Every $1 counts. If you reduce the price of your product by 10% then your profit margin also increases. A less expensive product also means you have to invest less up front for each order too.
In this article we cover our top tips for negotiating a better price with your factory.
Tip 1 Look for More Factories
One of the fastest ways to get the best price and supplier is simply to start sourcing your product from zero again.
Use all the main sourcing websites, such as Alibaba, Global Sources, and HKTDC or similar sites for the USA. Email all the factories that make the item you want to sell on Amazon.
By contacting more factories, you’re more likely to find a cheaper option. If you have 10 factories to choose from and you negotiate with each one, you’re more likely to end up with a better price and product. Sometimes it takes contacting 500+ suppliers to find a really great product & price.
Tip 2 Ask for Other Materials
Ask your supplier, or the top five factories you are considering, what other materials can be used to make the same product. You might find a better material that costs less but is higher quality.
For example, imagine your product is a backpack. There are hundreds of thousands of materials you can choose from. Something like nylon can be very tough yet cheap too.
By asking for different options from each supplier – you open up more possibilities with your product also.
Tip 3 Increase Your Order Quantity
Ask suppliers for the price for the minimum order quantity, as well as a price for 2000 to 5000 units.
If you’re ordering a minimum order quantity it’s hard to get them to reduce the price much, but if you’re ordering 1000 or more units you should be able to negotiate a discount.
Ordering in bulk also lowers the international shipping costs. For 1 product, I was ordering 1 x 4o foot container each time. When I ordered MOQ the price was $4.38 a unit, but in larger volumes we got it down under $3.
Tip 4 Change the Specification
Ask the factory for ways in which you can reduce the cost. They might give you suggestions for alternative specifications or for other products in their catalog that are much cheaper.
Maybe the factory has included a gift box with their price, you can switch this out to a polybag with an insert card.
For most products – there are lots of ways to cost engineer the price down without reducing the overall quality.
Tip 5 Lowball
Once you have decided which five factories you want to work with, give them all a target price of 80% of the lowest cost supplier.
For example, if your cheapest supplier quoted you $2.00 for an item, ask all five if they can do $1.60 including packaging. The factory will say that their quality is higher and they can’t reduce their price. Keep pushing saying you have a purchase order ready if they can hit the target price.
Then, negotiate for 7 to 10 days. Many buyers give up after two or three attempts but by holding out you should be able to get at least one of the factories to reduce the price substantially.
I have found by asking for a low price, some factories get offended, some can’t do it but usually there are 1 or 2 that come very close to the price I need with a quality product.
Tip 6 Get Your Own Freight Forwarder
A big part of the cost of any product is the shipping from the factory to Amazon.
Many of the factories get a kickback from the freight forwarder. They may quote you a low price for freight but then later you get a surprise big bill. Most of the money goes back to the factory.
This is a common occurrence. Search Google for freight providers near you and get multiple quotes. You could make big savings on the landed cost.
As we mentioned above, shipping in larger quantities can also help reduce the costs of your item.
Tip 7 Visit the Factory
It’s hard to negotiate by email and phone.
If you visit the factory you plan to order from, they will see you are more serious. You might also be able to work together to find ways to reduce the cost.
You will also see all the materials, options and other products they have on offer. This way you can be sure to build the best possible product for your listing.