How to Negotiate Price and Terms with Chinese Manufacturers

China Business Consultants, Sourcing Specialists, Quality Control. ProcurementAt this point your initial shortlist has been narrowed to your finalists, you have hopefully met most of your prospects and you have possibly eliminated a few.  The list is now significantly smaller than it was when you started.  You should have a good feel for the capabilities of each of the factories you have visited.   Now is the time to begin your pricing and terms negotiations.  You should have a good idea as to where the market is and therefore you may have a strong preference for one particular factory based on price and for another based on some of your other priorities.  Ideally, you might be able to get the more expensive factory down to a point where it would make your decision an easier one.

All factories will negotiate to some level.  But asking for huge concessions will usually not work.  Be realistic in your negotiations and understand you are developing a relationship that is one that needs to be nurtured.

China Business Consultants, China Sourcing, Quality Control, Supply Chain ManagementNegotiating terms can be difficult as many factories simply do not have the capital to be offering new clients financing or eliminating down payment requirements.   This is where a trading company or agent can help.  Effective intermediaries have existing relationships with these suppliers or at a minimum are in a better position to help build guanxi and negotiate more favorable financing terms.  Factories selling to a local are more apt to offer concessions when it comes to down payments or financing than when selling to a foreigner.

Negotiations with several factories is wise as we highly recommend having at least one back up supplier for your products in the event something happens to your preferred supplier.  We often manage orders at multiple factories for the products we manage for exactly this reason – we want to maintain relationships with several factories for a given product.  This is especially true if the factories operate in different regions.  It is simply a risk diversification strategy that we employ often.