Successful negotiation in China
Due to the many cultural differences between China and western countries, you will need plenty of patience when negotiating with factories and suppliers. Often the first price quoted can be ridiculously high and they will expect that you will know that this price is just being used to start the price negotiating process. This means that negotiating is an ongoing process and not a one time event.
The rules of negotiating.
Only negotiate with a person who has the authority to make decisions.
China is a hierarchical society, this means that at any factory there will only be a handful of people with the power to make decisions. These decision makers usually can't speak any English so you will either have to learn Chinese or negotiate with them through a translator.
The English speaking sales representative that you first make contact through will most likely have no input in any decision making. If there are any problems later with your order, they are usually blamed on the sales representative.
That is why at China Factory Sourcing we only deal directly with either the factory manager, head engineer or with the factory owner. This allows your account manager to discuss all details with the factories decision makers in Mandarin Chinese on your behalf. This allows for no room in blaming language misunderstandings later.
Problems – the real story and what you are told.
Because of the importance given to “Face” in Chinese culture, very rarely will will anyone ever admit to there being a problem with your order.
Your order might be 2 weeks late on delivery and you will be told there is no problem – it is coming soon. Whoever you deal with at the factory will never want to tell you there is a problem because of the embarrassment of loosing face and you will probably never find out what the real reason for the delay actually was.
Minimum Order Quantities – MOQ's
When you initially contact a factory or check product details on Alibaba.com or global-sources you will often find minimum order quantities that are far more than what you wish to purchase. These quantities are often 10,000 or 100,000 pieces. But you only want to buy 1,000 pieces, so what to do?
Many people will move on and contact a trade company that has a much lower minimum order requirement, but also a significantly higher price. But what many people don't realize is that Chinese factories are very open to new business and are more often than now willing to lower minimum orders to start a new business relationship.
The trade company that you contacted will probably be buying from these factories at the same low MOQ that you want. He can do this because he knows the language and how to negotiate, you can do this too by using China Factory Sourcing services.
Sourcing smaller quantities:
If you are looking to import smaller quantities, you will obviously have less bargaining power. But of course you will still want to get the best value deal possible. In this case you will need to shop around to get the best deal.
But be very careful....
You may contact 3 factories and get 3 completely different price quotes, really low, really high and somewhere in between. So how will you know which supplier to choose?
To start with you need to ask them as many questions as possible – what materials they use, the grade and thickness of materials, anything really that is important to you and the quality of your products. Make sure you get all these details in writing, so that there can be no misunderstandings in the future.
Then get some samples from these factories and again confirm in writing the quality of the samples will match the finished products. It is not unheard of for factories to buy better quality items from another factory or store and send them as samples of their own goods to prospective customers.
Remember never to buy purely on price! As the old saying goes that is something sounds too good to be true – well it usually is.
Sourcing larger quantities:
If you are looking to buy substantial quantities of goods, you will need to have a production cost estimate for your desired products.
To calculate this you will need to know the following:
- > Current material costs
- > Labor costs
- > China's tax back system
- > The amount of production you require
Once you know this information you can work out relatively accurately the per unit cost to manufacture your products. When you know this you will be in a great position to negotiate the best possible price.
*Don't forget when compiling your figures that labor, material and shipping costs will vary depending on the location of the factory. Inland factories will have cheaper labor costs, but will also incur increased shipping costs and possibly material costs.*
To be successful in sourcing from China you really need to understand how to play the negotiation game Chinese style. We have over four years of experience negotiating the best deals for our customers and will use what we have learned to get the best deal possible for you too.