Negotiating with Alibaba Suppliers EASY Guide for Amazon FBA

Contacting and negotiating with Alibaba suppliers can be a daunting task at first. But with practice and armed with bit of know-how, you’ll be getting the best deals more quickly than you think.

When starting Amazon FBA, it’s easy enough to look for and find a product. However, the thought of negotiating with professional companies in China on Alibaba, did not fill me with joy.

I wanted to communicate coherently in order to get the best deals and not be bent over a barrel, cash swindled and stuck with a mass of low-quality inventory.

Thus, I have created this guide for the less experienced to hopefully build your confidence and get you negotiating adeptly, first time around.

Just getting started with Amazon FBA? I wrote complete guide for beginners which you may find helpful: How to Start an Amazon FBA Business 6 Step Guide

Types of supplier

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There are two types of supplier you will come across on Alibaba: Manufacturers/Factories and trading companies. What’s the difference?

Manufacturers/Factories

These are companies that manufacture their own goods. As they are the manufacturer, their prices will often be lower (hurray) but have a more limited selection of goods (boo).

Factories can be hit or miss in terms of quality, some are excellent and some not so. Agents that work for factories more often than not, have worse English and are less accommodating.

Trading companies

A trading company does not manufacture its own goods and thus charges a higher price. However, often this comes with a larger selection of goods and more predictable quality. The agents have good English and are often easier to work with as a result.

Across my different brands I work with both manufacturers and trading companies.

Sometimes the cheaper price is worth the slightly harder communications. Sometimes the communication is worth the slightly inflated price, if the product is complex for example.

Neither is better than the other – just be aware of the difference!

How many suppliers to contact

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Once you have found a product you want to source, type the keywords into the Alibaba search e.g. whiskey stones.

Make sure to change the drop-down box to ‘Suppliers’, this will then show all the different suppliers, and not just different products from the same few guys.

Look for suppliers with the exact product or similar products to what you are after. Additionally, an ideal supplier would have the following credentials:

• 3+ years experience on Alibaba.
• Gold Award.
• Accept Trade Assurance.

Click ‘Contact Supplier’ on any that fit the criteria. I like to select up to 5 different suppliers, to start getting quotes and information from.

But I heard Skype was the best way to communicate?

Skype, WeChat, Whatsapp or Alibaba chat? Help!

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These four tend to be the most accepted mediums of communication on the platform. While Skype, WeChat and Whatsapp are the quickest way to get a response. I personally don’t like having my business spread all across different platforms.

I prefer to keep all communication on the Alibaba messaging system. This keeps everything in one place and gives added security in the rare event of a disagreement – everything is documented properly.

WeChat is the Chinese’ preferred method of contact. Use it later down the line, once you are familiar with your supplier and making regular orders.

Initial contact with template 

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It’s important to realise that not every supplier on Alibaba is desperate for your business. When making contact please consider:

• Be clear and concise with what you are looking for.
• Make it easy for them – you are less likely to receive a reply if a non-native English speaker has to put a lot of thought and effort into the response.
• Try to appear as well established as possible (without telling too many porkies).

My preference is to firstly introduce myself and company, state what product I’m interested in and what specifically I require from them. Attach some pictures to further illustrate what it is you are after.

Here’s a template letter to get you started:

Sir/Madam,

My name is Dom, I purchase products for a shop/brand called Company in the UK and online. We are looking to make a new addition to our catalogue and can see that you manufacture products similar to what we are looking for.

We are interested in your gaming chairs, specifically a design similar to those shown in the pictures attached. 

Could your company offer a design that includes:

1. Adjustable arm rests in both height and angle.
2. White and Black colour scheme.
3. Ability to put our logo on the cushions and on the seat. 
4. A metal 5-star base with large casters.
5. Adjustable back tilt and frog mechanism seat tilt.

Are you able to provide a rough MOQ and price per unit for us? Do you have a product catalogue that you can send across please?

I would be very grateful if you might consider my proposal and many thanks for your time. I hope this can be the start of a relationship that brings both sides great fortune.

