This is a story about negotiating with suppliers and how you can save hundreds of dollars on your next order.
A few weeks ago, I began the sourcing process for a new product that I will launch soon. Ultimately, I ended up speaking with 5 factories.
I found all of these suppliers on Alibaba but there was a small issue. None of the listed companies were actual factories. Nearly all of the listings I found on Alibaba were ONLY trading companies.
This was a bit frustrating as I know the product is very cheap and most of these guys were quoting me more than my target price.
So eventually I contacted an agent here in Guangzhou and they were able to get in contact directly with the factory through the Chinese version of Alibaba, 1688.com.
At this point I’ve narrowed down my choices to two suppliers.
We’ll call the first one “Factory” and the second one “Trading Co”.
The “Factory” is the one that the agent found via 1688, and the “Trading Co” I found on Alibaba.
I liked the Factory and their quality, BUT, the Factory did not have the specific color that I was looking for and they wouldn’t produce it unless I ordered 2,000 units.
I usually never order more than 500 units at first when launching a new product. I need to test the market first and make sure that it’s selling before upping the inventory.
However, the Factory price was much cheaper, and even though I didn’t plan to order from them this round (because of the color issue), I knew that I could use their quote information to my advantage.
Get Your Quotes!
The Trading Co finally came back with their quote as you can see here:
I already knew this was too expensive so I explained my concern:
You see here how she gave me my first quote in USD. I came back and told her my new quote in Chinese RMB. This shows her that I am likely getting info from the actual factory and negotiating in Chinese (which the agent was doing for me).
It also adds to your image of experience, like you know what you’re doing.
With this simple response she came back 15 minutes later with:
At the time of this negotiation, the exchange rate was approximately ¥6.4 RMB to $1 USD, making this a total cost of: 13,530/6.4 = $2,114!
In a matter of 15 minutes I saved $2,640-$2,114 = $526!
With an order of only 500 units that is a whole $1 LESS per unit cost, which is HUGE! So, I took her up on her offer and now production is almost complete.
Going forward, if this product sells as expected, I will actually place the order with the Factory, as the price will be even cheaper.
Save on Your Next Order
The moral of the story is to utilize the available resources to get as much pricing information as possible. Not only does this give you a better picture of what the market is charging but it will give you negotiation power once you narrow down your supplier list.
I hope this quick article was helpful and I’d love to hear any of your experiences negotiating with suppliers, your thoughts, and questions!
So please, don’t be shy, comment down below!