to make sure that whether they will accept it or not. Plus, it helps you not get hooked if they offer a 30% down payment because, in most cases, suppliers will not return your payment to you.
Chapter #6 12 tips for negotiating with China vendors
Be clear in your communication
Solid communication is a must when negotiating with a made in China manufacturer. We recommend you start with good communication and keep it going because you need to build trust and credibility. It goes both ways for you and your supplier.
As much as possible, negotiation should happen in person, but using online services should be okay. However, you must respond to messages ASAP to keep the momentum going. You should be attentive to any information, be respectful and make sure you communicate with the same person/s.
Note: when problems arise, make sure that you will do something to resolve them.
Know your goals
Before you negotiate or engage in any supplier, you must settle everything on your end first. Notably, you must know your goals to engage with the negotiation.
You and your chosen Chinese vendors will certainly exchange information, especially you. How can you fulfill that if you don’t know your goals, products, and what you’re looking for in suppliers and manufacturers?
The same way for your manufacturer and suppliers is that they don’t want to waste their time on something that won’t work. So, they will be most likely engage with you if you have concrete plans and goals.
Know your China manufacturer requirements
One of the things you must avoid is engaging with China manufacturers and suppliers who will scam you. It won’t turn out well — as early as the initial interview, ask for their documents and requirements.
You can verify these documents with the Chinese government. For sure, if they are legit and trustworthy, they will have no problem giving out these.
Research different prices
You must know the price range of your products and the suppliers you’re interested in working with. Since being unaware of these things can sabotage your negotiation. Some of the prices you can note are the overall cost, including shipping, packaging, and labor fees.
When you have all this information, you can have the power to bargain and retain the correct cost. Also, if your supplier sees your value and is afraid to lose you, they will indeed offer a more competitive price.
Learn from your China vendors
When you opt to work with manufacturer Chinese in every different industry, for sure, you will be amazed at how expert they are. It is your chance to learn from them and expand your connection in China. So, you must respect and humble ask your suppliers or manufacturers to assist you in the process.
At the same time, you also must learn and expound your knowledge. You should not entirely depend on them because they will likely engage with someone knowledgeable and will benefit them in the long run.
However, this goes both ways.
You also need to understand your supplier or manufacturer’s point of view. Be an effective communicator and show that you are a partner-worthy person or company.
Get as many products
Buying in bulk is one of the wisest strategies you can use to save costs. The more products you buy, the cheaper your product and overall cost become.
So during the negotiation, let your China manufacturers and suppliers know that you are buying large orders. They will undoubtedly be more interested in negotiating and engaging with you.
Reach out to their other customers
Building a good and strong relationship with your supplier and manufacturer is hard. But, you can have a way to make it easy for you, such as talking with their other customers.
You can kindly ask your supplier to give you a reference list of their current and previous customers, for you to contact them. By doing this, you can be sure that your supplier and manufacturer are trustworthy.
If you’re worried about being uncomfortable talking with other customers, don’t worry. They would be glad to engage with you and fill you up with information.
Look for a different angle
There is always a possibility that your supplier is not willing to negotiate with price reduction. So the best thing that you can do is choose an angle that can benefit you and your supplier.
For example, you can suggest down payments, repayment, and cost interest. You can also consider other factors like bulk discounts and free shipping. Of course, there are still methods like guaranteeing that you can increase your leverage and bring in new business.
The most important thing is to make sure you can offer a great customer for their product and services.
Prepare your deposit
In this kind of business, the supplier is the one taking a chance. They are betting on their time and the assurance to be paid. It is why they will most likely talk and negotiate with people and organizations if they are confident that you will pay.
As much as possible, be willing to provide a 50% to 70% deposit to gain leverage and have bargaining power during the negotiation. But, also see if you can trust your supplier to avoid losing money.
1. Obtain quotes from your chosen China suppliers
Getting quotes from multiple suppliers is always a good idea. Even though you already have a supplier you want to work with, receiving offers from different vendors will help you connect. At the same time, competition will be high.
We suggest that you inform your supplier to gather multiple quotations and select the best ones. For sure, they will offer you a competitive price, and from there, you can negotiate to get the best deal.
2. Be a good partner
Most Chinese suppliers are looking for customers who will work with them in the long run. So you should establish a strong connection with them and offer what they can benefit from you. They will indeed provide you with better deals in return.
One way you can do this is to determine what you can offer and make their lives easier. For instance, think of what can be beneficial to you and your supplier. Will it save both your money? Or will your negotiation work in the long term?
By doing so, you are building trust and consideration. Don’t forget to let your supplier earn their profit too. When you do this, you can spend months or years of partnership.
3. Be empathetic
Your suppliers need to earn too. It is why they will contend in a negotiation that can benefit them and bring them profits. In that case, decide what works for you and your Chinese suppliers.
However, we suggest that you should always have plan B, or best if you have plan C, D, and so on. Even though you care for your supplier, it is still business. So be ready to leave and go for an offer that will benefit you.
Believe it or not, your suppliers will do the same if both of you don’t meet the same goals.
Chapter #7 The best way to improve your price negotiation skills
Understand your role
Learning more about your business and the Chinese industry will give you have an advantage in negotiation. You’ll be surprised that bargains fail because of the gaps. To which expectations will not meet your outcomes.
So make sure to polish all your things on your end and present them to your supplier. Remember, the goal is to pitch the benefits written in the contract.
Be an asset to the Chinese suppliers
As mentioned above, you will have a possibility of a long-term partnership with your China suppliers. Everything matters to your supplier, starting with the initial interview, negotiation, and working process; the same goes for you.
Put yourself in your supplier’s shoes, and ask yourself questions.
Would it benefit my business?
Am I going to have a profit from it?
Is it gearing towards a good partnership?
This consideration is what weighs down on the suppliers’ end. Make sure you address it and offer a “win-win” possibility to both of you.
Many suppliers would not want to be associated with people and companies lacking in many things. Particularly if they miss payments, have late deadlines, and are hard to work with.
To appear strong and appealing to your supplier, make sure to engage in negotiation, have the confidence to pay on time, and opt to work for the long term.
Chapter #8 FAQS
What are the benefits of price negotiating with the manufacturing companies in China?
You can get many benefits once you successfully negotiate with your supplier. Some of these are:
- You can get a more favorable payment term.
- Get high-quality products.
- Better and cheaper product pricing.
- Updated to the suppliers’ new products and releases.
- Quality of service.
What is the most important aspect of dealing with China suppliers?
The most important thing you should remember is to keep your objectives and what you want to happen in mind. It is only a start; the negotiation will not happen if you don’t want to compromise and meet halfway with your supplier. Therefore, think in-depth and settle on your ends; you can respond properly from there.
What to consider when negotiating with a China vendor?
When it comes to negotiating with suppliers, there are a few things to consider.
- Make sure you have other options before you bargain with a supplier.
- You should avoid price hikes offered by the supplier unless changes to your requirements.
- Acknowledge the supplier’s quote before replying or turning it down.
- Recognize where you stand with the source.
When is it fair to negotiate a lower price?
You have to consider many things on your end and in your supplier. So, before you ask for a lower price, weigh your options. However, you can already ask for a lower price after obtaining an initial quote.
Is it required to be in a factory China wholesale?
Definitely, no. It may be recommended but not required. But, if you have the means to do so since you can inspect the factory, negotiate face-to-face, and you can see everything firsthand.