3 Ways to Negotiate Lower Prices With a Factory
Everyone wants lower prices, but simply asking for them is not an effective strategy! Here are three tips that will help you to lower costs in a methodical and professional way with your suppliers. But remember, a low price isn’t everything. Be careful not to compromise quality for the sake of saving money…it will cost you more in the end.
Before negotiating pricing with your supplier, it’s important to do your research about what other vendors are charging for the same material or process. Ask 3-5 comparable suppliers for a quote, and then focus on the middle offer(s). Are you currently paying more than the average price? If so, inform your factory about your research and let them make a counter offer. Be objective with the facts, and firm in your desire to reduce your costs, but be careful not to insult your factory by insinuating that they are dishonest, or by openly threatening to take your business elsewhere. This could create a hostile working relationship that you are forced to live with, should you decide not to move your production after all.
If you are currently paying on the lower end of what other suppliers have quoted however, trying to reduce pricing based purely on the competitive landscape is not going to be an effective strategy. Explore one of the next two methods instead.
Change the Design
There may be an aspect of your design that can be adjusted in order to lower production costs without altering the product’s aesthetic or functional value. Asking your supplier directly for advice about how to do this is usually the best way to trouble-shoot design changes. It’s also good to think through the materials that you use, and evaluate other possible alternatives based on suggestions from vendors, and an analysis of what your competition is using. One surefire way to lower materials costs is to choose stock items instead of custom-dyed/custom-molded fabric, parts and accessories.
Prices almost always go down as production quantities go up. Inform your supplier of a target cost that you are trying to reach and then ask what quantity you would need to order in order to receive a similar cost break. If this quantity is out of reach (which it most likely is, or you’d be doing it already), ask if the factory could group your order with another customer who produces a similar product to get more of a bulk discount. This requires flexibility with your delivery schedule but it may be worth the wait!
If you have an established relationship with your supplier, they may also be willing to do a larger order at a lower price, and store the goods without requiring full payment up front. Smaller quantities are then shipped on a monthly or quarterly basis, and you pay the supplier in smaller batches. This will usually only work however, if you have a solid ordering history.