As an Amazon seller, I strive to get the best bargain day in day out with suppliers. The most difficult part comes when you are trying to negotiate for lower prices. Suppliers are shrewd – most of them quote prices higher than the products’ real value (especially if you are dealing with suppliers from countries like China) – and refuse to budge, no matter what you say.
Negotiating for lower prices with suppliers requires a lot of tact. If you overdo it, you may burn bridges and earn a bad reputation with suppliers of the same industry. On the other hand, if you fail to make your stand clear that you are not going to pay more than what’s required, suppliers will see you as a pushover and take advantage of you. To avoid these situations from happening, I will be sharing six simple strategies to help you negotiate and get better prices from your suppliers, without sacrificing quality and workmanship.
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The reason why you want to prepare a table like this is to show the difference between the suppliers very clearly. Sharing this type of table with suppliers will show them where they stand with one other. That allows them to “negotiate against themselves” instead of giving you broad statements, quotes and empty promises in order to secure a new customer. Do adjust the table accordingly if you feel that the information stated puts you into a weaker negotiating position when you are facing any one supplier!
Strategy 2: Ask for Pricing based on Quantity Tiers
No supplier will provide their best price in the first interaction. The initial price quoted by suppliers could be around 20% to 30% higher than their best pricing, especially if you are a new customer. Hence, you need to be shrewd and try to find out what their best pricing is. Of course, you can’t do this by just simply asking them directly – you have to think smart and make them disclose their BEST PRICING RANGE instead. Then, you will be able to roughly gauge what is their best price.
To do this, one of my favorite methods is to request three quantity price breaks. For example, if my intention is to order 1,000 units of the product, I will request the suppliers’ quotes based on 500, 1,000 and 5,000 units of the products. Doing this will allow me to quickly discover what their true pricing is, and at the same time make suppliers think I have bigger long-term plans.
Below are 2 scenarios of how this may work out. Let’s say I am considering 2 suppliers for a product, and I obtain this information:
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From the data, I can see that Supplier A does not offer much of a price change. This probably means that the pricing they offered is probably close to their best pricing, and it will be tougher for us to continue negotiating.
However, Supplier B’s quotes show that there is more price change based on different quantity tiers. This indicates that there’s still probably more room for negotiations. Most likely, the supplier will want to gain your business – and hence for the larger price change if you order more units. Supplier B is actually more incentivized to get the sale instead of selling you the products at their highest price. So, you should use this to your advantage when making your orders.
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You may feel that it feels rather unethical to make up the above, but let me tell you the harsh truth: without these smart tricks, you might never be able to get a deal at the most affordable price. And to be very honest, you AREN’T ACTUALLY LYING – you are simply referring to yourself and your business in the third person, and there’s no rule in this world that dictates that you can’t do that. On the other hand, when you start running your business, you will have some semblance of a team, either through using freelancers or VAs to help you manage the nitty-gritty details. Furthermore, you may really want to visit the factory at some point in time, to check if they are operating their work in a proper way.
Keep in mind that most big companies today started off small, and they would have represented themselves like this at one point or another to land their breakthrough deal. It’s just part of the hustle to make suppliers believe that they are working with people who know what they are doing. Thus – why not try this if you can get better pricing?
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The second option is to adhere to the supplier’s required MOQ, but request to split the MOQ across multiple products. For example, if the supplier gives you the best pricing at an MOQ of 10,000 units, you can counter and suggest that you would prefer to buy four different products at 2,500 units each. Though it is true that you did not meet the required 10,000 units for that one product, most suppliers will gladly take up your offer. This is because most suppliers manufacture a variety of products, and they are bound to have some leftover stock of different product lines in their warehouses that they are trying to sell-off. Your offer will help them solve a great problem!
On the other hand, this option will allow you to diversify and limit both your financial risk and your product risk. Who knows? Maybe the product you are initially interested in turns out to be a bust, but the other products you purchased as part of the order could be an unexpected winner!
