Your Guide to Negotiating Prices with China Product Sourcing Agent

2021-05-19

插图1.jpgChina has been at the forefront of manufacturing and outsourcing for a few decades now. The cheap cost of production and good quality are two essential characteristics that have made China into the production hub that it is today.  

They have been known for providing great services throughout the years but sometimes the difference in culture can get in the way. There are a lot of factors to consider when you are negotiating prices with a Chinese vendor. Whether it be technical specs or getting over the language barrier you as a business need to take into consideration their ideologies and culture when doing business.

Being the prime hub of manufacturing Chinese vendors are the number 1 place to get your product outsourced from. It exponentially reduces cost while maintaining the quality of your product. A winning combination that has worked for decades moving your production to China is the best thing to do to reduce operational costs. 

Chinese Work Ethic

Hard work is something that has been integrated into the Chinese culture years ago. Hard work pays off is a slogan that is followed by them as a standard. China has had a long history of hard-working people that persist through hardships no matter what. 

They are also extremely punctual and do not take offense to tardiness lightly. Punctuality is seen as a form of respect and you should also take it very seriously when setting up a meeting. Another thing to note is that they do not like to leave things to chance. If they can work towards it to achieve it they will work very hard to make it happen. As a country, China has strived for perfection and is more than capable of getting near it every time. The same can be said for the workers there. 

They will work to achieve the quality and standard you have set and will be more than happy to make improvements. Being competitive and hungry for success most of the Chinese suppliers will give you a great quality to price ratio. 

Competition and ties to other nations

The Chinese suppliers are used to having competition and you can make the best of this situation for yourself. You might be able to get a better deal if you make sure to talk to multiple suppliers at once. China product sourcing is a very competitive market and you should be able to find someone in your price range easily. 

China has had great ties to various nations since ancient times, from the silk route to the new age trade deals. It has become the go-to stop for companies like Apple and Samsung. Almost everything that is available in the market is now produced in China. They not only have great ties with nations but also have the ability to diversify as the businesses grow. They have only become better as the decades have gone by and now are one of the most sought-after outsourcing destinations. The work offered is of very similar quality and you can easily reduce costs when choosing a supplier. 

Here are a few things that you can do to ensure that you are getting the best price from the supplier.

More often than not you and the supplier will have different prices in mind for the project. You research the price and what goes on an average in the market. Having a clear understanding of the expected price will give you a great idea for counter-offering.

There are many sites where you can see the price of various suppliers. Use these to your advantage. When you have a price range in mind only then start engaging with the suppliers. This way when you find someone you like you will have a clear-cut idea of what you want and what you need. 

You need to get leverage by getting multiple quotes from different suppliers. Having leverage gives you more room for negotiation and you will be able to get them to your expected price point. Remember at this stage you are just trying to get relevant quotes and not the final ones. We recommend that you get at least 10 quotes before you zero in on a supplier. 

After getting these quotes you will realize that there is a baseline price. If all the pieces are very similar you will have very little room to negotiate as anything below this will reduce the supplier’s profits. The volume and quantity you have to order will be the prime factor in negotiation.

But if the prices vary a lot then you have the ball in your court. You will have great leverage on the supplier in this scenario. With this leverage, you can get the supplier closer to your price and where you would like him to be. A reduced cost essentially means a larger profit percentage. 

插图2.jpgKnow that Chinese suppliers expect a hard negotiation from you

China has been the No. 1 country for outsourcing for years. With top brands working with them on a daily basis they are more than accustomed to people bargaining. This may come as a shock, but they are more than prepared for you to haggle on the price. 

At this point communication is key. You should ask the people who are not at all interested in your product. Go with people who have stated prices that are too low or too high. Try to get a good handle on the price and quality of the product they are delivering. Ask them all types of questions like, why did they quote such a high or low price? What machine will they be using? Is the product labor-intensive etc.  

This can be the cause when the product you have requested is not their forte or are super-specialized in it. They should be able to answer all your questions easily and if you have any doubt you can always go to another one. Ask them how they can make the product cheaper or are there any substitutes for the materials used in it. 

Communication is key

In such a situation you have nothing to lose and you also weed out suppliers with poor communication skills. Communication is key and you should get a supplier that meets your requirements and the price.

Talk to the supplier that wants to work with you at last. Make sure you let them know that you have talked to other suppliers and already have quotes. Do not reveal your target price rather ask them if they can do better than the ones you have already talked to. 

Ask them how their quality is similar or better than the others and ask them which materials they are using. Ask them if they have their own mold or not this will give you an idea of whether or not they have their own designs or not. Also, make sure you ask them whether they can customize the product for you. Ask them for confirmation of all that they may have customized in the past.  

They are already expecting a hard negotiation so there is no point in settling for the first offer itself. Bargain hard and try to have a leverage to work things in your favor. You will increase your profit margins and keep the operational costs down this way. 

Don’t deny the supplier their profits

You will have to pay attention to the fact that both of you are trying to make money in this transaction. Your baseline price should be reasonable enough so that the supplier also hits his profit goals.

