Amazon Sourcing: 5 Tips to Negotiate with Chinese Suppliers

So you’re about to enter a deal with a Chinese supplier. Scary? Not really, there are just certain things to remember that are useful for dealing with any kind of supplier as well as a few cultural differences that you might want to bear in mind. More about that later. For now, let’s focus on how to get those suppliers to think you’re a pro, even if you are in fact new to this game

1. Visit the factory you intend to use, or get someone you trust to check it 

Whichever supplier you decide to go for, always double check the factory they use is capable of producing the product you want them to make. That’s not to say they might be trying to dupe you, but in most cases the suppliers will outsource part of the production to factories which do not belong to them, usually because their volume capability is not big enough to handle all their clients’ orders. If you do not fully understand the operation and background of your supplier, that might cost you in the long run. In most cases, you want to avoid the middle man as much as possible. In China, the best way to do business is face-to-face. But don’t worry if you can’t go to China in person, there are agents and inspection companies who will do this for you. It means more money up front but is definitely a good investment. Visit, or have someone you trust visit the factory before and during production to ensure quality control while the product is being made.

2. Sign a clear and well-drafted contract

This is just generally good practice for dealing with any business regardless of nationality. Make sure both parties are clear on payment terms, product details, delivery time/dates and the procedures used to ensure quality control. It is possible to be very flexible about all of these things but you need to make sure both you and the supplier are clear about what each side needs to accomplish, and that these commitments are written down, before signing on the dotted line. Here is where cultural differences start to creep in. Very rarely will you hear the phrase “I can’t” from a Chinese person. If you think you might be asking too much of them, feel free to backtrack a little but make sure the contract is clear on what you expect from them.

3. Negotiate, negotiate, negotiate

Chinese businesses love to negotiate. Basically, whatever supplier you engage will view the signing of the agreement as the beginning of the process rather than the end of it, so just bear in mind you may have to do some more negotiating, particularly around prices. A lot of suppliers will put a time limit on the quote they give you because the costs of certain manufacturing materials fluctuate. Putting something in the contract about not allowing any price hikes may come in useful if the supplier comes back to you asking for more money. Price is not the only thing that may be debated in future so be prepared to haggle.

4. Understand the supplier’s cost structure 

Always verify the prices of different elements of manufacture, such as the cost of individual materials, labour hire and the marking up of the product. Also bear in mind that China is a very big place and the price for one aspect might be different if you choose a supplier from another area of the country. If you have time, research the product and how it is made before you even start talking to suppliers, so you have an idea of what they’ll need to do (and then you sound like you know what you’re doing when negotiations start). Manufacture isn’t the only element you need to be aware of. If your plan is to put the product on the market in your own country, there’ll be delivery, taxes and packaging to consider. Also, if you are importing the product you need to make sure it is legally compliant with your country’s rules. The supplier will only be concerned with Chinese rules and regulations.

5. Quality Control

Quality, quality, quality. This goes back to the first point about visiting the factory or having a trusted client do it for you, as well as having a good contract. Bear in mind if you’re a small business and the supplier is much more experienced, they’re going to have a lot of clients. One client’s opinion on what makes a good quality product may be different to yours. Deal directly with the supplier if you can or make sure you have a good agent who can do so. Also be very specific in the contract about what you expect in terms of quality from this product, so there is no room for error. Some areas of China and some businesses do not have the same standards as in other parts of the world. You may think you have found the perfect supplier for your product, but they might not have the same definition of quality as you have. That doesn’t mean you need a new supplier, it may just mean you need to dictate to them exactly what you expect. Put it in writing. Have them send you sample pieces, as many as it takes. Again, this might mean more money up front ($80 for sending a small sample by DHL), but it is worth it in the long run.

