Negotiate with Chinese manufacturers and suppliers is a tough job, beset by differences in language and culture, but with one thing both sides have in common: to make a profitable deal. If you aren’t steeped in years of experience with working with manufacturers in China, and many small business owners are not, it can be hard to jump right in. We asked a Shanghainese senior sales professional, who exports millions-worth of cookware products to Europe and the US each year, for an inside look into the process of finding and negotiating with a Chinese supplier.
Most business people automatically compare prices – but when it comes to Chinese manufacturing, that is easier said than done. There could be hundreds of factories that are able to make the same product, and price alone might not be the best indicator of which supplier is the best. Before you meet with potential suppliers, familiarize yourself with the norms, regulations, testing, and certification system for your imported products.
A good example from cookware business is the LGA testing and certification system and services developed and provided by TUV Rheiland in Germany, which has been widely recognized and adopted by the main supermarkets, discount chains, hypermarkets across Germany. It's a sign of quality (mainly in Germany and its influenced countries). This may not help if your main market is the US. However, like LFGB is the food contact regulations widely acknowledged in Europe, FDA is similar authority in the U.S., which is of similar or higher standards, and hence there is an impact on cost and price differences.
Know Your Market
Learn about the market you are operating in, and have some knowledge about your products and the technology used to make them. Ask people you know who have experience with sourcing similar products from China for references in price, suppliers, and quality. Use the power of the web for research: go to forums, read or ask questions. Nearly everyone shares their experiences online these days, so you’ll likely find something that applies to your product.
Get Smart References
A more effective way to get reliable references is to go directly to the stakeholders in the industry and its supply chain. For example, the coating companies is a key stakeholder for references for cookware factories. They, especially those internationally branded companies, usually have a preferred factory list that they work with, which is available to the end customers, i.e. the clients of the cookware manufacturers. Get peer reference from the suppliers, let them talk about their competitive relations.
Meet Your Potential Suppliers
After you’ve done your research on your product, manufacturing techniques, and your potential suppliers, pick your best prospects (perhaps the ones who have been recommended most) and set up in-person meetings at their factories. Make sure you meet with someone who has decision making power, and try to come off as an expert thanks to all of the research you’ve done. Building a professional trust (and even better a personal one) is key to having a good relationship with whichever supplier you choose.
Start With High Quantities
Ask for more of your product than you actually need – but don’t go overboard. If you need 100, ask for 500 to see how low the price might be. You can always revise your numbers when you actually place an order. Don’t, however, ask for 1000 if you only 100. When faced with that high of a number, companies sometimes cut costs when it comes to quality in order to make a profit.
Don’t let them know that this is the first time you negotiate with Chinese manufacturers and suppliers. Like any negotiation, don’t expose your weakness. If you let them know this is the first time you’re sourcing goods from China, they may take advantages of this when working with you on prices throughout the whole manufacturing and shipping process.
Communication is key in any type of relationships – and the supplier/buyer relationship is no exception. Dealing with foreign partners is challenging for both sides; and don’t be angry if they don’t understand you – they probably understand more English than you can understand Chinese. Just politely ask your supplier to recap their offer. Just because they say “Yes” or “Ok” to what you say, don’t assume that they 100% understand your request.
Some of the above are not directly about negotiation, rather to pick the right suppliers before making effective negotiations. But a big and important part in negotiation is preparation; preparation gives you the confidence entering the negotiation. So prepare yourself, do as much research as you can, be knowledgeable about your product. Knowledge is power!
Last small tip and trick, many Chinese owners start early and finish early. You have better chances to get good deals if they are hungry and sleepy, and have to make a decision in a hurry. This may not always work, but some shippers have shared this experience when they negotiate with Chinese manufacturers and suppliers – maybe it will work for you. So try to book your meetings when you can take advantage of this.