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How to negotiate prices with suppliers

15 April 2024

As an independent retailer, it can sometimes feel hard trying to compete with bigger brands, especially when you have to work off small margins to try to stay competitive. Negotiating with suppliers can be challenging, because it does require a level of confrontation that many find stressful, even if you keep it on friendly terms.

Negotiation is difficult, and that is especially true if you’re just starting your retail business and you haven’t even celebrated your grand opening. It may feel easier to just accept the rates proposed to you, but negotiating the best possible terms for products or services may make the difference between a successful business and a struggling retail shop. Better supplier prices make it possible for you to offer your clients better rates and hopefully gain a bigger market share.

Andrea Landi

Setting Clear Objectives

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.

Understanding Supplier Needs and Constraints

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.

Conducting Thorough Research

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.

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Preparing for Different Scenarios

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.

Leveraging Multiple Value Points

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.

Active Listening and Communication

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.

Focusing on Win-Win Solutions

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.

Being Patient and Avoiding Pressure

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.

Knowing When to Walk Away

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.

Documenting Contract Agreements

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.


What do I need to do to prepare for a negotiation with my supplier?

Before sitting down with vendors, you’ll want to use time to research industry standards, competitors, and your own requirements for a successful retail shop. Take the time to write out your goals and plan the various points that you’ll want to go over in order to structure the meeting to stay on track and cover all the right points.

Why is it important to focus on win-win scenarios?

Win-win scenarios are important for forming long-term and trusting relationships with your suppliers and vendors. If you’re both coming away from the negotiation happy, you and your supplier will be more willing to work together in the future on other contracts, it’s as simple as that!

How do I know when I should walk away?

Knowing when it’s the right time to walk away is an important part of negotiating, and it comes back to the quality research you should have carried out upstream. If you’ve identified compatible competitors for the products you need, you’ll have more leverage to use to be able to successfully walk away if you aren’t able to reach an agreement. Sometimes simply walking away gives the supplier time to rethink how much they’re willing to work with you in order to close on a sale on their services or a contract for their product. Other times, you’ll simply not be able to come to an agreement on a specific item and you’ll have to go with a secondary supplier. As long as you’ve kept the negotiations professional and refrained from pushing the supplier, there is nothing that’s stopping you from working together on other contracts in the future.

What terms can I negotiate?

Negotiations can cover a wide range of terms, from pricing to payment schedules, shipping and after-sales service. That’s why it’s important to plan ahead and decide what you’re looking for in a negotiation before sitting down with your supplier. From product prices to discounts or multi-year contract agreements for services and delayed payment plans, it’s up to you to define your requirements and sit down with the right vendors to get your retail store off on the right foot.

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