Negotiating With Product Suppliers: What You Should Know

One of the hurdles that comes with operating a retail store or business is negotiating with product suppliers. Unless you plan on manufacturing the product yourself (which typically doesn't happen), you'll need a supplier or distributor to sell your store product. Unfortunately, many new retail store owners fail to realize the importance of negotiation, resulting in high markups with minimal profit margins.

Why Negotiations Are Important

Negotiating with product suppliers is important because it keeps your prices down. When you're able to buy product for a lower price, you'll reap the benefits of a higher profit margin once a customer buys it. Here's a scenario to consider: let's say a pair of jeans costs you $10 wholesale from a distributor. Selling these jeans in your store for $25 would yield a $15 profit margin, which is an excellent return on your investment. If you paid $20 for those jeans, though, you would only see a $5 profit margin.

Communication Is Key

When it comes to negotiating with product suppliers, communication is key. Just because a supplier or distributor has a “buy” button on their website with a certain price listed doesn't necessarily mean you have to pay that amount. Contacting them – whether it's over the phone, in person or through email – could result in a lower price.

Open the lines of communication by introducing yourself to product suppliers as a prospective buyer. Let them know a little bit about you and your business, along with your interest in their product. Don't make any offers to buy their product just yet, as price negotiations should come later.

More Product = Lower Price

Typically, the price of a particular product varies depending on the quantity purchased. The more units a client purchases, the lower price-per-unit they'll receive. Product suppliers and distributors do this to encourage clients such as yourself to purchase in bulk.

Talk with product suppliers to see what kind of discounts they offer for bulk units. Assuming it's a safe product that's easy to move in your store, opting for wholesale units could significantly improve your profit margins.