2019 FBA Case Study: Part 3 – Negotiating with Suppliers & Samples!

What is up guys!

In part 2 of the FBA Case study I showed you how I found 20 high quality suppliers on Alibaba with the new Jungle Scout feature.

I have send them all a standard message and now I want to give you a little bit of insight of how I negotiate with Chinese suppliers.

First of all, it is very normal for Chinese to haggle over the price. If you are not used to this then this might feel kinda cheap but you will quickly get used to this.

This is the first message I send em:

Hi,

I am looking to manufacture product X ( see attachment for picture ).

Product description
Size: X
Weight: X
Material: X
Packaging: x
Color: X

Are you able to manufacture this product?

For my first order I am looking to purchase 1000 units FOB. Can you send me a quote for this?

Is it possible to add my logo on the product? How much is the extra cost for this?

What is the current lead time?

Thank you very much

I usually make an Excel spreadsheet where I would save all the supplier info. This will give me a quick overview of all the suppliers.

Negotiating Round 1

Supplier Port FOB Price Quantity Branding Packaging Lead time
Mr. A Ningbo $ 4.87 1000 Yes, + $0,10 per unit Yes, + $0,3 per unit 30 days
Mr. B Shenzhen $ 5.10 1000 Not possible Yes, + $0,35 per unit 25 days
Mr. C Ningbo $ 4.95 1000 Yes, + $0,20 per unit Yes, + $0,35 per unit 30 days
Mr. D Ningbo $ 4.90 1000 Yes, no extra charge Yes, + $0,50 per unit 40 days
Mr. E Ningbo $ 4.85 1000 Yes, + $0,20 per unit Yes, + $0,40 per unit 30 days

In the spreadsheet above I have already narrowed down the 20 suppliers I messaged to 6 suppliers. Some suppliers did not respond. Others required a Minimum Order Quantity (MOQ) that was too high for me. And others just had terrible communication.

Now I will start to negotiate with these 6 suppliers I have shortlisted. I like to keep it straightforward and just have them outbid each other. My goal is to get the lowest price. Right now Mr. E offers me the lowest price, so I have send all other suppliers the following message:

Hi,

Thank you very much for your quote! I really like the product you manufacture and appreciate that you respond very quickly. However, my boss wants me to pick the lowest price for this product and we received a quote for: $4,70 FOB for the same product.

I would much rather order from you but this is only possible if we get a more competitive price.

Please let me know if we can do something about the price.

Thank you!

Very basic. I straight up tell them that I like their offer but they need to drop their price if they want to get my order.

Negotiating Round 2

3 out of 4 suppliers dropped their prices after this message. Mr. B wouldn’t drop his prices, it’s also not allowed to put my branding on the product if I order from him so I am going to eliminate him.

Mr. C dropped his prices but only to $ 4,90. So I am going to eliminate him as well.

Supplier Port FOB Price Quantity Branding Packaging Lead time
Mr. A Ningbo $ 4.70 1000 Yes, + $0,10 per unit Yes, + $0,3 per unit 30 days
Mr. B Shenzhen $ 5.10 1000 Not possible Yes, + $0,35 per unit 25 days
Mr. C Ningbo $ 4.90 1000 Yes, + $0,20 per unit Yes, + $0,35 per unit 30 days
Mr. D Ningbo $ 4.70 1000 Yes, no extra charge Yes, + $0,50 per unit 40 days
Mr. E Ningbo $ 4.85 1000 Yes, + $0,20 per unit Yes, + $0,40 per unit 30 days

I am now left with 3 suppliers. I am pretty happy already with the prices but I think I can still get it a bit lower.

Samples

But first I will order samples from all 3 suppliers. I have also asked them to include their business card & example of the packaging they use. When I have received the sample I can test the actual product quality and continue negotiating.

To save a bit on shipping I have them ship the sample to an address in China first. Because shipping in China is very cheap (none of them charged me any shipping cost). I will then have the 3 samples put together in 1 box so I only have to pay shipping to my office once, instead of 3 times. The company I use to do this is: TipTrans.com

 

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9 Comments

  1. Hey man, I sent you an email a couple of weeks ago asking about a volunteering opportunity.

    I’ve had my own product going for 7 months and I’m wondering if you’d be willing to take on someone that can bring some more value to your current operations.

    I have a finance degree and have worked in the sector for a little bit now, but hoping to get more insight into the e-commerce business. Hope to hear from you soon, thanks!

    1. Hi mate,

      Sorry I did not reply to your email. Right now I am not looking to take in volunteer or do any coaching. This might change in the future, but for now I am to busy with Amazon & the site. But I can always help you if you have any questions if you drop em in the Q&A section.

  2. Thanks for the great post. I have a question about how you finalized your price to $4.70. Was that just an estimate? You could’ve shoot for lower price but just interested how did you come up with $4.70. Thanks!

    1. I stopped pushing for a lower price because there were only 3 suppliers left at this point. Perhaps I could push to a lower price but then I will only have 1 supplier left over. I rather have my options open, so I am happy with the $4,70 price for now.

  3. Hi mate, thanks so much for this case study.
    I have a question regarding branding and packaging. As per my understanding, you want to give your own package designs to the manufacturer so they print and package your individual pieces of product product with it. I am not sure about branding part. I mean, you would have a product logo on your package itself, so why branding is different to packaging in your supplier table?

    Also, in terms of designing the package. How do you deal with it? When It is the best time to commence designing the package so its on time for post-manufacture process?

    Thanks alot

    1. Hi,

      Branding on the product itself is a requirement if you want to use Amazon’s Brand Registry ( which will give you loads of bonus tools later ). So that is why I want branding on the product & packaging.

      It is probably best to have your design done before you start with production. Else you might run in production delay.

      1. Ah, I see. So do you register all your products when you bring them to the market? Even the smallest one? Are you planning to register the one from this Case study? When you register the brand you will also need the UPC code right?

        1. You need UPC codes regardless, also when you don’t plan to register with brand registry. Yeah I brand register all my products.

          1. Ah ok, I get it now! Thanks. And what do you put on the product itself as a branding, logo, name, or both? For example, what would you put on a metal garlic presser as branding? Is that even feasible to put something on the product itself?

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