by Etienne Charlier
It would seem straightforward to get a price quotation from a China supplier. You describe what you want, you provide volume information and desired Incoterms. Then you expect suppliers to give you pricing and delivery terms. There is really nothing to it.
Think again. In reality, things get trickier, like many aspects of doing business in China.
There are many reasons why purchasers will not receive pricing from their short listed Chinese suppliers. If they understand these reasons, purchasers will be able to adopt an effective strategy and collect more reliable pricing and quotations.
Let us review some situations that lead to suppliers not quoting correctly.
It occurs more often then we would think that a Chinese manufacturer is not interested in our business.
Suppliers with good marketing will receive many price requests, mostly for pure benchmarking purpose. The sales people have developed a nose to identify vague or “benchmark-like” request for prices by email.
One of the reasons your price request does not get an answer may be that the supplier believes you are asking them just to get a price reference and are not planning to purchase anything.
This will not happen when you had prior contact with the supplier, by email, phone or even better, face to face. In this case, they know that you are interested in them and that the price request is the result of a process, not the starting point.
Misunderstanding regarding the scope of work is another common problem.
When requesting prices from suppliers, many buyers will only describ part of their expectations. But they will also have some implicit expectations such as type of quality control and test reporting, packing, level of service during warranty.
In most cases, this will lead to misunderstanding with the suppliers. Or it will give leverage to the supplier to argue for price increases in later stages of negotiations. It is always best to explicitly list the aspects that need to be covered in a price quotation.
It does not have to be complex; a simple list may be enough.
All prices will include the following:
- Price of the product as per attached specifications
- Testing and control
- Packing for sea transportation, using EURO pallets
- Delivery “Relevant Incoterms”
- Cost of any certification required for export
Tooling will be quoted separately, with the estimated life time of the tool
In some cases, it will be more complex, especially when the project includes factory acceptance or on site commissioning abroad. In some cases it is important to specify the expectation in more details.
Chinese companies always expect many rounds of negotiations. If you have been on the street market anywhere in Chine, you know that merchants and prospective buyers negotiate at length. Chinese professional buyers will also come back many times on prices to get better conditions.
It is therefore not uncommon to have serious negotiation margins in the first price. The supplier will take some safety margin to give discount later on or to cover any risk of misunderstanding in the scope of work. Suppliers with lots of export experience have understood this, but they also know Western prices better. The more local the supplier, the higher chances you will see this phenomenon occur.
Most often, buyers who are serious about purchasing will come back and ask for a “real price”. But when a traditional sourcing process is followed, these companies are often prematurely screened out. Do not fall into this trap.
Next time you request a price from Chinese suppliers, remember these points.