This post is by Jae Jun, a seven-figure Amazon seller and founder of Gorilla ROI.
You’ve found a brilliant product on Amazon. The scouting methods and tools show you that this is the one.
You’ve gone through the initial steps of:
- Contacting multiple suppliers and requesting samples
- Rigorous sample testing
- Narrowing it down to two suppliers based on the initial samples and price
At this point you are going to enter the negotiation stage as you don’t want to take the quoted prices at face value.
I’m going to share six simple strategies to help you negotiate and get better prices from your suppliers, without sacrificing quality and workmanship.
View Top Product Sourcing ToolsWhat is the goal of negotiating?
The goal of your negotiations is to create a win-win scenario with your suppliers.
You want to find the best partner in terms of price and quality. You don’t want to choose a supplier simply because they offer the cheapest price. That could be a fatal mistake because you will likely get what you pay for.
If you are making widgets and supplier A quotes you $1.00 compared to $0.75 for supplier B, it is tempting to start negotiations with supplier B. But they could be using recycled materials for the widgets, taking shortcuts in manufacturing, and have no process for quality control (QC).
By the time you work to improve the quality of the widget and work through QC, your final cost could exceed $1.00.
Let’s take a look at these simple yet effective strategies we have taken to reduce our costs and build long term relationships.
All without making it seem like we were trying to win while the supplier loses.
1. Prepare data for negotiations
For this article, let’s assume you are looking to source yo-yos.
Ever been in a situation where you don’t want to buy something, but because the facts were all laid out on the table, you didn’t have any excuses to say no?
That’s what you need to use to your advantage with suppliers. One of the best practices for any negotiation process is to prepare data to share with the suppliers. This is as quick and easy as making a comparison table.
Here’s a blank template:
| Product: | Supplier A | Supplier B |
|---|---|---|
| Price | ||
| Quality | ||
| Material | ||
| Packaging offered | ||
| Customizable | ||
| Lead time | ||
| QC process |
And a filled-in example for the yo-yo project:
| Product: | Supplier A | Supplier B |
|---|---|---|
| Price | $1.00 | $0.85 |
| Quality | 8/10 | 7/10 |
| String type | Double braided nylon | Cotton threads |
| String length | 1.5 meters | 1.5 meters |
| Case material | PLA | PP |
| Packaging offered | Blister, box, poly bag | Box |
| Customizable | Yes | Yes |
| Lead time | 6 weeks | 4 weeks |
| QC process | ISO 9001 | Internal |
The reason why you want to prepare a table like this is to show the difference between the suppliers very clearly. It puts you in the driving seat of the negotiations based on whether you are going for quality or cost.
You can choose not to disclose some rows from the table, if you feel it puts you into a weaker negotiating position.
However, sharing this type of table shows the two suppliers where they stand with each other. That allows them to “negotiate against themselves” instead of giving you broad statements, quotes and empty promises in order to secure a new customer.
You can adjust the table so that when you are sending it to Supplier A, you show them the data that makes them look weaker than Supplier B and vice versa. You don’t want to select a supplier and then find the cost continually going up in order to meet your final requirements.
In the example above, Supplier A offers better quality, customization and QC. The downsides are that they are more expensive and their lead time is longer.
Supplier B is cheaper and quicker, but their materials are definitely cheaper too. The overall tested quality is slightly lower than Supplier A.
2. Ask for pricing based on quantity tiers
You’ve probably heard that you don’t want to be the first to give out a target price. The initial price of $1.00 could be 20% higher than their existing customers.