In most cases, a supplier has a 15~20% gross profit margin. If you ask for a discount exceeding this the chances of them turning you down is very high. A 10% discount is often more than what they will be willing to give but will settle for it, nonetheless.

As a business, you should be cognizant of the fact that both parties are trying to make money. You as a business undercutting a supplier’s profit can come off as rude and disrespectful.

Set your expectations regarding quality, quantity, and supply

When you are looking to get your work done abroad it is in your best interest to be strict about the quality of work you want. Also, discuss the quantity and how much you will be ending in the future. You might have to adjust according to the quality that they offer and the quantity they can produce in their factory. If the numbers and quality they suggest are not up to your mark or will not be able to keep with sales it is best you look elsewhere. 

Paint them a big picture as to how your product is going to do well and how you are going to rake in a lot of profit. Use your yearly projections to your advantage and make the offer enticing for them. A yearly forecast is a great way of gaining the trust of the supplier. This means that you have put in the work and are confident about your product.

For your new product take advantage of forecast and estimated orders that you will be needing to hit those targets. This gives you an upper hand in the negotiations as they see the confidence you have in your product and marketing capabilities. Suppliers are enticed by this confidence and the yearly sales figures make them work harder to achieve your goals. Because if you sell well they get to make more of the same products for you. 

161908296.jpgNegotiate at the right time - not the wrong time

The best time to negotiate is when you are ready to take the decisions. You should also have all the yearly sales forecast and profits in hand. You should also have a good grasp of the number of items you will need and at what time. It is also your duty to make sure that the supplier is able to meet your demands when you start expanding. 

China product sourcing might seem like an easy task, but it can be hard to find a supplier that meets your requirements. Always ask for a sample before you finalize your product sourcing in China. Always remember to message during business hours and make sure the requests are formal. Product sourcing in China is a huge market and many people are competing with you in securing a supplier. 

A product sourcing agent like Maple Sourcing can get rid of all these problems. They are well versed with the Chinese supplier and are a household name in the China product sourcing game. They are aware of all the nitty gritty and will speed up your process exponentially. 

Negotiate only when you are ready with all the data to have a leverage on the supplier. Negotiating at the wrong time without any leverage will not benefit you while searching for a supplier. 

Keep track of raw material costs (your China product sourcing agent can help you here)

Raw materials prices can fluctuate for a number of reasons, it could be because of shortage or shipping restrictions or a fallout. Keeping tabs on the raw materials can easily reduce your costs of operations and help you in maximizing your profit margins. 

A china product sourcing agent can help you with this. They will keep a track of the prices of the raw materials and let you know of all the price changes that may happen in the product. China product sourcing has been a booming market for years and many of the world’s top brands have outsourced their work to China. 

Product sourcing helps you with your offshore team so that you can concentrate on the onshore team. You will be busy formulating sales strategies and pitching the product to people who the agent product outsourcing in China helps you with the costs of raw materials. Take help from the agent and make the process easier for yourself. 

Skip the unnecessary product customization

It is always a good option to have customization but in the earlier stages, it is best that you keep it minimalistic. In the first few runs, you will want to get an idea of what the potential of the supplier is.

Unnecessary customization will increase the time it takes to make the product which will in turn delay the shipment too. Also, unnecessary customization will force the supplier to make changes. If they are not able to handle your requests well then there is a chance that you may not be happy with the product. 

To avoid such a scenario, you must keep the customization precise and clear. If it feels like a feature that you can live without it is best to avoid it at first. You can get to customization after you have achieved your sales targets and started raking in the profits. This will help you update the product in the future and keep up with trends too. 

Allow the supplier to win some battles

The person on the other end of the messages is also trying to make ends meet. He or she also wants to have a thriving business, as a leader you should realize that you should let them win some battles. 

Also be aware of the cultural differences, during the Chinese New Year the prices will go up and you should accept that. During this part of the year, they are very busy. And if they take longer to respond to you or are not as accommodating of your requests you should be more understanding. 

You should also ask if there is anything happening in China that may affect your business. Currency fluctuations and commodity price changes are also some business conditions that might change from time to time. Work in tandem with the supplier and let them also have a say in the decisions. They will be more than willing to boost the production numbers but if not communicated properly it might lead to friction.

One must also take into account the production quantity and quality of the supplier. Your product sourcing China agent should be able to tell you more about such things regarding the supplier. Product sourcing China might sound like an easy option, it will reduce the costs of your ongoing operation. But you will have to study a bit about Chinese culture and work ethic. 

Trust the advice offered by your China product sourcing agent

Your China product sourcing agent only wants the best for you and it is imperative that you trust them. In the long run, it is better for both to be transparent and have a mutual understanding of all topics. Product sourcing in China can be tricky so it is best that you leave it to the experts.

You should convey your needs in a clear and precise manner and ask questions. We at Maple Sourcing encourage this behavior and ask people to ask as many questions as they’d like. This not only helps us to get a clear understanding of what you are looking for in a supplier but also how you want to take the business forward. 

Come to Maple Sourcing and have all your China product sourcing queries answered. We are proud of ourselves for being the best, and we will be more than happy to help you in achieving your goals. 

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