5 things to do when wholesale businesses negotiate with suppliers

Even if you have the best sales team and distribution chain imaginable for your wholesale business, it won’t amount to much if you are paying too much for your stock in the first place. This point should drive home just how crucial negotiating with your current and prospective suppliers is to the success of your company.

Rising to the challenge

Because the amount of stock sitting on the shelves directly impacts cash flow, most SMBs are compelled to operate with a fine balancing act between purchases and sales. This creates a real challenge when it comes to inventory control, inventory management techniques and constant monitoring.

The good news is that the law of mathematics is stacked in your favour due to the fact that as a wholesaler, you are dealing with high-volume sales. With these high volumes, small changes in the price you pay for your products can make a big difference to your bottom line.

And how do you get that price? Excellent negotiation skills are a good place to start. The following advice focuses on some of the most commonly utilized principles that successful businesses apply when negotiating with their suppliers.

1. Research, research and research

There is no alternative to doing good research. Whether it’s to discover how much a product is costing the supplier, who else can supply to you, or how much everyone else is selling it at, diligent research will always pay dividends in the end. It is good practice to obtain at least 3 other quotes and use that in negotiations with the supplier of your choice. The more information you have, the better equipped you will be when it comes to securing the best deal for your business.

2. Having the right mindset

It may appear obvious, but before you even think about talking to a supplier about getting the best price, the longest payment terms, or any other flexibilities, you need a strategy. Being clear about what you are hoping to achieve will not only assist you in focusing on your business goals, but those you negotiate with will pick up on it too.

Through pointing out the positive aspects of supplying to your business, you will go some way towards reminding the supplier of “what’s in it for them”. The most favourable deals are those that bring benefit to all the parties involved - the real-life win-win scenario. Put yourself in your supplier’s shoes and try to think like they would, while asking yourself what you would hope to achieve from the deal if the tables were turned.

3. Communicate clearly throughout the negotiating process

It cannot be stressed enough just how important communication is to every aspect of business, but it is particularly crucial when negotiating with suppliers. Slips of the tongue, misinterpretation, and even cultural misunderstandings can make the process longer and harder than necessary. Keeping communications open and transparent throughout the negotiating process will ensure that both parties know exactly what they are getting out of the deal.

This is especially important when nailing down the terms and conditions of such things as delivery, pricing, and the all-important dates of payment. Work to make communications a two-way street where you feel free to ask the questions that you need answered. Being upfront and transparent doesn’t mean that you have to give your game away either. Play your poker face and hold your cards close, only revealing them when you can make them count the most.

4. Show them the money

Of course, it’s all about the money. That’s why you and your suppliers are negotiating in the first place, isn’t it? Money really does talk, and if your cash flow can stand it, you could use yours to do some of that talking. It is fair to suggest that in most business environments, there is a kind of unseen sliding scale in operation between the available cash up front, the price offered, and the final payment terms. That is to say, that if you are able to put down a deposit, you will then probably be in a strong position to negotiate everything down to the most favorable terms. The larger the deposits, the better those terms are likely to be. The challenge, of course, is that you then have to factor in the impact that will have on the cash flow.

5. Aim high to buy low

Sometimes it can make a lot of sense to make your initial enquiries based upon much larger volumes than you actually need. The logic being, that this will give you a valuable insight into how the low the supplier can actually go. While you may not be able to secure those terms and prices for your smaller volume, it will undoubtedly give you another tool to bring to the negotiating table.

Making it all work for you

Before opening negotiations with any supplier, make sure you have a full and clear understanding of what exactly you want and what you’re willing to pay for it. Once you have a clear idea set, you can start negotiating, working on getting the best prices and payment terms. This will have a positive impact on everything from cash flow to revenue, to relationships within your industry.

See Also: 

Tips for successful supplier relationship management

10 ways to find & verify Chinese suppliers you can trust

10 ways to increase your wholesale sales