Does Negotiation always lead to Discounts?!
Does Negotiation always lead to Discounts?!
Lately I keep receiving absurd offers of price for different stocks that do not close in sales, and these only give me an idea about the type of person making the offer. I will share some facts with you, hoping my article will help you get an idea about how the negotiation process actually works.
It is well known that in all business sectors the maximum acceptable margins for negotiation are between 1% and maximum 10%, depending on the product's category and quality.
I will try to explain and maybe all our partners will have a clearer idea on the whole negociation process.
Prices are not set randomly by manufacturers or sellers, just because they want to achieve huge profit overnight. The aim of each business is to have repetead and continuous orders for their products and to sell them at the minimum acceptable prices that can alow them to cover the production costs and a small profit margin. On the long run, the smaller profits achieved over repeated sales and larger quantity sold monthly guarantees long lasting business life and presence on the market. This, obviously, leads to constant growth of the business. If you are looking to sell a product at a huge price and get a huge profit overnight, it is not only unrealistic but also the shortest way to bankrupcy. You will buy cheap low quality products, try to sell them very expensive and this will be a one time deal for you and your buyers - as they wil never come back for more. So you will achieve a high profit for those few sales, but at the same time you will accumulate more costs.
When you, as a buyer, make a certain offer, put yourself in the shoes of the seller/manufacturer. For instance if your cost to produce an item is 10 euro/pc plus aditional costs, would you sell me that product for 7 euro/pc, just to close the sale and fulfill my dream of becoming a millionaire overnight?! If you are a real businessman you won't accept my silly offer, and don't give in to my desire of becoming a millionaire overnight. Because if you would, after 1 or 2 sales like this you will go bankrupt, you will have to let go your employees, close the business and go home.
So, dear customers, a price is set based on certain costs, and when you make a ridiculous offer, not only that you will offend the manufacturer, but you will also give him an opinion about you as a person and he would never want to do business with you. So instead of thinking that you will get the products at the price you offered, you might only cut off any future business with that source.
Business is built on trust and mutual benefit, manufacturers are not greedy, when it comes to stocklots, they will set the price at a certain amount that will cover the production cost, extra expenses and also a very small profit, and still leaves a good margin for the buyer to sell the products fast, make profit and come back for more. The key to success is not to make 10 euro/pc profit and sell 100 products per month, but to make maybe 0,5 euro/pc and sell 100 000 products per month. If we do simple Math you will see that in these 2 cases we talk about a profit of 1000 euro in the first case and a profit of 50 000 euro in the second case, so which one would you prefer?
Many customers have the wrong impresion that the manufacturers or sellers do not want to sell them a stocklot at the price they offer just because they want to keep the big profits for themselves. This takes us back to the trust issue: if you do not trust the seller when they give you the bottom price, why would you keep doing business with them?! Why waste everybody's time ? Let's make a simple example: you want to purchase a Ferrari and you to to the Ferrari store and say: " I want the latest Ferrari model and I offer you 50.000 Euro for it - when will you deliver it to me? The latest Ferrari model costs 600.000 Euro - so what in the world makes you think that you offer could ever be accepted??? You think they will cut down all the costs and expenses just to make you a happy customer? False. On smaller scale it is the same situation with all the products and the silly offers.
A professional advise not only to my direct customers, but to all customers involved in any type of business: when you make an offer please make sure you take into consideration all the aspects involved and only then press the SEND key. Think that, otherwise, you might just loose a source that could offer you good deals and on the long run help you make nice profits.
International Sales Manager
ATTRACTING REAL LEVERAGE Ltd