Introduction: Price negotiation skill is an art. Every single day we are going through different negotiations, especially in the RMG industry. According to industry experts, we have a huge lacking of negotiation.
Many reasons are contributing behind that like lack of preparation or homework, lack of technical data, huge production capacity, lack of knowledge about competitors, proper study on buyer’s present sourcing hubs, fear to say “no”, huge bank loan, foreign fascination, open costing, fear to lose order, misuse of transparency, unable to present our unique strength and buyer dominated market, etc.
However, with its existing negotiation skills, the Bangladesh apparel sector is going ahead and recently Bangladesh is having increased orders. So, if we can overcome the above issues regarding the negotiation, we can boost the apparel business more effectively.
Win the psychological game
Buyers play a psychological game at the negotiation table. You know we make sure huge hospitality to make buyers happy. They feel superior–showing the feeling of being better or more important than others.
They call top management to create a serious environment, so that other employee fear to talk in front of owners if it needs to talk too. They create a furious expression to dominate our psychology, present some negative events so that we go buckets, highlight some mistakes in front of top management and make an attitude that they have huge alternatives, as a result, we lose the game before it starts.
If you dialyze the above points those are not relevant to your product costing. They just make extra pressure to create an environment to win. If you keep in your mind the above points that will give you extra advantages because we are serving a sector where every single day we have to face lots of challenges. Nobody can make the production process flawless, so it is part of our daily activities. We should always focus on the relevant issues on the negotiation table like our facilities, services, innovations, productivities, efficiency, fabrics, trims, utilities, qualities, etc.
Preparation before negotiation
It’s very important to make homework with enough time before the negotiation. For example, think that we are going to make a functional 2-in-1 jacket. Buying team will come from the local liaison office who knows about the Bangladesh market. Before siting the negotiation meeting to place the order (though you already have given them the open costing) you need to do:
- Start with a big smile, get a professional look and use selective words for communication.
- First of all you have to study the product details. Most of the time we forget to ask about destination, test parameter, packaging details and who are the end customers.
- If you are working as a local buying agent you need to think which factory you should select. You need to select the factory where you can achieve the right quality and meet the lead time. Factory selection depends on buyer standards and ends customers’ verity? Like Hugo Boss polo shirt customer and the H&M polo shirt customer are not the same.
- Find Out fabric consumption and cross-check with a buyer has any mini marker consumption, if the buyer has a consumption, you must ask the parameter used to make the consumption, specially marker efficiency and wastage. Because nobody wants to give non-value-added costs. When checking with your CAD -is it possible to achieve or not?
- Before declaring the CM must find out the SAM and discuss with IE or technical people about the production feasibility, any customization to make the production better and note that.
- You must have the raw material price stability analysis data of at least 2 seasons and a product to understand the potential changes within the lead time.
- PPM, efficiency and commercial cost need to be calculated very carefully so that you can give a logical explanation.
- Why you are declaring the profit margin higher you should not explain. The buyer never declares how much profit they have done so why do you share with them?
- All data should be written so that you can share it confidently. Don’t forget to add the facility cost which you have done specially for the particular buyers like recyclable polyester.
- Must have the Price validity announcement, not for the whole season or even if it is the round the year order. Because you don’t know the yarn price, raw material and political instability, or any unwanted situation like a pandemic.
Technical data: Technical information playing a vital role in a functional product. Before costing you have to know the test parameters, inspection method, sampling stages, approval process and most importantly if the test or inspection failed in the first time who will bear the cost the second time.
Huge production capacity: Maximum time we heard that we have huge capacity so that to fulfill the capacity we have to compromise in the negotiation table. It’s partially true, but my question is that if we have huge capacity why are we in the second position? And the market share gap between Bangladesh and China (the 1st position holder) is huge (6.8% to 30.8%).
Actually, we are competing with some same categories of products like T-Shirts, sweaters, jeans, etc. We are not competing in different types of products or value-added products. So that our market size squished and we are trying to compete with each other in an unethical way.
So, we have to diversify our product categories, and we have come out of our comfort zone. We have to create:
- New categories of products specially polyester-based
- Value-added products
- Real R&D, not copied product of China or Turkey
- Unique functional fabrics development
And we should not give more than 30% capacities to a specific buyer. When a buyer observes you are allocating 60 to 70 percent capacity for him/her, it will give the buyer huge advantages to play a game with you.
(To be continued…)