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Meanwhile, always work to show that you have a proven track record of selling to the target industry. Good suppliers will like to know that their products are getting to the right buyers. Appear professional and keep to business ethics, so that suppliers will want to strike a long-term partnership with you. This will also help to build up your reputation as a trustworthy business owner, and allow you to earn more favors from the suppliers than you might ever imagine.
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Sometimes, familiar suppliers may take your business for granted. Some signs include lower quality products being supplied for your business, late shipments, slow replies, etc. To avoid this from happening, you should give your suppliers something of a wake-up call: tell them that if they don’t improve their services, you will end your collaboration with them and switch suppliers.
However, this strategy is only possible if you show that you are serious about changing everything over to a new supplier. You must have done proper research, i.e. really found a new supplier as a backup plan, and be prepared to switch to them should your old partner refuse to believe you. Or else, you will find yourself losing all negotiation stakes, and ending up with a bad reputation as the ‘bluffing buyer’.
Here’s a summary of the strategies I have gone through for the past few days:
Strategy 1: Prepare data for negotiations
Strategy 2: Ask for Pricing based on Quantity Tiers
Strategy 3: Make Yourself Seem Bigger Than You Are
Strategy 4: Ask to Purchase an Initial Test Order
Strategy 5: Present Yourself as their Dream Buyer
Strategy 6: Suggest to Change Suppliers
With this, I have come to the conclusion of my 6 strategies for Negotiating with Suppliers. I hope that these strategies will help you clinch better deals with your suppliers. Stay tuned, and see you around soon!
Strategy 1: Prepare data for negotiations
One of the best practices for any negotiation process is to prepare data to share with the suppliers. Presenting data in a clear, simple format, such as making a comparison table, will put you in the driving seat of the negotiations, regardless of whether you are going for quality or cost. For example, you can make a quick, simple table to compare the price, quality, and material, etc. Here’s a sample template provided for you.
Strategy 3: Make Yourself Seem Bigger Than You Are
Now call me a Machiavellian, but I must warn you that in the e-commerce business industry, people will judge you based on how you sound and come across. On my own e-commerce journey, I have met oh-too-many unscrupulous suppliers, and I picked up a few tactics along the way to protect my rights. One of them is this: ALWAYS SOUND BIGGER THAN YOU ACTUALLY ARE. When dealing with suppliers, if you reveal that you are a very small business, they will be less likely to negotiate or bother to give you the best pricing. To get around this, you should:- Consider addressing yourself as a “team” instead of as one person;
- Tell them that your role is to source, find suppliers and communicate, instead of revealing yourself as the direct boss;
- Inform them that “the boss” has to get the necessary information for your “team” to make a sound decision.
- Mention that your “boss” may visit the factory in the future.
Strategy 4: Ask to Purchase an Initial Test Order
When ordering stocks from suppliers, the most probable scenario would be that the minimum order quantity (MOQ) being asked for by the supplier is too high. Or else, the best pricing may be offered at an MOQ which is way too high for your needs – for example, you only required 1,000 units, but the supplier’s best pricing is offered at 5,000 units of the product. I will advise you of two methods to get around this tricky situation. The first is to request a test order of a lower quantity. Though you may sacrifice a little on the price (the price will likely be more expensive with a smaller batch of products), remember that your ultimate goal is to build up your brand name. If the product sells well, you’ll be able to back it up with a bigger order, and recoup your losses over time.
Strategy 5: Present Yourself as their Dream Buyer
Throughout the negotiations, don’t forget to stand in the shoes of the suppliers. While they may want to sell their products to you, suppliers also want good partners. Buyers who present themselves as trying to scrooge and pinch at their expenses will most likely put them off. Whatever you do, never appear to suppliers as only money-minded businesses. Just like me, suppliers want to work with people who they can trust, communicate and build long-term relationships with. If your objective is to always lower your cost at the expense of others, suppliers can easily cut you off one day and leave you stranded.
Strategy 6: Suggest to Change Suppliers
If you are negotiating with a supplier you have bought from in the past, and everything you have tried is ineffective, inform them that you will have to find a new supplier. This is often what it takes for suppliers to provide better prices, and really understand that you are serious.
