Since 2009, China has dominated the global trade scene. The country has occupied the world’s largest exporter position since then and in 2017 alone, the value of exported goods exceeded 2.097 trillion dollars!

Digital business models and opportunities have further increased the popularity of Chinese goods. Entire business models are based on Chinese exports. Running an Amazon FBA business or a dropshipping business, for example, almost certainly means that you’re at least partially dependent on Chinese supplies.

To make your business successful, you have to source the right items from the right suppliers. Your margin is very important. Thus, you need to find reasonably-priced products and reliable partners that will help you grow in the long run, whether you do Amazon fulfillment or you run a Shopify ecommerce store.

Price negotiations with Chinese and other international suppliers are dependent on several key essentials. The following guide will help you master some of the steps that will give you financial stability and help you recognize whether suppliers are attempting to overcharge you.

Do Your Research

Regardless of the monetization model you choose, you need a business plan to make your endeavor successful.

How much will it cost you to set up the business? Will you need custom products created for you? How about ongoing expenses? Do you plan to scale and expand the opportunity in the years to come? Where do you plan to source products from and how much will that aspect of running the business cost you?

These questions will help you set a realistic target price.

When you know your framework, you will find it much easier to identify the right Chinese product suppliers and to negotiate reasonable sourcing prices.

There are no universal rules in the field. A margin that would work for one business isn’t necessarily a good goal for another. This is why you need to start with the math. While digital opportunities like an Amazon FBA business tend to cost very little to set up, there will still be expenses you’ll have to factor in the equation.

Get Multiple Quotations

Have you dealt with the sale of pet products via a Shopify ecommerce website before? If your answer is no, chances are that you really have no idea about what goods in the field cost.

To start understanding the market, solicit multiple quotations from Chinese product suppliers or distributors.

There will be numerous Chinese product suppliers offering identical or similar goods. Getting official quotes from all of them will help you compare wholesale prices and determine whether you’re being treated fairly.

In addition, getting multiple quotations will give you knowledge and knowledge is power in price negotiations.

You will have to create a request for quote (RFQ) that asks a supplier or a manufacturer about some or all of the following:

  • Cost
  • Price per unit
  • Minimum order quantity
  • Shipping terms, conditions, and fees
  • Features customization and how much it will cost
  • Bill of materials

Here are a couple of different RQF templates you can use to simplify the process of inquiring for prices when communicating with Chinese product suppliers.

Keep in mind that sourcing websites like Alibaba already have a built-in RQF feature that members can access via their profile.

Know When to Negotiate

If you’re sourcing ready products for your Amazon FBA business, you can do the price negotiations at any given time.

When a product is being created for you from scratch or it’s being customized for your ecommerce business, however, things are a little bit different. If you’ve already requested a prototype or some customization, you’ll find it very difficult (almost impossible) to negotiate a price reduction in the aftermath.

Since you’ve submitted specs and you’ve already invested in customization, the supplier knows you’ll be placing an order. Otherwise, you’ll be at a much bigger loss than you already are.

This is the main reason why you have to negotiate prices before you commit to any additional interactions with your Chinese product supplier. Even more importantly, you need to have some proof of the terms and conditions that the two of you have agreed upon. Signing a sourcing contract before the beginning of the partnership is one of the best ways to protect your interests.

Use Strategies That Will Give You a Better Price

There are various strategies you can employ to get a better price than the officially announced one.

The first and the most obvious choice you have is buying large volumes.

If you have an interest in the purchase of a large number of items, you will potentially get a wholesale discount from your Chinese supplier.

Chinese manufacturers and distributors know that negotiations are a part of the process. Thus, you can confidently send a short note and ask if a discount would be possible in the event of buying a large number of products.

You can easily concentrate your orders on a smaller number of suppliers/manufacturers. This way, you will place larger orders with them to benefit from better prices.

Avoiding product customization and choosing options that feature standard materials or manufacturing processes can also prevent overcharging.

Product prices depend on many things. Premium materials and the need for specialized manufacturing equipment will obviously bump up prices. The Chinese market is so diversified, however, that you will potentially discover at least one standard option that matches your quality requirements.

Customized products are similar to premium products. Specialized tools and molds could be required for such items. In addition, asking for customization will make it difficult to compare the quote you’re getting to a similar one.

The more customized/premium your product is, the higher the likelihood of getting overcharged.

Take some time to research manufacturers and suppliers. Just because someone promises to create a specialized product for you doesn’t mean someone else isn’t already mass-manufacturing a similar unit.

A few other strategies that can give you a better price include:

  • Choose more affordable shipping/transportation options (these usually take more time, which is why you have to plan ahead)
  • Bring down your product quality requirements
  • Try to identify the manufacturer to eliminate distributor and other middle-men (these entities usually bring the price up to earn their commission)
  • Acquire products at times when discount campaigns take place (Alibaba features several periods during which prices go down significantly)

Be Ready to Walk Away

A final thing to understand when launching an Amazon FBA business and dealing with Chinese suppliers is that things aren’t always going to go your way.

Even if you’re polite and professional, chances are that you’re not going to see eye to eye with every entity you come in contact with. That’s ok and a normal aspect of doing business.

As you research the market and you come across additional opportunities, you will understand that you’re not reliant and dependent on a single Chinese product supplier. There are always alternatives and some of them could be much better than the original offer you got.

It’s possible for a supplier to eventually increase a price or start offering lower quality. In such instances, you should be prepared to end the relationship and move on. If you’re hesitant, your Amazon FBA business or ecommerce website could suffer.

Time and experience will make you a good negotiator. You will also accumulate a lot of market knowledge that will enable the instant recognition of the best offers out there. The process could be a bit more challenging in the beginning but if you take your time and do your homework, you will definitely identify the right products and suppliers to make your business profitable.