Tips for Renegotiating Prices and Terms With Your Suppliers
by Carrie Hinkel on March 27th, 2008
Most business owners just accept their vendors’ prices, payment terms, shipping terms, etc. as is, without ever questioning them or trying to renegotiate better terms. But the truth is, as a buyer, you have the leverage to get better pricing and terms – and it’s all just a phone call away. Here’s how:
Getting better prices on products
There are a few tactics you can use to lower your current wholesale pricing. The first is using an increased order quantity to get a discount. Let your suppliers know that you are willing in increase your standard order size in exchange for a discount in price. If you feel comfortable, you may want to give a reasonable discount percentage as a starting point, say 10 percent.
The second price-lowering tactic includes using your vendors’ competition as leverage; you’ll need to do a little bit of research for this one. Let’s say you have been successfully selling a certain brand of dog squeaky toys. Your customers know the brand name and like the quality of the items. However, there are a ton of manufacturers making squeaky toys for dogs. Get wholesale pricing from the other manufacturers and compare their prices to what you are paying. Show your supplier the competitors’ pricing and ask them to match the prices. If they are unable to match, then ask them to give your their best pricing that comes close.
Getting better payment terms
If you’ve been paying your supplier upfront with a credit card, chances are you can get net 30 terms. If you have net 30 terms, why not try for net 45 or net 60? Getting extended payment terms gives you more flexibility with your cash – you can even use it to increase your order quantities in order to get pricing discounts. This is one of the simplest terms to negotiate because most times it simply requires asking your vendor to increase your payment terms. If your company has a history with them and you’ve always paid on time, there’s no good reason why they wouldn’t extend your payment terms – especially if it translates into a larger order for them.
Getting better shipping prices
Take a look at your vendors’ invoices; if they’re charging you shipping fees then it’s time to talk with them about getting free shipping or at least sharing the shipping costs 50-50. First, do some research on other suppliers in the industry and see if they charge shipping fees to their retailers. If not, you can point this out to your vendors and ask them to match their competitors’ free shipping policy. If they refuse to budge, then see if they will agree to split the shipping costs with you instead. The next step will be for you to offer to increase your order amount in exchange for free shipping.
The key to negotiating with your vendors is by starting off by offering the terms most advantageous to you and then working your way down. Give each one of your suppliers a call and try to renegotiate your pricing and terms, one at a time. You’ll be surprised at how much you end up saving!