“How To Source Your Private Label Product In China, Without Getting Screwed By Alibaba Suppliers.”
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Negotiate with Chinese Suppliers for the BEST prices on Alibaba
Without a comprehensive negotiation strategy you will never achieve the best prices on Alibaba.
That’s why today, I’m giving you the lowdown on how to negotiate with Chinese Suppliers like a pro.
These tried and tested techniques will have your Private Label Business achieve the best prices, every time.
Alibaba and Negotiation
Negotiation is the only way you can achieve the best prices on Alibaba. That’s because it’s a fundamental aspect of the platform.
However, if you don’t live in China negotiation is often a completely alien concept. That feeling is rooted in how different buying goods in Europe, America and Australia is when compared to China.
Think back to the last time that you negotiated with a salesperson.
I bet it was when you were buying a car, or maybe a large piece of furniture.
Be honest. How much did you manage to get knocked off the price? In Europe, it’s an impressive feat to achieve a price reduction of 5%, or even a set of complementary tires
However, that isn’t the case in China.
In China price negotiation is part of everyday life.
Normally, people buy their food from local markets where prices aren’t set. This gives people the opportunity to negotiate on how much they’re willing to pay for their everyday basics, whether it’s shrimp, pak choi, or coffee.
Chinese suppliers bring this mindset to Alibaba. That’s why negotiating is the norm. Suppliers expect their base prices to be haggled down, so they make sure that they start off high
That means as an Amazon FBA Seller importing products from China, you need to master negotiating techniques to make sure that you achieve fair prices. If you don’t haggle, suppliers WILL take advantage of you.
Sell Yourself as a Serious Business
Negotiations with Chinese Suppliers begin as soon as you start a conversation.
That is, they’re already part way through when your supplier sets their base price.
In my experience, there isn’t a single base price, instead base prices are adapted by suppliers to match their assumptions about the buyer. If they think a buyer is unfamiliar with the purchasing environment, they’ll use that to their advantage and set their prices high.
Lesson 1: If a Supplier realises you’re an Amazon FBA Seller, they will set their base price to the highest level. That’s because they assume you are unfamiliar with the platform, and they think they can make a quick buck out of you.
Base Prices in China – My Personal Experience
Recently, two of my friends visited me in China.
To pass the time, we visited a fake market to find the cheapest Rolexes
When my friends spoke to a market vendor offering Rolexes, the base price set by the seller was 1,000 RMB, or about $140. Note, these guys don’t speak Mandarin and haven’t ever lived in China
I saw what was happening and joined the negotiation. I started speaking to the seller in Mandarin. He immediately slashed his base price in half, from 1,000 RMB to 500 RMB, or about $70
That’s because the shopkeeper recognised that while I wasn’t a local, I knew what I was doing. He knew there was no way I was going to buy a fake Rolex for $140
By achieving a lower base price before I’d even started haggling, I was able to negotiate the price down much lower than my friends could.
Say that you want to buy a Rolex for 300 RMB. If the vendor sets their base price at 1,000 RMB, you’ll be lucky to get them down to 700 RMB. However, if they set their base price to 500 RMB, you might just manage it
This story is important because it shows the importance of appearances. To get the best base price you need to disguise yourself as a local.
Lesson 2: Your first encounter with a supplier will determine the final price you achieve when negotiating. As a seller, you need to make sure suppliers take you seriously from the outset.
Making a Good First Impression
That’s why when you approach suppliers on Alibaba, you have to make a good first impression.
One of the easiest ways to do this is with your first email.
- Always present your product requirements logically and professionally. If you understand your product well, you will be able to set out all of your requirements clearly in a Product Inquiry Sheet. This shows the supplier that you are professional, and it helps you get comprehensive answers to your inquiries quickly. Try out my free Product Inquiry Sheet template, which you get for free when you sign up to the latest Easy Peasy Sourcing Web Class.
- Choose your words carefully. Your first email needs to be professional. I recommend stating that you are considering working with the supplier, on the basis that they can satisfy all of the requirements listed in your Product Inquiry Sheet. Make sure your email has a professional signature. This shows that you operate a serious business.
- Give yourself a job title. Suppliers are less willing to work with single person operations. That’s why it helps to present yourself as an employee working for a large business. You can achieve this by setting your job title as Purchase Manager. It’s easier and more effective than presenting yourself as your company’s CEO, as it allows you to distance yourself from some of the difficult negotiating decisions.
Whenever you contact a supplier, it’s crucial that you understand everything about your product. This means that you need to be familiar with all of the product’s technical terms and know which certifications are relevant to your product
Every product is different, so there’s no simple guide for this.
