Episode #43: Greg Mercer of Jungle Scout Interview  (Suppliers & Predictions - PART TWO)

Suppliers

Does negotiating on price ever work much with suppliers or do you have to increase the numbers to get the discount or try to add in extras to get lower prices per unit?

Greg doesn’t worry so much about this now. 10 cents off doesn’t add much to your profit.

But if you keep asking for lower price, the Chinese person at the other end feels more inclined to cut corners, e.g., use worse materials, leading to Quality issues. Or it will get put to back of the queue etc. etc.  If you get moved back to the back of the line so you’re out of stock for several weeks, you could be losing $100 a day in lost profit! This doesn't compare to 10 cents a unit!

Don’t get hung up on low price if it’s profitable. If there’s something left in it for the factory, they’ll be more inclined to be helpful.  (This ties in with Peter Zapf’s advice - Global Sources).

Actually factories do have rising costs. Going out there has given Greg a perspective.  Your suppliers are a crucial part of your business so treat them well. 

Apart from Chinese new year are there any other times of the year that slow down the manufacturing rate such as the Canton Fair?

Gearing up to 4th quarter in Sept, Oct means longer queues. Seasonal items like patio products would be even worse because that involves Chinese New Year.

Just say to your supplier, I’m planning the year out (and they will like this!) so can you let me know when you will need longer to manufacture? This actually sends great signals: a. you're organised b. you are planning to order regularly.

Is there any way of ensuring that once you have differentiated a product from a supplier (by colour or design) that the supplier won’t then send your differentiated product out to other customers as samples and then they will just order the same differentiated product (just with their logo on it)?

Short answer: not really! You can try to work with your supplier on this - you can try to get them to sign something which could possibly work. But if you tore them apart about saving 6 cents on something, they probably won’t do it! Talk to them about it. You have the most negotiating power BEFORE you place your first order. Or first large order.

However, even if your factory does that, there are probably 7 other factories making the same product. Don’t get too hung up on that.

So how do you build a defensive wall around your products?

It's almost impossible to do fully with a private Label product. But if you go into a newish market or you are the first into a market with a modification, you can use the time that buys you (say 3-6 months) to build reviews and sales rank to get a solid head start on the competition.

 An example from Greg: first person to sell a product with metal instead of plastic buckles. For 6 months he was the only one; now there are 15 others doing it.  even though there is tons of competition, he has top rank, 400 reviews, the best pictures etc. So he hasn’t really seen sales decrease.

When I looked on Aliexpress at getting just a few items of the product I was interested in, they seemed quite expensive (like the same amount as similar products were selling for on amazon) and I would be making quite a big loss once I included import duties and FBA fees.

Do people just take this loss to test if a product sells or is there any negotiating on price on aliexpress rather than alibaba?

Greg has never used AliExpress - but it is bound to more expensive because there are no economies of scale! Just treat it is as a market and supplier test. Or to be more cost effective,  you could just place an order for say 100 units with an Alibaba supplier. 

Would Greg recommend going the route of getting an agent to source p...