As a total supply chain solution, China beats most countries on cost, talent pool and workforce maturity. A China wholesale strategy makes good business sense for several reasons, but the fidelities of partnering with Chinese factories should motivate you to take the right steps starting with your initial interaction with suppliers.
1. Negotiate price correctly
Amazon sellers’ price their products 7x-8x the costs of sourcing them from China. When you’ve figured out your margins, haggling too much on price could work against you for the following reasons:
– It is necessary to be reasonable with your supplier because ideally you will stay in business, as long as they stay in business. If every Amazon seller tried to beat down the price and squeeze manufacturers’ profits, they would potentially be risking their own business.
– The quote may not be what you pay. Suppliers do put time limits on prices as they must deal with fluctuations in raw material prices, higher taxes and other cost variables. This is a common reason of why price changes do occur for the same product. Understanding these nuances and accepting that variations do affect the amount you are willing to pay initially, could pay off as your supplier may be more inclined to return the favor if their cost of manufacturing goes up.
– Manufacturers often investigate your business on Amazon to see how it’s faring. They will know whether you’re making a huge margin and if your first order has sold quickly. If you treat your supplier right the first time, there’s a good chance that the price they quote or subsequent orders won’t increase, which if it did it could take a bite from our profit margins. This is true for any supplier, not just those in China.
So, what is a good way to negotiate and what can you negotiate? You can negotiate a fair price on large orders and the promise of along-term commitment. If you’re happy with the product quality and interested to buy above the MOQ, you should then ask for concessions. A $0.10 price increase won’t hurt your profits, but at ¥ 0.68 in Chinese currency can make a difference to the supplier’s bottom line.
It is possible that a manufacturer that specializes in the type of products you sell quotes a high price. How do you tactfully convey that you know enough about the market to understand that you can get better quotes elsewhere? By doing your research – it’s the best way you will be able to negotiate a competitive rate or possibly a better rate for a larger order.
Great negotiation is about having conversations that include facts and figures as these are undisputable. A single line such as, “Mr. Lee, I have another quote from a factory not very far from yours. Mr. Zhang has quoted $5/piece which is roughly 40% below your price,” should benefit you greatly during a negotiation.
Different industries have different margins. When you’re sourcing from a manufacturer that customizes in metal stamping, you cannot expect a similar quote from someone that makes ABS plastic conduit boxes or toys. Doing your research and relying on the numbers matters more than playing hard. Comparing apples to apples should bear fruitful as you negotiate.
Suppliers will also be willing to negotiate certain terms and conditions so long as they’re reasonable and don’t affect their manufacturing processes. For instance, if a piece of the product you’re sourcing is prone to falling off or getting damaged easily – such as a gasket or covering – you can specify 150 spare gaskets or coverings with each order. Here again, a deal that doesn’t hurt the supplier’s position will encourage them to make allowances.
2. Know what you’re in for when you request a sample
The sample is proof of the manufacturer’s capability. Order samples from all shortlisted manufacturers to determine which factory ticks the boxes on quality and price. These tips will help you at the time of placing your order.
– Want to sell a variation of a product on Amazon? You can request the supplier for a sample that has all the specifications you want from changes of color, size, logo and other features. The sample fee will include a one-time logo creation fee, which the supplier will adjust against your next order. However, creating a custom sample usually takes time. If you’re hoping to have a sample in your hands within 3-7 business days, you should consider ordering one from what the supplier already has in stock. Specify details so that they send you a sample that is relatively similar to the one you want.
– You may be able to order a free sample and only pay for shipping. It’s up to you whether you’re okay having each sample shipped separately and pay the $30-$60 in shipping costs per sample. The alternative is to use a freight forwarder to bundle all the samples and ship them in one box.
– Depending on your products, you can order different types of samples.
