PRICE NEGOTIATION 101: 6 ways to negotiate a cost price
I’ve spent the last 15-years as a Buyer negotiating the best possible prices for my collections and I want to share with you 6 of my top strategies for getting the best price and making your range more profitable!
#1 NEVER ACCEPT THE FIRST QUOTED PRICE
The first price a supplier gives you will be their desired price for the product - don’t forget they have margin targets too, so there’s often room for about a 2–5% reduction even without changes - every penny counts.
With new suppliers, prices may be higher while they assess your knowledge and buying power. How you respond sets the tone for future negotiations and mutual respect.
New customers also require extra management time, which suppliers may try to absorb into early pricing. Once routine is established, in the future you may be able to negotiate lower prices on this basis.
#2 DON’T NEGOTIATE ONE PRICE AT A TIME
Negotiating style-by-style limits your leverage as the supplier will not be able to give the economies of scale related to making several orders at once. Even if you are promising to book other styles soon, the supplier doesn’t have the security until they have the purchase order (PO) in hand.
Negotiating an entire collection together increases buying power across materials, trims, packaging and production efficiency — and signals that you’re a serious customer. Where possible, align ex-factory dates for all orders to optimise shipping costs.
For example, if you are making several trainer styles that share the same sole unit and laces, then you could get lower prices for these components buying in larger volume. It also allows for improved line efficiency, less downtime for changeovers and often lower defect rates and wastage.
Pro Tip: Track negotiations in a spreadsheet and share it in email communications with suppliers. Showing total volume and year-on-year growth can unlock better pricing.
#3 KEEP INFORMED ON RAW MATERIAL MARKET PRICES
If your brand relies heavily on a specific raw material, for example jewellers working with precious metals or a loungewear brand with heavy use of cashmere, you need to be up to speed with raw material price fluctuations. Don’t wait until the last minute when you have no material left, only to find out prices have increased significantly.
You will need a close relationship with your material suppliers, check in with them regularly for the best information on local price fluctuations. This will give you the chance to either stock up at a current favourable price or hold off buying for longer if prices are set to come down soon.
Refer to third party sources for market prices and other news that affects the supply chain. For example, LBMA for metals, ICAC for Cotton, Woolmark for Wool or Fibre2Fashion.
For more developed businesses where there is certainty the material will be used and the cash flow can be absorbed, I highly recommend pre-booking raw material ahead of the peak production season to get the best bulk-price.
Pro tip: A significant increase in raw material prices that you cannot absorb into margin will require a change to your retail pricing architecture and product development approaches, so address this in your strategy as soon as possible.
#4 LEARN WHEN TO GIVE A TARGET COST (& WHEN NOT TO)
Sharing a target cost too early can backfire — if your target is higher than what the supplier would have offered, then they will naturally quote your target price and pocket the difference.
Avoid giving a target when:
The supplier is consistently well-priced
You’re very unsure of typical cost benchmarks and might reveal a knowledge gap by giving a target that’s very high or very low
You often receive prices lower than expected from this supplier
Give a target when:
The style is clearly complex or expensive to produce
New materials with an unknown cost must be sourced
Your retail price is fixed and non-negotiable
Your margin goal seems high
Pro tip: Ensure clear baseline costs are established when onboarding a new supplier, covering testing, labelling and packaging to ensure accurate prices are quoted.
#5 RESOURCE MATERIALS & REVISE YOUR DESIGN
Sometimes a quoted price might truly be the lowest that can be achieved for the product in it’s current design and no amount of negotiation is going to improve it.
When this happens, we need to go back to the tech pack and review every detail. What could be the key factors driving up the price?
Here is my top 10 list of considerations:
Material
Lining
Trims or Hardware
Labour intensive techniques & constructions
Material Wastage
Length, Size & Volume
Pleats, Darts, Gathering, Ruching, Topstitching and Seams.
Extra Closures, Pockets or Compartments
Weight or knitting time for knitwear
Costs for opening new moulds, kits, lasts & tools in footwear & accessories
Before downgrading design or materials, consider your brand positioning. Premium and luxury brands must protect perceived value, while value brands have more flexibility.
Pro Tip: Always ask for a full cost breakdown sheet showing the price of every item & process. It can be very revealing!
#6 MATERIAL FIRST: BUILD-IN MATERIAL CONSOLIDATION TO YOUR DESIGN PLANS
To avoid unexpected high cost prices in the first place, the secret is to source all your materials before you design anything.
Avoid sending out a tech pack to a supplier with ‘To Be Sourced’ materials if you want a predictable cost price. Instead, pre-source the materials, requesting the supplier source and submit suitable options in the required price per metre range.
Once you have found an affordable and versatile material that you love, you can create many styles using this material. Not only will this will make your collection cohesive and easier to style, but you will be buying more of the fabric enabling you to meet MOQs or achieve economies of scale for better prices.
Pro tip: Low season bookings will achieve the best economies of scale. Consider low-season bookings for materials such as linen, cashmere or faux fur.
If you need hands on help with cost management strategies, please reach out on the links below!
