Tuesday, August 22nd, 2017

Giving Birth To Our 2nd Product – Our Negotiation Proces

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As May moves along, I’m happy to report that the 2nd product idea that both me and my wife are working on is moving along right on schedule.  We are concurrently in the business logo design and the product sourcing phase.  The purpose of this blog post is to relay to my readers some interesting experiences we’ve had so far this month related to one of these phases  – Product Sourcing.  Our hope is that you will be able to take this information and apply it once you work through developing your own product.

 

 

Product Sourcing

For our second product, my wife and I are focusing on the children’s niche.  For reader’s who don’t know this, I have a young daughter who is 2 years old.  She’s the greatest little person I’ve ever seen.  (Daddy Bias). Because we are charged with the day to day care of her, we’ve gotten really familiar with the products that we use on little girls (or kids in general).  This being said, my wife came up with an idea a few weeks ago that we both felt would be a great product to create and sell online.  We found similar products already selling, but nothing that would have the details that we wanted to see in the product.   So we put our minds together and figured out how we could make our idea into a reality.

What we needed was a factory that would take our specific product specs and turn them into a real product.  This is where the Amazon Selling Machine training course helped us out on our journey.  The course had tons of videos and text teaching us how to source products domestically and overseas.   I’ve already stated in previous blog posts that I decided to source products from China with Alibaba.com being my favorite clearing house.  But what happens when you find a manufacturer?  Should you start the process of having them create your product?  My answer to that is NO!

I’m hear to tell you that there is one more step I’ve not talked about.  Negotiation!!!   But not just with 1 manufacturer, but with many.  As you may know China has a huge manufacturing base.  I found that many different factories can produce some of the exact same products.  You can use this fact to your advantage.  What I mean by this is you can send, in many cases, your product specs to multiple factories that product things in a particular genre.  For example, say you find a factory that produced socks and shirts.  You might not think to ask them whether or not they can product neon lights or plastic bracelets.  What I’ve found however, that this is not the case.  What this means is that just because you are sourcing a product from 1 factory that you “believe” specializes in product X, does not mean this factory could not produce a radically different product Y.

Getting back to my topic of negotiation, below is a perfect example of how you can get different prices for the same product just by getting factories to compete against each other.  Below is a table illustrating this exact case.  The 5 factories below are all capable of producing my product.  However, as you can see, they all have different price points.    They also have different minimum order quantities (MOQ).

Chinese Factory Pricing and Terms

Once each factory submits an official quote, send this quote to the other factories and see if they can beat what they originally quoted you.  You’ll be surprised how the prices and/or terms of the deal can change literally overnight.  The chart above shows the final prices I was able to get for each factory.  These prices all range from 5% to 30% off the original quoted price.  On a few occasions, the MOQ was dropped by 10k to 20k units.

End the end, I chose Shenzhen Conti as my factory, not because they had the best price, but that they had the better overall deal.  Their MOQ was lower than everyone else.  This is great because if the product turns out to be a dud, I’m not stuck with a bunch of inventory I can’t sell.  They also threw in the ability to pre-package my product in custom quantities without a huge markup.  This was something the other factories could not effectively do and keep a good price point.  Finally, the factory rep spoke really really good English and was very responsive to my questions and concerns.

So that’s our product sourcing experience in a nutshell.  Go out to Alibaba.com, find multiple factories that can produce your product, and place them into a bidding war with each other.  If they won’t bend on price, see if you have have them bend on terms such as MOQ, shipping terms, or whatever product specific term that can be a make or break deal.

That’s all I have to say on this topic.  On my next blog post, I’ll talk about our experiences with graphic and logo design.

Signing Off

-Ollie James Hales

P.S.  Sorry this post did not have a bunch of pretty graphs and pictures……I wrote this post in my car during my lunch break…

Comments

3 Responses to “Giving Birth To Our 2nd Product – Our Negotiation Proces”
  1. Brian says:

    So you aren’t private labeling? You’re actually designing and creating the product? Are you having 10000 units sent to your house to repackage for amazon? Im curious how you’re paying your supplier(using escrow or paypal)

    Brian

  2. admin says:

    Hey Brian,

    We are private labeling. The product that we chose to sell will be private labeled and slightly improved upon the the original. Mostly cosmetic. To answer the 2nd question, yes, we are getting 10k units sent to our home. Sounds like a lot, but they are relatively small so my garage will be able to hold them still I get them off to Amazon. As for paying the supplier, I’m doing a wire transfer. Scary I know, but taking a calculated risk..

  3. Brian says:

    Nice. I did domestic initially but want to do china products next. I’ve read multiple Asm people getting bad samples so that is my first step. I posted a buyer request on alibaba and got slammed with proposals but seemed like they didn’t even read my product specifications.

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