How to negotiate prices with suppliers

Setting clear and specific goals will enable you to guide the negotiation process by moving through the points with purpose and communicate clearly and with confidence. You don’t want to waste time or lose focus because you didn’t prepare in advance.

In order to prepare yourself to open into any negotiations, you have to do your homework (here are some useful resources to get you started). Prepare a list of goals based on the realities of your retail situation. How much of a budget are you willing to or able to allocate to stocking your shelves with your chosen assortment of products? What is your bottom line and what are you hoping to get out of the negotiation? 

As a new retail store owner, you’re going to be investing in quality products before you even receive your first income from sales. It’s not an easy place to be negotiating from, as you won’t have a long-term relationship to be building on, but it’s all the more important to secure the best prices you can. Be realistic with your goals, and learn to work with the dynamic as it stands to create a trusting partnership.

When you’re defining your goals, you have to consider that your suppliers also have their own imperatives and limitations. Asking for stock at cost doesn’t leave anything on the table for the suppliers. They have their own employees and expenses.

Being considerate of their position can help create a stronger, quality relationship. Showing empathy and consideration will help to create a good-faith negotiation where both parties work for a mutually beneficial conclusion.

Setting clear objectives also means doing research, not only on your requirements, but also on what is available on the market. You should also research any direct competitor and market-wide prices for similar products. Knowing what’s available will help you discern if what your supplier is offering is a good value for the price, if you have room to ask for a better price, or if you just have to walk away.

Once you’ve completed your research and set your objectives, consider the various negotiation outcomes you might be faced with. In an ideal world, you’ll get everything you want and not have to make any concessions. But, more likely, you’ll be faced with decisions that require some contributions on your part. Can you commit to purchasing an extra hundred units if it’ll allow you to reach your price point? Can you accept higher up-front payments with an end-of-year rebate depending on units purchased?

Make sure you think through as many possible outcomes as you can, this will help you be adaptable and make quick decisions to secure a successful outcome.

Price isn’t the only thing that can be negotiated, and this is part of the reflection that should go into what you would consider a successful outcome. 

There may not be a lot of wiggle room when it comes to per unit prices, however, if you are able to guarantee a certain quantity of units over a year, you might just be able to negotiate a bulk volume discount, or even a year-end cash back incentive. On top of that, consider more lenient payment schedules. Rather than paying out the full cost up-front, some suppliers may be willing to work with you for a no-interest payment schedule that will enable you to purchase stock in advance and pay back over multiple months as you start to see a profit on the merchandise.

Think about what benefit you can see in various contributions that can be arranged by your vendors and don’t hesitate to bring it up to the supplier. As long as the conditions remain profitable to them, they may be willing to work with you.

If you are interested in delayed payment options, consider signing up to the free Ankorstart programme. As a member, you can benefit from interest-free, up to 90-day payments on any vendor brand and any of the high-quality products on the Ankorstore marketplace.

When you are actually at the table, it’s important to practice active listening. This means not only listening to and thinking about what is being said, but also what is being communicated nonverbally. Body language can tell you a lot about how someone is feeling; listen to what they’re saying, and when responding, make sure to show you were listening. 

For example, respond with phrases such as, “I understand that (repeat or rephrase what was said).” This is one way to show empathy. Show that you aren’t there only for your benefit but you’re willing to work with them to create a mutually beneficial relationship.

If you are able to hear and understand what is being communicated, you can work to find a win-win scenario. This is a scenario in which both you and the vendor are able to walk away from the negotiation feeling like you’ve achieved a positive outcome. This might mean finding better payment terms like we discussed earlier rather than remaining absolutely fixated on a price drop.

If both parties are able to walk away happy, you’ll have an easier and better time negotiating other contracts in the future.

Another part of active listening is knowing when you can or can’t put pressure on the vendor. Sometimes, you may notice that your supplier is able to make a deal but is holding out hoping for better conditions, whereas other times, they may not have the authority or be ready to commit to a contract. In these scenarios, it might be best to pull back and allow them time to work the numbers or run it up the management chain.

Don’t overplay your hand, be respectful of their requirements and contributions and keep a cool head. Pushing too aggressively or not keeping a respectful tone won’t help win them over to your side, only make them not willing to work with you.

If you can sense that your negotiations aren’t going to conclude in a contract agreement that aligns with your objectives, it might just be time to walk away from the table. On one hand, you may be able to find other vendors who are able and willing to meet your demands, and on the other, by giving the supplier time, they may reflect on what they are willing to accept to close a sale on their products or services.

This isn’t always going to be the case; after all, they may have enough other clients already that one more sale isn’t going to be sorely missed. In any circumstance, if you aren’t going to get the deal you need, then you aren’t risking anything by walking away. This might mean working harder to find the best supplier, but it’s the reality of any negotiation that if you aren’t willing to walk away, you’re already in a disadvantageous situation.

When you’ve finally come to an agreement at the table, you’ll want to get the verbal agreement down in writing. By having the terms and commitments of both parties down and in writing, you can avoid future miscommunications and protect your retail shop in the case of legal disputes.

Negotiating with your suppliers is a key ingredient for ensuring your retail shop remains competitive. And like any skill, the more you practise, the easier it will be.

If you need more tips or tricks for how to carry out a successful negotiation, register for the totally free Ankorstart programme, where a retail expert will be at your disposal to offer you guidance for a successful retail business launch.