Here are 3 mistakes to avoid when negotiating with Chinese factories. 

(1) Starting with lowball offers

Nobody likes being lowballed. Take our home storage brand for example—we sell products on Ebay. Sometimes, through the bidding feature, we’ll get customers offering 50% or less of the sale price. 

Initially I got a little offended. But now I don’t waste the emotional energy and we have a process to simply ignore these bids. 

The same goes for a potential factory partner—lowball them and you will be lucky to even get a response. 

By doing your market research and requesting multiple quotes you can start to understand the “fair” price for your product. 

We take it further and look into the Bill of Materials, raw material costs, factory location and labour rates, currency fluctuations, order quantity, and many other things that go into what creates a fair price. 

(2) Skipping relationship building

Building on the first point, negotiations rarely happen during the first conversation. And rarely do they ever happen in a single conversation. 

Typically, negotiation starts after initial quotes are received and once intent has been established. 

Through sampling and while approaching production, negotiation is an ongoing dialogue. Details are clarified, the product is fine-tuned and expectations are aligned—leading to a final set of negotiations before placing a purchase order (PO). 

This iterative process is especially necessary when dealing with customized products as the factory needs time to understand and adjust to the product specifications. 

Our negotiations happen over email but increasingly with methods where we can get the closest contact to decision makers—WeChat and phone calls. 

(3) Being inflexible 

This can be true for either side. I have young children so I know all about “no, I don’t want to wear this colour of socks!” type of inflexibility. 

Just as insisting on a certain colour of socks for a toddler can result in a standoff, so too can being too rigid in negotiations with a factory lead to an impasse that neither side wants. 

If a factory can’t meet your pricing, they may have flexibility on payment terms. Similarly, if you can adjust your order quantities or timelines, the factory may be able to work with you more on pricing. 

What’s the main way to get ahead in negotiations? 

Ask a lot of great questions. 

Your factory has its pain points. So do you. Draw out more information when you hit a road block. Ask questions like: 

➤ Can you explain why this particular cost is higher than anticipated?

➤ Is there an alternative you can suggest that meets our needs?

➤ What would make this order work better for you?

What’s another tip or trick that has worked for you in negotiations?