At the end of the day, no advice beats this one: Research. Look at as many suppliers as you can. Have other businesses left feedback on the ones you’re interested in? Make sure you know the product and exactly what you need. Even if you only want to pretend like you know what you’re talking about, a little research will help that. These are useful tips for convincing Chinese suppliers that you’re a pro, but there are plenty more out there. Just keep these things in mind and learn as you go along and it will make all the difference.

 

A table for common terms we used when dealing with suppliers:

 

Vocabulary	Explanation
After Sales	The provision of services, support and spare parts after making an initial sale. This often occurs in the provision of complex machinery which requires regular maintenance.
Anti-Dumping Fee	A protectionist tariff that a domestic government imposes on foreign imports that it believes are priced below fair market value
CBM	CBM stands for “cubic meter” in shipping. This measurement is calculated by multiplying the width, height and length together of one’s carton, and if one has multiple cartons to ship, by adding the CBMs of each carton together.
Certificate of Origin	A certificate of origin (often abbreviated to C/O, COO or CoO) is a document used in international trade. It is completed by the exporter and certified by an recognized issuing body, attesting that the goods in a particular export shipment have been produced, manufactured or processed in a particular country.
Country of Shipment	The country from which goods are shipped
Custom Fee	A tax levied on imports (and, sometimes, on exports) by the customs authorities of a country to raise state revenue, and/or to protect domestic industries from more efficient or predatory competitors from abroad. Customs duty is based generally on the value of goods or upon the weight, dimensions, or some other criteria of the item
DDP terms	Delivery duty paid (DDP) is a shipping term specifying that the supplier is responsible for all costs associated with delivery of the goods to the buyer
EAN	The EAN barcodes are used worldwide for marking products often sold at retail point of sale. The numbers encoded in EAN bar codes are product identification numbers. An EAN barcode is constituted by 13 digit (12 data and 1 check) according to barcoding standard.
FOB terms	Under FOB terms the seller bears all costs and risks up to the point the goods are loaded on board the vessel. The seller must also arrange for export clearance. The buyer pays cost of marine freight transportation, bill of lading fees, insurance, unloading and transportation cost from the arrival port to destination.
GSP / Form A	A Certificate of Origin Form A, also known as Generalized Preference. Certificate or, simply, as a ‘Form A’, is used to support certain products for claim to preferential tariff under the Generalized Systems of Preferences (GSP)
HS Code	The Harmonized Commodity Description and Coding System, also known as the Harmonized System (HS) of tariff nomenclature is an internationally standardized system of names and numbers to classify traded products
Incoterm	The term, Incoterms®, is an abbreviation for International Commercial Terms. They are a set of rules which define the responsibilities of sellers and buyers for the delivery of goods under sales contracts for domestic and international trade. The Incoterms rules are accepted by governments, legal authorities, and practitioners worldwide for the interpretation of most commonly used terms in international trade.
L/C	A letter of credit (L/C) is a document from a bank guaranteeing that a seller will receive payment in full as long as certain delivery conditions have been met. In the event that the buyer is unable to make payment on the purchase, the bank will cover the outstanding amount.
MOQ	The Minimum Order Quantity (MOQ) requirement specifies the lowest quantity of a product that the supplier is willing to sell
Payment Terms	The conditions under which a seller will complete a sale. Typically, these terms specify the period allowed to a buyer to pay off the amount due
FCL, LCL	Full container load (FCL); Less than container load (LCL)
Production Leadtime	Period between receipt of the first time order and until when it is available for shipment (ready for delivery)
Quantity 20′, 40′, 40’HQ	Number of product SKU per 20′ container, per 40′ container, per 40′ HQ container

Author bio

Sarah Kaiser is a digital marketing manager at Casino Global Sourcing, the sourcing division of a French retailer Groupe Casino. Godirek.com is the product catalog of Casino Global Sourcing, which offers helps and tips from product sourcing, cost saving to sales boosting for Amazon third party sellers . She’s a fan of water sports and has studied business management in France. Her works have been published on dozens of websites and blogs.