One of the biggest challenges sellers face when ordering from their Chinese supplier is meeting the minimum order quantity or MOQ. This is even more challenging if you have just started your business and it’s your first time to order. So, how can you negotiate with your supplier so you can order less than their MOQ?
This post is a comprehensive guide that will teach you the proper ways of negotiating with Chinese suppliers. But, before anything else, let’s address these two questions first:
What is Minimum Order Quantity?
A minimum order quantity refers to the lowest amount of stock suppliers are willing to sell. If a buyer cannot meet the MOQ, most sellers will not supply the products. This is because in order for the manufacturer to produce the products, they also need to purchase the required minimum quantity of raw materials. Not only that, but the factory also needs to set up its equipment and facilities, which can be costly. So, for them to meet the standards of the products, both in quality and quantity, suppliers also need enough resources.
As a buyer, why do you wish to buy the quantity less than the MOQ of the supplier?
The main reason why you are purchasing less than the MOQ of a supplier should be because you want to confirm the production quality of the supplier. It should not be because you are not sure if the products are going to sell. If this is your answer, then you have to rethink and perform research on the market again and be sure that you are confident in moving forward with these products.
In addition, your reason shouldn’t also because you do not have enough money to meet the factory’s MOQ. It’s totally understandable that your funds are limited right now, especially that you are still starting. However, you need to remember that after purchasing this small quantity, you’re going to have to order more in the near future to keep your business going.
Once these questions are addressed, you will have more confidence in talking with your supplier. Now, let’s say that you have five quotes that have different prices and MOQs. It’s easy to get tempted to land an agreement with the one that offers the cheapest prices. But, remember that the quality of the products is more important. However, being able to compare the prices will give you some ideas about which factories you’d like to work with.
The next thing you’re going to do is to order samples from these suppliers. When doing so, you can inform them in advance you might order lower or higher than their MOQ, depending on their production quality.
After receiving the samples and evaluating them, you are serious about going to the customization stage, such as redesigning the logo and the product, like changing the colors, and customizing the packaging design. After careful thought, you are now ready to negotiate.
A Step-by-step Guide on How to Negotiate With Your Supplier
This guide will provide scenarios that commonly happen when negotiating with manufacturers from China. This is for you to understand the negotiation process better. Let’s go through the steps:
As mentioned earlier, it’s not recommended to give out reasons, such as insufficient funds and not sure if the products are going to sell. These may be real reasons, but these are not enough to negotiate a supplier. If you are going to need customizations, it’s better to focus your reason on that. For example, you can tell the supplier that since there will be customizations and improvements, it is crucial that the first production run is done properly. You can tell the supplier that instead of ordering 1,000 units, which is the MOQ, you are going to order 300 units.
You can also specify with your supplier that the reason why you are only ordering 300 units is you want to make sure the durability of the packaging. You can also say that a smaller order can help you collect market feedback so the next order is done right.
These reasons are valid and many suppliers are going to agree. But, if the supplier will respond that they cannot make 300 units, then proceed to step 2.
The main reason why suppliers don’t agree with small orders is that they are going to lose money. If this is the reason for your supplier, you can tell them that you fully understand and that you most certainly do not want them to lose money, especially in the long run as you plan to work with them long-term.
Then tell them that you are going to lose money more since you are going to pay more for shipping. This is why you want to do this one time only just to make sure that everything is done perfectly.
By this time, many suppliers will agree to the negotiation. However, others will specifically tell you that their superiors won’t agree. In this case, they are using the boss card, but don’t worry! There are still things you can do.
In this stage, you have to use some of your creativity. Although the negotiating process should be taken seriously, you can be playful a bit. You can tell the representative something like, “Your boss said no? Can I talk to them directly?” You can also tell them that you are a serious buyer and that you have sold many products in the past.
It’s also good to inform them that you are going to spend a lot on marketing and advertisements since it’s a new product. Make them understand that you are spending a lot on the logo, packaging, and photography.
So the representative will tell you that they are going to talk again to their superiors. This time, let them know that you are comparing several factories and their company is one of them. Tell them that you’d love to work with them but they need to inform you tomorrow right away if they are okay with the 300 units. Otherwise, you are going to move forward and negotiate with other suppliers.
If they still say no, you need to listen to what they really want. Address these conditions the best way you can. These are the things you can do:
- Share the setup fee with your supplier
- Pay a price that is slightly higher for a low quantity order
- Purchase less unique components
- Increase the quantity to 500 units instead of 300 units
- Draft a PO of 300 units to prove your commitment
So these are the things you need to do when negotiating with your supplier from China. Remember, it’s how you present yourself and talk with the factory that will make or break in landing an agreement!
Best of luck!