Alibaba today’s one of the biggest e-commerce companies that cater to online buyers. Unlike other e-commerce companies, Alibaba focuses on bulk purchases. Plus, you can contact suppliers and manufacturers to get private label products.
In this Alibaba Price Negotiation Guide, you will learn the importance of negotiating with Alibaba suppliers to reduce product price, whether or not the lowest price is the deciding factor for you, how to do it successfully, and what you should do to save if the suppliers are against lowering the price.
So, let’s get started!
Is It Really Necessary to Negotiate with Chinese Suppliers for a Price Cut?
The answer is YES! If you are serious about getting a reasonable price for the product, you need to find a way to dominate Alibaba suppliers.
Price negotiation is also part of business culture in China. So, if you will not negotiate with them, they will be surprised. In other words, they are already expecting you will haggle.
If you are a business owner, you know that cutting costs is one of the simplest ways to increase your profit. When you negotiate with Alibaba suppliers, you have a better chance of boosting your efficiency and increasing your profitability.
Is the Lowest Price Always Needs to Be the Deciding Factor for You?
In every buying experience, price tends to be one of the discussion points. Most buyers make acquisitions for the lowest possible price. After all, the price will be your major deciding factor when buying products from China.
But you shouldn’t put too much pressure on the supplier in terms of reducing the cost of goods.
You may find yourself in a situation where you will get the desired price reduction. At the same time, the quality of the goods will be much worse than you expected.
Another situation is also possible. The supplier will simply refuse to cooperate with you. And you have to go back to the beginning of the search.
The point is that a supplier is also a person who owns a business, just like you. And it may simply not be profitable for him to produce goods for the price that you demand.
Therefore, before writing to him about your ideal price, do market research and find out what price other suppliers are offering, and how much this product costs from wholesale suppliers. You will assess its real value and agree on an adequate price reduction.
Also, you should not put too much pressure on the supplier in matters of price reduction, because he may considers you not a serious customer. After all, someone who is serious about running a long-term and profitable business (and the supplier will only benefit from this because you’ll be ordering the production of goods from him for a long time), understands the absurdity of pursuing the lowest price.
What Should You Do to Negotiate with Chinese Suppliers Successfully?
Below there are some tips and tricks on how to have a successful price negotiation with Chinese suppliers:
- Determine the price you are willing to pay for the item.
Before engaging in the price negotiation, ensure to set your target price. As we mentioned, this is very important for successful cooperation. To do this, you can try contacting the suppliers to get quotations.
When you get answers from 10-15 suppliers, compare the cost per item, which each of them offers. However, do not forget to compare other important points as well: materials which he uses, delivery methods, etc. When determining the final price, suppliers take into account various factors that you should be aware of in order to determine your target price correctly.
- Consider the direct impact of product value on quality.
Remember that the quality of the product corresponds to its value. If there are 8 out of 10 suppliers which offer a unit price of $ 8 and 2 of them for $ 4, you should think about it. How can they offer such a low price? You can also ask them directly, but politely, and provide the prices that other suppliers have suggested to you. This way you have a better chance of determining the real price of the item.
Therefore, when you ask to reduce the cost of goods by 40-50%, and the supplier agrees, this should also alert you. Ultimately, this will affect the quality of the product or the number of defective items.
- Negotiate the price оn time.
You need to start negotiations on time. If you raise this issue early, the supplier may doubt the seriousness of your intentions. If you try to cut the price after the production of new products’ samples, you may get a refusal. Let's look at different situations to get a better understanding.
If you order a standard product and don’t require deep changes in it from the supplier, then it’s definitely not worth negotiating a price reduction at the first contact. You must obtain samples of the product, evaluate its quality and suitability for your requirements. Otherwise, how can you understand how much one unit can really cost and how much money can you save? Besides, after receiving the samples, you may not want to cooperate with him at all, having evaluated the results of his work.
On the other hand, if you plan to launch a new product that needs to be manufactured, it is better to negotiate the price earlier. If the supplier takes 3-4 months to design and make it, it will be more difficult for you to get a good price after receiving the samples. Suppliers are well aware that deadlines are just as important to you because this is a business. And you hardly want to look for another manufacturer if you are satisfied with the quality of the product. Therefore, after receiving the samples, it will be more difficult for you to achieve a price reduction. Try to resolve the price issues earlier, at the stage of discussing materials and specifications.
But another situation is also possible, when the supplier, after all the agreements, is trying to raise the price of the goods, justifying it by the rise in prices for materials, new taxes, etc. Therefore, you must control this so that you are not caught off guard. And even if the supplier insists on his own, be ready to leave him. He also understands that it will be very difficult to refuse the deal at this stage. Therefore, he is trying to dictate his terms. If this happens, you must leave.
