Do you want higher margins? Do you want to purchase your products for at a lower cost? Do you want to price your goods more competitively to have a better chance at winning the Buy Box?

 

Every seller wants to cut costs, but not every seller knows how to lower their cost without also lowering the quality of the goods.

 

How do you cut sourcing costs without skimping on the quality of the product or your relationship with the seller?

 

1. Order higher volumes.

 

Suppliers generally prefer to produce larger runs of products at a time. Thus, in most cases, the greater the order quantity, the greater the discount. The majority of suppliers will offer a lower price per product when you order a higher volume of goods. For example, ordering double the MOQ of products will likely cost less per piece than if you purchased only one round of the minimum order quantity. This is often called a “discount quantity.”

 

2. Negotiate.

 

Whether a new or existing partnership with your supplier, you can try to negotiate the price per unit with the factory. Start by shopping around and getting quotes from a number of other similar factories. You can then go to your first or ideal factory to show them the quotes from the other manufacturers; this can give you a sense of the average cost and help negotiate the price down. Keep in mind that you don’t want the price to be too low, as some factories might offer a low price while cutting corners.

 

You can get sourcing negotiation assistance through Ask Idea Sourcing.

 

3. Perform inspections often.

 

You should be doing quality control inspections often. This will ensure that you are getting quality goods each and every time you order. With frequent inspections, you’ll be able to catch any potential problems early before they become a time-consuming, money-consuming monster. If you let problems fester, you’ll end up with a disaster that could drastically damage your margins.

 

Learn more about performing quality inspections here.

 

4. Discuss other discounts.

 

After or during negotiation, talk to your suppliers about additional discounts they may offer. Some manufacturers offer discounts based on when and how you place an order.

 

An “early buy” discount is when you buy goods out of season or not in high demand; for example, you could be ordering Halloween costumes in February or Christmas goods in March. A “defective allowance” means you can purchase defective or damaged products at a discount, which you could then potentially buy and resell as used.

 

Moreover, some sourcing associations offer discounts to their members. Contact Ask Idea Sourcing to find a community of sellers and sourcers who can help you find the best discounts.

 

5. Change your shipping method.

 

Shipping by ocean costs less than shipping by air in most cases. Maritime transport is the most economical method if you are shipping high volumes of large or heavy goods. Keep in mind that the lead-time is longer for ocean than air, though, so you should plan your order timeline accordingly.

 

If you need to ship via air because the volume or size is small, use negotiated air courier rates. Often, manufacturers will have relationships with certain air carriers who can offer discounts. Your volumes will be shipped with others’ to create a lowered group rate.

 

6. Look at currency discrepancies.

 

Keep an eye on the Chinese and American markets to watch for currency depreciation and changes. The Chinese economy has been slowing down in the past few years, possibly even heading towards a recession. This will impact the overseas import market drastically.

 

New government policies in China will lower the foreign exchange rate, which will make Chinese exports more competitive. The U.S. dollar is worth more than the Chinese RMB, so it may be worthwhile to discuss this exchange with your factory to potentially receive discounts.

 

7. Build a relationship with your supplier.

 

Ultimately, the more your supplier trusts you, the easier it will be to negotiate. If you have a strong relationship with your manufacturer, they are more likely to give you a discount while still maintaining quality.

 

How do you preserve strong relationships with suppliers?

  • Get to know the sales rep.
  • Send them thank you notes.
  • Be reasonable with negotiations.
  • Don’t take them for granted.

 

You can also try to solve their pain point to gain extra leverage. For example, they may have extra inventory that they need to get rid of. You could offer to buy it at a low cost and sell it out. Or, for example, if the factory is running behind on schedule, you could be lenient with your current order’s timeline. Help your supplier and they’ll help you.

 

The Bottom Line

 

Cutting costs start with building relationships with your suppliers. You can only negotiate discounts and changes to the production line if you and your supplier have a strong line of trust and connection.

 

Build a face-to-face relationship without being face-to-face through an intermediary like Ask Idea Sourcing. We will put you in contact with the highest quality suppliers, who function on the ground both in the U.S. and China.

 

Don’t wait to start cutting costs!