Kindest,

Dom Haines

Purchasing and Procurement
info@Company.co.uk
Company Ltd

This template can be copy and pasted to each supplier that tickles your fancy. Once you’re happy that the supplier can manufacture the product and you have some rough MOQ’s/prices, consider asking for a sample to be made.

Should I get a sample?

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Yes. Samples are usually ‘free’ however, you will be charged a hefty shipping free. £50-100 is not uncommon to get a sample into your hands.

Consider getting multiple samples sent because:

• It won’t cost much more than being sent one.
• You can make sure the ‘Golden Sample’ isn’t just a one off.
• You can send them to third parties such as photographers, designers etc while you wait for your main shipment.

Price

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Unless you know the true value of raw materials and manufacturing costs, you won’t know the true value of the product. As such, we can only find the best prices by getting a range of quotes and comparing them.

Key points:

• The lowest price is often the lowest quality.
• Prices can be influenced by shipping terms e.g. EXW is cheaper than FOB.
• Suppliers are well aware of what their competitors’ prices are, play them against each other but don’t lie about competitors’ prices or you will lose credibility.
• Expect to be able to negotiate prices down by about 10-20%, it’s not as much as it used to be!

MOQ

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Make sure to let them know your annual order quantity (estimated), this lets them know that you will be a returning customer.

I like to outline my intentions like this:

‘We would like 3 samples first, if my superiors are happy with the quality, we would then like to make a trial order of 300 units. Should we receive good feedback from our customers and inspection team, we would look to make the first main order of 600 units.’

‘We project an annual order volume of 3000 units a year. If all goes well with the first orders, we would like your company to be our sole supplier for this product line.’

This technique lets the supplier know that you don’t just want 100 units for cheap and to never be seen again. They make their money from the larger orders and are therefore more interested in longer term customers with larger order quantities.

Things to keep in mind:

• If the product is popular, they may be more than willing to offer a small MOQ as they may have units readily available.
• If the product is rare or not in demand, MOQ’s are much harder to negotiate down.
• MOQ and unit price can be traded off against each other in most cases.

Shipping

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For the less experienced, definitely use a courier like DHL or FedEx to send the goods. This is called air express shipping. Ask your supplier for an air express quote and for them to add it to your Trade Assurance order (more on this below).

This method is just like ordering something online, you pay a fee and it turns up at your door. You will only need to pay import duties and tax when a letter comes through, simples.

For more information on shipping check out How to Start an Amazon FBA Business 6 Step Guide and How to send products to Amazon FBA

If the goods are particularly large or heavy, the most cost-effective way of shipping is by sea using a freight forwarder. This is more complicated and not recommended for first timers!  

Payment

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Samples – for values of up to about £500 use PayPal for the payment and dispute protection. You will likely have to eat the 5% fee but it’s worth it.

Orders – Wire transfer (T/T) using TransferWise to send the money through the Alibaba Trade Assurance system. Using Trade Assurance grants you buyer protection should there be a problem with the order. TransferWise affords you the cheapest and safest payment fees that I’ve found anywhere to date.

Read my full write up about international payments and TransferWise here – The Cheapest and Safest Way to Pay on Alibaba: TransferWise

Parting thoughts

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Negotiating with foreigners half way around the world can seem daunting, but don’t let it deter you from getting stuck in.

Here’s some key take aways:

• Know who you are talking to, Factory or Trading company. Look at their company profile or ask if you can’t work it out.
• Use the Alibaba messaging system to contact and negotiate with suppliers. Consider WeChat once you have made a few orders with one.
• Make it easy for the supplier and know what you want from them.
• Get at least one sample, ideally more.
• A reasonable price negotiation is around 10-20%.
• Outline your projected order quantities to earn some credibility and room to manoeuvre with the negotiations.
• Use air express shipping for your first orders.
• Pay for samples using PayPal.
• Pay for main orders using TransferWise.
• Still looking for the most profitable products to sell on Amazon? Make sure to use Helium 10 BlackBox – the best product research tool.

As ever, I hope this has guide been helpful and has given you the confidence and know-how to start your journey.

Take care,