There are some tactics to negotiate with Chinese Suppliers. Be cautious and take advise from importers who have previous exposure to such situations.
If you are into import and export business, negotiation can form a major part of your daily work life. But the task can be daunting if you are trying to deal with the Chinese Suppliers.
In this article we are sharing 11 tips that will help you to to Negotiate with Chinese Suppliers.
How to negotiate with Chinese suppliers
Below are 10 effective tips to help you negotiate with Chinese Suppliers successfully. Follow them thoroughly and you can easily break-through great deals with your suppliers –
1. Involve a Translator, Neutral to Both Parties
Before you get into any negotiation with a Chinese Supplier, you better hire a translator to break the language barrier.
Engaging a translator is a practice to be started even before you narrow down your supplier list. May supplier, like mentioned before will not have English website. Identifying a supplier becomes easier with aid of a translator.
Here comes the necessity of the translator being neutral one. Choose a person who will not have their preference of supplier. This can save you from getting misguided.
2. Setting a Target on Pricing
Before you begin your negotiation, you need have a set price in mind. Ensure the figure you set per item is realistic. To have success in price negotiation, it is important that the figures are realistic, neither high, nor low, it should be at par with the market.
To get more clarity you can take prior quotations to help you with product pricing idea. Suppliers ask for similar quotes if they are to negotiate for a lower price.
3. Negotiate with A Slow Pace
Chinese Suppliers, unlike others in the world are a fan of one-on-one conversations. If you have identified your suppliers, schedule a meeting with the decision maker of your chosen supplier and pay visit with translator.
Pick up all relevant topics about the product like the quality you need, the price you have in mind etc. Go slow with the negotiation.
You might have to repeat your requirement and nullify their proposal several times. Remember to stay calm and show no sign of aggression with negotiation.
4. Chinese Expect Negotiation
Remember, Chinese suppliers expect negotiation for the price they set on a product. No bargain might come as a surprise to them.
However, you shouldn’t push the negotiation too hard. You can simply provide them with the price you targeted and ask for a price match with other similar quotations.
Price reduction can be requested if you have the market idea.
5. Let Your Suppliers Earn Some Profit As Well
When you are negotiating keep in mind that its justified for the suppliers to keep some margin for smooth operation.
It is already a known a fact that Chinese suppliers anyways don’t work with very high profit margins. Asking them to lower more than 3%-5% is as good as asking them to do a nett or loss business.
This is the reason you are supposed to keep a realisted budget or else your supplier might agree to your price terms and reduce the product quality without prior intimation.
6. State Your Product and Its Quality Requirement in The Beginning
Negotiating hard might lead to quality compromise. State your product quality requirement right at the beginning of the discussion.
Having idea on the raw materials is essentials to be firm about a requirement. You can start by sending your supplier with a SOP or the specification of the non-negotiable raw materials.
Give them as much product details as you can. A bargain is never successful if you don’t get the best product for a justified price.
7. Negotiate When the Price is Right
When you are bargaining with a supplier, the time has to be right, not earlier, not later. Ensure the negotiation has happened before your supplier take you across the prototypes and tooling.
Showing you the prototypes is a clear indication of the fact that they have your faith for business.
This makes the fact clear that there remains no of negotiation in such a case. Strike a deal before you commit.
8. Have an Update on the Raw Material Pricing
Being gullible is no solution to good business deal. You must be having a good command over the raw materials needed their prices when you are discussing with the suppliers.
They need to feel that you have the knowledge and are not going to be fooled easily. This reduces the chance of price raise after you have placed your order in the name of increment in cost of labor and taxes.
This means you need to stay updated on the products constant while the deal is on.
9. Over Bargaining is Not a Business Strategy
As discussed before, you should have a fair bargain so that both parties benefit from the deal.
Harvey Mackay of EverythingSupplychain.com said, “You do not get what you want. You get what you negotiate.”
It is very evident that if you negotiate too hard with your supplier, they will compromise on the quality to match your deal.
Chinese suppliers don’t say ‘No’ to their customers ever, they match the bargain. You need stay wary when your supplier refuses to lower the price.
This is clear indication that they are being pushed to the edge.
Read More : Best Cities for Doing Business in China
10. Be Prepared to Walk Away
When you are negotiating, lets try and step into supplier’s shoe to understand the situation for once.
You have bargained so hard that the supplier has agreed to reduce cost and then because of your quality specifications, decides to hike it up again you are to place your bulk order.
What can you do in such situation like that? If your supplier observes that they are running in low margin, they might end up rising the prices saying there had been increment in cost of labor or taxes.
But still, a deal is not final until you make payment for your order. So, if your supplier thinks that by raising cost, he can trap you, it’s a wrong thought.
Instead of giving in for the new deal, you should be able to walk out of the old deal. Its all about mental preparation.
Keep all these points in mind and set your business proposition in front of your supplier. When you are clear of what you require in a deal, nothing can go wrong.
Other Options for Better Deal
If you are not very satisfied with supplier offers, then there are other ways for you to get a product at a good price. Know your options –
- Contact with other factories and suppliers and place your order in bulk. Bulk order ensure cheaper rates.
- Customizing your product might lead to increase in price. Let your supplier know that the standard components and materials are fine with. Standard materials mean standard price as per market.
- Even you are fine with little hike in price as compared to the market then customization is an option. But don’t over customize a product. Doing so means hiring services and raw materials from various vendors, leading to havoc increase in price.
- Compromising on quality, though not a preferred option, might work sometime if you are too tight on budget.
- Don’t get last moment air-freights for good import. Sea-freights booked in advance are cheaper.
Summary : How to negotiate with Chinese Suppliers
Bargaining forms the core of any business. Know your supplier well and understand their demands properly before you place your terms.
If you are negotiating for quality product at a cheap price, you have enough knowledge on the raw materials needed for your product and their market value.
Remember, never to deprive your supplier from their legitimate margin earning. Bargain fair and get the best product. Overcome all cultural and language barriers, explain what you require and what price suites you.
Being clear to your suppliers can solve long term issues.