However if you conduct enough research, you will be able to find all of the technical information you need.
If you need some help doing this, head over to QIMA, formerly Asia Inspection, and seek their advice. They’re experts and can provide all the information that you will need about your product quickly and professionally.
How Many Quotations?
To successfully negotiate with Alibaba suppliers, you need to have a clear overview of the cost and quality of products from a wide range of suppliers.
The only way to achieve this is to get as many quotations as possible. Five quotations sounds like a lot, but it isn’t. You need at least 20 quotations.
This step is important, because despite the common myth that a higher price means a better quality product, this is not always the case on Alibaba. You can find very expensive products that are extremely poor quality and vice versa.
To make this process more manageable, I always hire a Sourcing Agent. They will do this work on your behalf, get you hundreds of quotes in very little time. While it does cost money, it will save you money in the long run.
Lesson 3: Get as many quotes as possible.
The Same Number of Samples
You also need to get as many samples as possible. That’s because reviewing samples is the only way that you can determine the quality of a supplier’s product.
It’s important to conduct this step well before you start negotiating with a supplier, because understand what is on the market will provide you with leverage during negotiations
For instance, you may have found a supplier that matches all of your criteria but they are quoting a price per product that is too high.
When you challenge them on the price, they will often claim that their prices are high because their products are better quality than the competition’s.
If you’ve looked at a lot of products, you will have a better chance of contesting this. That’s because you will be able to quote where you have found a cheaper product that’s a similar quality. Making your chosen supplier more inclined to reduce their prices.
Lesson 4: Always review as many samples as possible.
Know What You’re Paying For
When you source a product from a supplier on Alibaba, never forget that you’re sourcing more than a product.
You will be paying for a range of extra services including packaging, branding, labeling, shipping and customisation.
However, when you receive your quotes, suppliers will quote a single price and not normally provide clear breakdowns of where the costs lie. That makes it difficult to understand how much you are paying for each aspect of the product
The lack of transparency makes it difficult to understand exactly what you are paying for, and harder for you to identify where costs are mounting.
That’s why you should always request a BOM, or a Bill of Material. This is a breakdown of all the costs involved with your product, including packaging, branding, and more
The information in the BOM will help you negotiate better prices, and will help you intelligently alter your products to reduce their cost.
Lesson 5: Always request a BOM
Don’t Order Unnecessary Samples
Always make sure you’re working with a reliable supplier.
If you can establish that your supplier is reliable, you will be confident enough to forgo additional samples every time product designs are altered.
While it’s obvious, if you do not constantly have to pay for new samples, you will save money.
Lesson 6: Don’t spend money that you don’t need to spend.
Develop a Good Relationship with your Sales Representative
By establishing yourself as your company’s Purchase Manager, instead of its CEO, you will develop better relationships with your Sales Representative
That’s because when you want to negotiate product prices down, you can always blame it on your ‘Boss’.
Inserting your ‘Boss’ into conversations will help reduce friction between yourself and your Sales Representative. It makes it easier for you to empathise with the Sales Representative’s challenges, while also keeping your red lines firmly in place, without it ever getting too personal
Using this tactic, I have found it much easier to develop positive working relationships with suppliers, and achieved better negotiated outcomes.
Lesson 7: Never underestimate the importance of a good relationship with your Sales Representative
The Biggest Sourcing Secret Revealed
Get ready for the big reveal.
On Alibaba, not all buyers are created equal.
In fact, there are three tiers of buyers and corresponding base prices that suppliers will set.
This is how they rank:
- The Amazon FBA Seller – the highest base price
- The Foreigner – the middling base price
- The Local – the lowest base price
That means that a lot of people are set up to fail because of who they are.
But overcoming this is simpler than you think.
Suppliers treat Sourcing Agents as locals, and will offer them Local prices.
Recruiting a Sourcing Agent is the only way you can get the best prices from Chinese Suppliers on Alibaba
Even if you’ve already achieved a good price from a supplier, you can get that price down even further by getting the right Sourcing Agent to approach them again.
The cost may seem steep, but in my experience, the right Sourcing Agent can save you an incredible 20% to 30%. That price covers their fee and helps you make even more money when you get your product market.
Lesson 8: Get local prices by working with a Sourcing Agent.
Now you’re negotiation ready, get out there and start brokering some great deals with Chinese Suppliers on Alibaba.
Which top tips have you found the most useful? Have you got any other great techniques that have helped you haggle incredible deals on Alibaba?
Let me know in the comments section below!