Effective negotiation strategies in business are critical to be a gainer. Sellers can face the dilemma of losing the sale during price negotiation. Thus every single step you take, need to take so carefully. You need to analyze the other competitors, buyer present sourcing hubs, marketing strategies, etc.
Recently our apparel exporters are getting huge work orders. So, we need to step carefully while negotiating with buyers to get the right price.
Competitor analysis: competitor! Who is your real competitor? We need the answer first, as we can prepare ourselves to compete with them. We can define competitor in two ways:
- Country-wise competitor: We think China, Vietnam, India, Turkey, Ethiopia, Indonesia and Cambodia are our competitors. Are they our competitors? If we compare based on the manufacturing of basic items, we would see that their labor cost, energy cost and other facilities costs are more than that of Bangladesh. But yes, they are our competitors, while we think about synthetic, value-added and luxury items. To compete with them, we have to introduce more functional, synthetic and value-added products. In that case, if we get any buyers from China, Vietnam, India, Turkey, we will get huge advantages in terms of CM and FOB. Our entrepreneurs need to think that for which kind of products buyers still do not consider Bangladesh as the best sourcing destination. So, we need to build our capacity on those products as we can increase our contribution in the global market for those products.
- Local supplier wise competitor: We have 144 LEED green garment factories certified by the U.S. Green Building Council (USGBC), 9 out of the world’s top 10 green garment factories are in Bangladesh, 39 out of the world’s top 100 green industrial projects are in Bangladesh and 500 more factories are in the process of getting LEED certification. So, who will be the competitor here? Who will compete with whom? It should be clear first. So that unequal competition can be reduced. But in our country, we are doing an unequal competition. A LEED-certified factory’s competitor will be a LEED-certified factory or a green factory’s competitor will be a green factory. A LEED-certified factory should not compete with a compliance factory and a non-compliance factory should not compete with a compliance factory. In the name of transparency, buyers know everything from us, in this same way buyers, must be transparent with us about a single inquiry. They have to declare that how many types of factories they have sent the same inquiry. If a buyer gives an inquiry in three types of factories (like LEED-certified, Compliant and non-compliant) and starts negotiation considering the lowest price they get, the practice would not be fair, however, maximum buyers are practicing this unfair thing. This unfair practice leads manufacturers to do an unequal and illogical competition with each other getting orders at the lowest price. It creates an unsustainable business environment for the exporters. So, buyers should be ethical here, at the same time, exporters should avoid such completion that killing their own business, making them a loser and buyers are becoming the winner.
Right approach: Here I want to tell an interesting true story of a Swedish buyer who is sourcing from China. One of our marketers knocked him for a work order. After a long discussion, the buyer sent some Twin-One jacket pictures and asked for an approximate price to understand the supplier price ranges. While the marketer asked about the price, the buyer informed that he was getting it by $ 24. During price negotiation, the marketer said he could supply it for $ 18-20 only. It was a wrong approach.
Another example will clear the matter. Another buyer from the same destination sent some sweater pictures and asked for an approximate price to understand the supplier price ranges. While the marketer asked about the price, the buyer informed he was getting it below $8.
The marketer said, “Your price is competitive, but if you move to Bangladesh you will not get the advantage on raw material, but you will have CM, GSP, transport and service charge advantages. Overall you can save almost $ 10000.00 in our MOQ 20000 PCs, whereas I know your order quantity is almost 3 times than our MOQ.” And finally, they got the order without saying any target price.
Fear of saying “No”: “No” is a powerful word but in our country, maximum people can’t say ”No”. We need to think why? When we go to a shirt store and ask for a higher price, we are not afraid to say “No” but at the negotiation table, we are afraid of that because we didn’t create many more alternatives.
We give our maximum capacity for 2 or 3 buyers and we build our capacity to serve them. That means we are loyal to buyers. But remember, no buyer is loyal to suppliers. In my opinion, buyers only ensure their profit. When you will give them the best price and best quality, they will give you the order. When you ask for any favor, they will place the order in another alternative. So, we have to handle it professionally, not emotionally.
For creating more alternatives our marketing and merchandising team must be separated, dynamic, proactive and sales target oriented. Insight expert opinion is that a supplier shouldn’t give more than 30% capacity for a particular buyer. Even If they also added that those buyers who are always doing some basic item, we should leave them after a period, because it damages our creativity and dynamism. And this will save the sick and poor factories.
To be continued…