Negotiating the Best Deals with Your Supplier
Any veteran merchant will confirm their profit is made when they buy a product rather than sell it. For this reason, negotiating the best deals with your supplier is key to securing the broadest possible profit margin.
These tips will help you get there.
Do Your Homework
Can you find out what your competitors are paying? Can you extrapolate based on what they’re charging? One thing is certain, if they’re constantly undercutting you and aren’t showing any signs of going out of business, they’re getting better deals than you are.
Talk to some other suppliers; see what price they’re willing to give you on the same goods. How much do you need to make on each sale to cover your costs and extract a reasonable profit? What is your ultimate goal? Answering these questions will give you a good idea of where you need to be, so you’ll know a good deal when you see it.
Be Honest
Don’t claim you can sell 10,000 units in one month when the best you can do is 5,000. Now, with that said, nobody’s saying you need to disclose everything—as long as you’re not committing lies of omission. In other words, disclose what you need to disclose to get your deal, but don’t share information that can erode your bargaining position.
Tell Them Who You Are and What You Can Do
Unless you’re an Amazon or a Zappos, odds are any new vendor you approach is going to need some background information on your business. Give them a succinct history of your company; show them your ecommerce theme – your Shopify-built website, your Shopify-built website, explain your business model, disclose your long-term plans to help them see how doing business with you will benefit them in the long run. In other words, demonstrate your potential!
Terms Matter Too
While your goal should be to get the best price you can, seeking favorable terms can be of consequence as well. Ask about incentives, co-op advertising, payment terms and the potential for exclusive deals. All of these factors can evolve into more profit. Take co-op advertising for example, if you have to spend less money to get an ad out there, that’s cash you can keep in the coffers for other purposes. In many cases, it’s just as good as getting a lower purchase price.
Meeting in the Middle
The goal of any negotiation is to find the point at which both parties can derive the maximum benefit from the deal. If you’ve done your homework, you know a fair price is and you have a pretty good idea what your competitors are getting. Don’t be so caught up in winning you try to push past the point of reason. Think of your supplier as a partner rather than an adversary. Talk about creating long-term relationships in which you both come out ahead.
Leverage the Competition
Unless you’re in a situation in which your supplier has a monopoly on the goods you need to represent, you can bring their competitors into the conversation. Again, having done your homework, you have a ballpark idea of what you can acquire the merchandise for from another supplier. While you shouldn’t disclose the pricing you could get elsewhere, it doesn’t hurt to let them know they aren’t the only game in town, so you will look elsewhere if you can’t reach an agreement.
It’s Real When the Contract Is Signed
Anybody can agree to anything in theory, but it isn’t reality until it’s down on paper and signed by both parties. Handshake deals might make you feel good, but they can be difficult to enforce. When you reach an agreement, get it in writing.
These seven tips for negotiating the best deals with your suppliers will help you get the greatest possible price, so you can be more competitive in the marketplace. When done well, all parties will benefit, including your customers. Even better, it doesn’t have to be an arduous task, as long as you plan in advance and pay attention.
