You may think that the way to grow your business selling on Amazon or your own website is to sell MORE volume or RAISE your prices. Think again. Often overlooked, sourcing professionals know that PURCHASING is where the real money is made. I.e. buying low.
Long story short or the 80/20 as I like to call it, from August 2015 until now the RMB has depreciated 3-4% against the USD (this is a moving target so check your exchange rate). So if you haven’t already, now is the time to renegotiate pricing with your suppliers to get the discount. You can see this depreciation in the image below.
USD to CNY Exchange Rate Depreciation – Yahoo Finance
Some background information: the exchange rate between RMB (aka CNY) and USD is controlled by the Chinese government. They depreciated the RMB to boost the sluggish Chinese economy and export manufacturing sector. Depending on the severity of the slowdown this depreciation may continue.
BEST PRACTICE: The big players like Walmart have already requested up to a 5.5% price cut with all their suppliers across the board. Now is your chance to do the same to increase your margins and stay ahead of your competition. Anytime there is a moderate depreciation like this is an opportunity to renegotiate pricing.
Note: this works under the following conditions:
- The supplier’s previous price quotation was made before the devaluation in August 2015
- You already have an existing relationship with this supplier so they are motivated to do this
- How much you can get depends on your relationship with the supplier as well as your negotiation skills. I was able to negotiate 2-3% with our suppliers.
My advice is to ask for 5% and see what they offer. I’m curious to hear your results so let me know in your comments below how much you’re able to get. Good luck!
I found out the my supplier sells the same product but using different model number in China. The price is cheaper than the price they quoted me. I plan to negotiate more but also wonder if the quality would be the same even if they look the same. I would appreciate your feedback and comments in this case.
Stephanie,
Great question. Often times the same factory will have different quality grades of a product for export versus domestic China market. And most times the higher quality grade will be labeled for export and the lower quality grade for China. For example I was talking to a friend about Chinese teas recently and his supplier sells the top grade teas to Japan and the lower grade teas for China and at a lower price. So buyer beware – make sure you do your homework!
I hope that helps.
Gary
Hi there Gary, good content. I signed up to receive the email script to negotiate the price cut, but the email with the pdf is the dropbox for the baby hood for the Jungle Scout “Million Dollar Case Study” Webinar Viewers. It contains:
The Art of Alibaba Worksheet
Warning signs of a bad suppliers
Request for Quotations (RFQ) script
But no email script to negotiate the price cut which this blog post was about. I am also having the same problem when trying to get the Purchase Order template that you can use when placing orders from the first webinar you did (https://www.8020sourcing.com/junglescout/). How would i go about getting the purchase order template and price cut negotiation script as everything seems to be directed to The Art of Alibaba Worksheet and RFQ.pdf
Thanks