Hello, I'm Mike Bellamy, founder of PassageMaker Sourcing Solutions and blogger at www.AnotherChinaBlog.com.
I've been living in China full time now for over 12 years, and it is my pleasure to offer in this short video, some tips about how to negotiate with Chinese supplier.
Earlier videos talked about how to find and evaluate suppliers, now let’s get into how to negotiate a good price.
Different industries have different margins in China, and even within the same industry, some suppliers quote high, some quote low. So, I am sorry to say there is no set formula for negotiation like "if they say 100, I say 50 and we split the difference".
In the USA for example, we tend to think of negotiations as a sport with set of rules and protocol. Two gladiators sit at the negotiation table and the one with the supplier negotiation ninjitsu is going to get the better price.
But in China, the rules of negotiation are totally different. There is no fixed time when the negotiation takes place or ends. In short, there are a whole set of Chinese negotiation tactics which are beyond the scope of this video and certainly outside of the skill set of the average foreign buyer, including myself.
I like to joke that Chinese have been negotiating with each other for 5000 years of continuous history and it is not like I'm going to walk in the room and out negotiate them.
But even if I can't out negotiate them, I still have the ability to out research them. And this brings us to the most important weapon in your supplier negotiation arsenal: research.
Most of my negotiations take only a few minutes, but my research may have taken months. My typical negotiation goes like this:
Mr. Li, it has been a pleasure to get to know you and ABC company. I am impressed with the quality systems and the strong reputation your firm has. However, my co-workers on the sourcing team are required to get multiple quotations from multiple suppliers. My staff has found a factory of similar size to yours with similar quality and lead-times in XYZ location, and their price is 8% lower than yours. We would prefer to do business with ABC if you can match the offer from XYZ.
It basically comes down to a diplomatically delivered "take it or leave it". If my research is accurate about the options, for example supplier XYZ is 8% lower, then ABC supplier will know that I know what they know, in terms of what is the going price for a given product in China, and ABC will more than likely come down in price.
However, because suppliers have a very good sense of the going price of a given product in China, and they may even know most of their competition very well, never try to bluff or make up a fictitious 2nd supplier with prices made up out of thin air. If supplier ABC senses you don't really know the going price for a product in China, you will find it hard to negotiate effectively.
See you next time. Wishing you successful China sourcing!
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