Revisiting the Fundamentals of Negotiating with Chinese Manufacturers
The fact that we still receive a substantial number of questions regarding order quantities from our China sourcing customers tells me that some people will find this post helpful. For those e-commerce sellers that have been sourcing and importing private label products for years, negotiating with Chinese suppliers is likely “old-hat” for them. However, no matter what your level of experience dealing with suppliers, you may still be able to pick up some useful tips.
While this course of action has some merit when talking about brand new products not currently listed on Amazon, it has no place as a negotiation strategy for the vast majority of products. Regardless of what your negotiation goals are, it all starts with that first communication to a supplier. And let’s face it, not all suppliers are the same. Different skills are required to effectively negotiate with the plethora of different personalities you’ll run into when sourcing products.
- Buy 100 units @ $7 = $700
- Buy 100 units @ $6.70 = $670
When your business begins to scale:
- Buy 500 units @ $7 = $3,500
- Buy 500 units @ $6.70 = $3,350
When your business establishes regular and continuous sales for you product:
- Buy 1000 units @ $7 = $7,000
- Buy 1000 units @ $6.70 = $6,700
On with the examples!
- Buy 3000 units x $7 = $21,000
- Buy 3000 units x $6.70 = $20,100
Net Savings on COG: $900 And it will likely be MUCH more savings, as you will easily be able to qualify for a better discount when ordering at these levels. But for the sake of consistency in the example, the discount is 30 cents per unit. You might be thinking “but I’m not currently able to buy 21k worth of stock right now”. And that’s understandable, but we wanted to show you the benefit of ordering higher quantities and how it can save you thousands of dollars by not only lowering the price per unit, but also cutting down on the freight costs of shipping those multiple, smaller orders—which can be a HUGE bump to your bottom line.
While it’s all about negotiating, this can’t happen without first building a real relationship with your supplier. Please familiarize yourself with the differences between American business culture and Chinese business culture, as even the concept of negotiation is different in China and it all revolves around the concept of guanxi. As we revisit the basics of negotiating with Chinese suppliers, we thought it would be a good idea to list some of the “DO’s” that will help you in your efforts.
- You DO want to show your suppliers that you’re a good customer by paying on time and communicating efficiently and effectively with them (a surprisingly big deal to Chinese suppliers)
- You DO want your suppliers to know that you have a solid plan to grow your business and thus, increase your orders with them.
- You DO want to show your suppliers that you are an expert when it comes to knowing your product. You need to be able to demonstrate that you know what you’re talking about when it comes to the specifications and details of manufacturing your product. Study up! This is a big deal to suppliers.
- You DO want to convince your suppliers that you’re in it for the long term and not just looking for a “one and done” deal. If they know that you are loyal and plan to be with them for a significant period of time, they will be more likely to help you by doing the favors that were mentioned earlier in this article.
- You DO want to show your suppliers they are appreciated by not only maintaining, but nurturing & growing your relationship with them. This is only a part of the very important cultural concept of Guanxi (google it and study it). This can be accomplished in a number of ways: sending gifts, offering compliments, writing a testimonial for them, and visiting them from time to time.