Yes, it can be very difficult. You will have to re-analyze the suppliers, perhaps contact other manufacturers or even go back to the very beginning of the search. But it's better to do it now than to get into this situation again later. Where is the guarantee that after a while the supplier will not try to raise the price again unreasonably?
- Study the specifics of negotiating with Chinese suppliers.
If you want to be successful in negotiating with Chinese suppliers, you must study their way of doing business. You should also be aware of the cultural hang of working with them. This will save you a lot of hassle and time when you start interacting with them.
Remember that the supplier is just like you. Both cultural communication and a friendly tone will help you to build a trusting and mutually beneficial working relationship.
The principle of doing business in China differs from the usual business communication in Europe and the USA, where it is more formal. So you have to accept it.
In the first letter, try to tell all the details about the product you want to make, show the specification, indicate the questions that interest you. The fact is that not all suppliers respond quickly to requests. And this does not always mean that they are not interested in cooperation or treat their clients without respect. Sometimes the factory is overloaded with orders. Or, to answer the questions, they need to prepare documents, make an estimate, etc.
Sometimes the manufacturers themselves suggest how to improve your product if you create a good impression. Or you can ask them about this in the process of developing a new product.
- Do not use ambiguous phrases.
Don't expect that the supplier will understand you exactly the way you think. Write clearly, unambiguously, try to give as many details and clarifications as possible. Ultimately, it's in your interest. You don't want to waste time, money, and effort to end up with a completely different product than you planned, do you?
- Do not promise the supplier an unrealistic purchase volume in the hope of getting a discount on the product.
Some buyers become unrealistic with their purchase volume just to get a discount. First, you will destroy the trust that can be created between you in this way. If you promise to order 1000 units a month but instead place an order for 100 units, don’t expect understanding from the supplier. In the best case, your order will simply be rejected. In the worst case, the supplier can fulfill it out of schedule, using cheaper materials, etc.
- Be ready to leave if the conditions are not correct for you.
If you think you will not get what you want, tell the supplier that you cannot do the deal. For yourself, you must clearly understand that you have to leave at any stage of the transaction if something worries you. Finding a supplier and concluding a deal for orders is the foundation of your business. After the first order, you don't want to regret that the supplier behaves incorrectly towards you, unreasonably raises prices, misses deadlines, or does not fulfill obligations on the quality of the goods, do you? You should be aiming for long-term cooperation. After all, you don’t want to look for a new supplier every half a year and go through it all over and over again, do you?
What Else Can You Save On If the Supplier Doesn’t Want to Lower the Price?
Below are other ways how to negotiate the best price even if the supplier refuses to lower the cost:
- Order a large batch to get the supplier to agree to a lower price.
However, this decision can be dangerous, especially if the product is seasonal. You may not have time to sell it, and then it will remain a stuck inventory in which you invested your money.
The second drawback is the likelihood of getting a poor quality product, especially on the first order. Even if you have received good enough samples, it’s dangerous to order a large batch from a new supplier for the first time. You have never collaborated before and so far you can’t be sure of its reliability.
- Try to use standard and widely available materials and components for your product.
Suppliers purchase materials for the production of goods from other manufacturers. Therefore, it also has an impact on the final cost of your product. Try to use materials that are common enough to be easily found and ordered.
On the other hand, if your product requires a specific material that significantly improves its quality or performance, don't compromise on price. It is better not to save on this because you plan to sell it successfully and for a long time. Don't skimp on things that directly affect the success of your Amazon business.
You can ask your supplier for advice about replacing individual components with cheaper ones if you think he is experienced enough in these matters. However, always consider any proposal before making a final decision.
- Don’t complicate the product specifications.
Avoid product customization or complicating the product specifications unless it is necessary. The more changes are required in the manufacturing process of your product, the more expensive its final cost will be.
- Minimize the Quality Requirements.
Suppliers consider the quality requirements in terms of increased waste, additional time production, and difficulty in manufacturing the product. Therefore, they often add value for each unit of the product you want to buy and raise the price to offset risks.
Once the supplier tells you that your product requirements are impossible or hard to reach, you can accept the price increase, adjust the requirements so that the supplier can meet them, or look for another manufacturer.
Cooperation with suppliers is a difficult stage for any business. It makes sense to have a strategy to negotiate with Alibaba suppliers so that you can get the best price. After all, the price of a unit largely determines the profitability of your business and is a key point in your business growth. Pay more attention to learning the specifics of interaction with Chinese suppliers. And the result will pleasantly surprise you!