Why is there such a big difference between suppliers’ similar products?

By justchinait
 / 
December 21, 2020
 / 

The cost of a product is complex to calculate. The purchase cost of raw materials, the labor cost of making products, the development and design cost of products, the consumption of water and electricity, the consumption of tools, the transportation cost of products, other incidental expenses (tax and financial expenses). And finally, the expected profit on the product.

These cost variances result in variances in supplier quotations. And if your supplier is a trader, they will add 20%-30% to the factory’s quoted price.

For example, why does the same series of U Disk factories offer a far different price? We can analyze the possible causes:

1. If it is the same style U Disk, U Disk Shell the same, the same packaging, memory is the same, but u disk manufacturers quoted a different price, it may be because of the chip. The packaging price, shell price is basically the same, only the chip price will directly affect the price of U Disk finished products.

The general chip has many models, some have 4 models, even 5 models, different models have different prices. A lot of U Disk Factory may use the low-quality chip for the customer who don’t have a special requirement for the chip.

2.The factory has accumulated a large stock of raw materials for the USB stick, selling it cheaply in order to get rid of the stock.

3. The factory has old customer base, because of service, reputation and other reasons, even if the price is not cheap, these customers will buy the U disk, so the factory is dare to sell more expensive than other factories.

4. New Products. When new products appear, there is no corresponding standard on the market, it is difficult to judge the value of products, of course, it is more difficult to judge the price of products.

For the promotion of new products, the factory can be priced a little higher in the early stage, for the later promotion and discount to pave the way, leaving a certain price space.

The supplier will flatten the mold cost of the new product to the unit price of each product. Mold fees can range from a few hundred to one hundred thousand depending on the product, material, and size. For the mold expensive products, just released when the price will be a lot more expensive. The unit price of the product will drop after the factory has earned back the cost of the mold.

5. The truth about the difference in profit orientation. Different suppliers are pursuing different levels of profit, which is what one supplier once said to me, companies are positioned differently, and this is often related to the composition of their customers, because the same products are sold to different industries, even the same industry, prices often differ from one customer to another, and I have encountered such suppliers before.

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