What goes into an effective purchase order
Feb 3, 2021
3 min read
Finding a competitive price when sourcing products is vital for your business, but it’s not easy. You need negotiation strategies and skills. When dealing with sellers on Alibaba.com, you also need to consider language and cultural considerations.
Successful price negotiation is about finding the right balance, where you pay the right price for the right quality, while the seller can make enough money to stay in business. A good negotiation leaves both parties happy with the outcome.
First, ensure that the seller is trustworthy. Seeing a verification badge on their online profile provides a level of assurance.
Next, identify the costs your seller incurs, and what their competitors charge. Your baseline price should be within reasonable range for them. Most sellers aim for a 20% profit margin, so it’s reasonable to ask for a 10% discount.
You may be negotiating with someone from a different country who speaks a different primary language. Multilanguage conversations are easiest with a translation too. We recommend both buyer and seller interact on the Alibaba.com App (AppleTM link) (GoogleTM link) . The app provides real-time translation so cross-language negotiation isn’t an issue. The app also strings your correspondences together, making it easier and quicker to keep track of everything being discussed.
Sellers are more inclined to work with established companies with proven sourcing power. Tell them how long your company has been established, and what level of purchasing you do, if it’s impressive. Tell the seller how many units you want to buy, your shipping destination, and how frequently you want to buy.
Alibaba.com sellers are more likely to give you discounts if you’re a high-volume customer. The seller wants to sell as much product as possible so if you’ll be purchasing frequently and in large quantities, you will get a better deal. Provide sales projections if you need to convince them. Or share records of past purchases.
If you’re a newer business, look for manufacturers willing to work with someone smaller, and who is willing to grow with you.
If the seller says prices need to go up by 10%, don’t hesitate to ask why. Don’t take things at face value, dig deep to understand why things are happening.
Asking questions will also help you to understand their business. Ask them: What other products are you selling to businesses like mine? What is a hot seller for you?
Asking for samples of products can create the sense that you are a serious buyer interested in placing an order. When you receive the sample, the seller can’t claim that their prices are higher because they have a higher-quality product, since you know how the quality compares with competitors.
You are in a position of power when you’re talking to a seller. Don’t be afraid to say you can’t do the deal and walk away. The seller will often come back with a better price and better terms. Talk to multiple Alibaba.com sellers to encourage competitive pricing. Let the seller know you have competing quotes that are equally attractive.
When your seller won’t negotiate on price, you can negotiate other things that affect your cash flow. You could negotiate the amount of deposit, or how long it will take to pay off a purchased order.
Other aspects you can negotiate on without affecting price include payment terms, faster shipping, responsive ecommerce fulfillment, warranty improvements, and better packaging.