How to Get a Better Price from Your Chinese Supplier?
Many importers will always try to get a better price from their Chinese suppliers, but how? You need to know some tactics to try to meet this target. Here are some tips:
#1 - Buy larger quantities
This one might seem fairly obvious - buy more and you’ll get a lower unit price. However, many importers tend to buy from more suppliers than necessary - and thus lower the quantity purchased from each one of them. Orders can easily be concentrated on a smaller amount of suppliers if you base your product selection on what the suppliers has to offer, rather than selecting a number of suppliers on a predetermined product list.
#2 - Streamlined usage of Materials & Components
A product is a composition of materials and components. Your supplier needs to purchase these materials and components from their subcontractors. A large number of various components and materials results in a higher amount of purchases that needs to be made, and thus higher costs. The best way to avoid this issue is simply to reuse the same materials and components in several products. A positive side effect of this approach is that you might also be able to lower the suppliers Minimum Order Quantity (MOQ) requirement.
#3 - Avoid unnecessary product customization
Customized products often require customized tooling, such as injection moulds. While an injection mould can be used for a very large number of units (often counted in the hundreds of thousands) it’s in general paid for by the importer. Thus the more customized products you order, the higher the tooling cost will be. If you’re specifically importing unique products that have no equivalent on the market, then you can stop reading. However, plenty of importers fail to understand that even the slightest change in a design may lead to dramatically increased tooling costs. I list my suggestions below;
The importer is usually expected to pay for any additional tooling. Avoid product customization unless it’s essential.
Limit the product customization to components and/or materials that doesn’t require expensive tooling.
#4- Reasonably lower your quality requirements
I’ve seen plenty of situations where the importer requires a quality standard that simply cannot be matched by the supplier. This could be dimensional tolerances that are too narrow or other product specifications that are all but impossible for the supplier to comply with. From the supplier's perspective, quality requirements that are very hard to reach increase the waste and the risk of a total loss. The end result is that the supplier is forced to raise the price in order to compensate for the increase waste and risk. If a supplier clearly communicates that your requirements are hard or impossible to reach, you should do any of the following;
Look for another supplier
Accept a price increase
Adjust your requirements according to the supplier capability.
#5 - Ship by sea
Many importers tend to waste money on not so cost efficient transportation. Sea freight is in general much cheaper than Air Freight, something that can have a big impact on the unit price. Especially if we take customs and VAT into consideration, both of which are added on top of both the product price and the freight cost. However, Sea freight is slower and takes around 30 - 40 days to reach most ports in Europe and North America. Thus it requires the importer to have some foresight and place the order well before the existing stock runs out. It’s rather common that importers end up wasting their profit margins on highly expensive Air Freight because they “simply cannot wait 35 days” for the cargo to arrive. This is what I advise you to do;
Place your order at least 3 months before you expect to run out of stock.
Ask your supplier to quote you a C&F price that includes shipping cost.