For some business people, the back-and-forths of negotiating with suppliers deliver the same thrill and adrenaline rush as a fight to the death. But for others, even the mere thought of negotiation conjures the same fear, anxiety, and nervousness as a fight to the death. The difference between the two fights-to-the-death is how confident you are that you’ll come out on top.
We know that negotiating with suppliers doesn’t come naturally to a lot of ecommerce managers, even if it’s a main responsibility. So we’ve compiled this quick list of the 7 best expert negotiation tactics. Simple and straightforward, even first-time negotiators can use them for expert results.
1. Do Your Homework Beforehand
Presumably, your supplier knows their product through-and-through. They know how much it costs to manufacture and ship, they know how much their competitors charge, they know the industry conventions for payment variations, and they know the market demand. They also know that you, the seller, don’t know as much as they do.
So the first expert tip on negotiating with suppliers is to do your homework and research these products yourself. You don’t need to know everything that the supplier knows; you just need to understand the basics enough to get a fair deal.
Contact other suppliers to see how much they charge, how long their deliveries take, whether they offer any discounts, etc. Going into your negotiation well-informed gives you three major advantages:
- You signal to your supplier that you know the industry, meaning they’ll be less likely to overcharge you.
- You earn bargaining chips that can be used for leverage on a better deal, i.e., “your competitor offers a discount, so I’ll do business with them unless you match the discount.”
- If their competitors offer much better deals, you can just work with them instead!
This is a good foundation to start any negotiation — it’s hard to push back unless you have secure footing.
2. Tap Other Bargaining Chips
Negotiating with suppliers goes beyond just the price per product — and that’s great news for startups and SMBs on a tight budget. At some point, one party is going to hit a stopping point on price, but that doesn’t mean the negotiations have to fall apart. Tap a different kind of bargaining chip to reach a fair deal. Some of the most useful include:
- Buying in Bulk — If you can guarantee a certain amount of sales, it’s better for everyone to buy those products in bulk; most suppliers offer a price break in exchange for unloading a bunch of inventory at once.
- Down Payment — You can adjust your down payment to win over some suppliers. Paying a little more upfront doesn’t necessarily cost you more over the long-run, but it could make a supplier happy enough to throw in some extra perks.
- Shipping — Although this is a trickier point to argue, if you’re a smooth enough talker or if you have a good relationship with the supplier, you could have them pay part of the shipping costs as a way to reduce your costs.
- Long-term Contracts — Customer loyalty is just as important to suppliers as sellers. Promise them more business in the long-run in exchange for better rates from the get-go.
For ecommerce brands without a lot of resources, negotiating about prices can only get you so far. These alternative bargaining chips can be the best weapon for “underdog” negotiators.
3. Make the First Offer
Citing the negotiation advice of Wharton’s Adam Grant and Northwestern’s Adam Galinsky, Forbes suggests always making the first offer.
For more timid negotiators, this seems counter-intuitive. What if you suggest something lower than the actual value and end up cornering yourself? Many people are too scared of undervaluing the first offer, they’d rather concede the first move. But the truth is, as long as you do your homework like we mentioned above, your first offer will be right on the money.
Moreover, anyone familiar with price anchoring can understand why making the first offer is an advantage. Even if the first offer is rejected (which it often is), it still provides a point of reference for all subsequent offers — if you can dictate that original point of reference, you can sway negotiations to your favor.
4. The Open Book Approach
Another counter-intuitive negotiation tactic — also advocated by Forbes — is to be open and honest. Many people approach negotiations guarded and stone-faced, but research has shown the more you open up, the more it encourages the other party to open up as well. Honesty begets honesty, and more honesty leads to more satisfying deals for both parties.
In some cases, it avoids misunderstandings — if you explain why you can’t go below a certain price, it might make your supplier more flexible. Other times, it just facilitates a more trustworthy conversation — interestingly, the studies showed that even opening up about non-business issues tends to lead to more favorable outcomes.
5. Be a Little Defensive
Don’t let the optimism of the above tips fool you — there will always be some negotiators who hug you while planning where to stick the knife. While we encourage you going into negotiations with a positive and friendly approach, that doesn’t mean go in defenseless.
Negotiation tactics range from dishonest to psychological manipulation. The best way to protect yourself against “guerilla negotiations” is to know what to look for. Harvard Law School’s Program on Negotiation outlines 10 hardball negotiation tactics to watch out for. Learn to recognize them now before they take you by surprise.
6. Lock It Down ASAP
All offers have an expiration date — even when no deadline is specified. Approach every negotiation with a mindset of reaching a deal as soon as possible. There’s nothing superstitious about it; the longer a deal waits to be finalized, the more opportunity there is for something to go wrong.
Of course, you don’t want to pressure the opposing party; you may end up forcing them to decline when they were leaning towards accepting. Rather, set a punctual deadline on an offer that both parties are comfortable with. Again follow the tip about making the first offer and set that deadline yourself.
7. Be Ready to Walk Away
Last but not least, we present the greatest negotiating tactic of all time: walking away. The entire art of negotiating is built upon the premise that both parties want to do business with one another. If one party pulls out, the other party loses equally.
If your only choices are between accepting a bad deal or no deal at all, choose no deal at all. Sometimes you need to draw a line in the sand; the trick is knowing the difference between a mere inconvenience and a flat-out deal-breaker.
Of course, this tactic is only as strong as your resolve. In other words, don’t bluff! Only walk away when you’re prepared to walk away, and don’t be afraid to cancel any unfulfilled contracts.
Negotiation may seem intimidating, but remember the best deals are the ones that both parties are happy with. While some negotiators truly are out for blood, most just want a deal fair enough that they benefit from. Strip away intimidation, manipulation, and power moves, and you can reach an honest agreement where everyone wins.
Ready to start sourcing products? Check out our guide full of product sourcing tips for the most common ecommerce business models.