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4 steps to negociate price and moq with chinese supplier [2022 ]

negociate-chinese supplier

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Part I: Ten golden negotiation techniques


1/ Create “leverage.


If you don’t have any leverage, don’t start the negotiation.

Otherwise, you will be going in for slaughter.

The best way to create leverage is to get MULTIPLE quotes.

At this stage, you are only trying to get relevant quotes, not the exact matches.

You need minimum 10 quotes to feel out how competitive the supply side of market is so you can determine how much leverage you have to negotiate.

By examining the multiple quotes, you will see if there is a “baseline” price.

If the prices are very close, you are getting into a commodity type of the product.

There is very little room to negotiate in product price, so pay attention to product quality, supplier’s communication skill.

On your end, carefully calculate your own annual quantity (Technique #4) because your volume (quantity) is going to speak volume (price).

If the prices are all over the place, the opportunity is yours. This is the kind of product where you can get advantage when you negotiate right.

TIP: Use RFQ Templates: 1 RFQ, 10 suppliers, Same Due Date.


2/ Negotiate with the supplier who you are least interested in doing business with first


Once you have created the leverage by getting multiple quotes, you need to know HOW TO use the leverage.

The first step is to go full force with the suppliers that you are least interested!

The ones that could be too high or too low on price, or the communication is so poor, or the quote is not complete, or the product doesn’t seem to be this supplier’s main product.

Ask as many questions as possible (Use the “5Ms cost factors – Part III”).

Try to find the truth on everyone’s price and quality.

Why they quoted the product at such a high price or low price?

What machine is used?

How labor intensive is this product?

What materials can be substituted to make this product cheaper?

What do you have to lose? Nothing.

Use this round of negotiation to learn as much as possible of the supply market condition.

TIP: Note down the things you’ve learned from this round. Write down your target price and get ready to negotiate with the suppliers that you ARE interested.


3/ Negotiate with the supplier who you are most interested in doing business with last


Make it known that you have spoken to other suppliers. Ask very pointed questions:

1). Price: you are in the ballpark but it is not the most competitive, what you can do? (Do not reveal your target price please. Not yet.)

2) Quality: how does your product compare to this one? (show another supplier’s image). Or explain to me the materials you used in this product so I can compare the differences;

3). Design: do you have your own mold for the product? Did others copy yours or you copied others?

4). Customization potential: can you customize this product? Have you done the customization before? Can you show me a picture of the customized part?

Tip: Negotiate from the position of knowledge and confidence.


4/ Use your annual forecasted sales quantity to negotiate


Always, always paint the big picture!

Negotiate from a position that is BEYOND the transaction point. The transaction point is how much you buy now. The strategic point is how much you buy in a year.

Negotiating with an annual volume has two powerful effects:

1). It shows that you have done your homework and you have a PLAN to sell;

2). The compounding effect of the “estimate” is built in the annual figure which will make the number looks way more powerful!

Example, 1 month of estimated sales could be very close to 1 month of the actual sales; but 1 month of estimated sales x 12 could be much more than your actual annual sales.

Paint this annual volume picture with big bold brushes to secure the best quote.

Tip: Take advantage of the window of opportunity when you negotiate with the supplier for a NEW product price. Nobody has a crystal ball. You are not lying, you are estimating. The unit price negotiated based on the annual estimate will be better than the price negotiated on your first purchase quantity.


5/ Use your product knowledge as your leverage


Are you an expert of your own product? Do you have deep knowledge of the product?

If yes, perfect! Use it to your advantage. Share your background with the supplier so they know they cannot fool you.

WARNING for the product expert:

Don’t be misled by your own knowledge. Example, you ask your supplier, “CAN you do this …?” The answer is “yes” and will be “yes” almost all the time.

Just because you know it is a simple thing to do, it may not be that simple for the supplier. So do not assume the supplier’s “yes” is a true yes.

Instead, your question should be, “HOW do you do this …”, without disclosing your knowledge.

Your knowledge is yours; their capability is theirs. You need let the supplier prove to you what they can do.

Use your knowledge as your leverage not to use it as the training material.

Tip: If you are not a product expert, don’t worry. You can educate yourself on the market trend, selling price range, material specifications, material price index etc. Combining what you’ve learned from the suppliers and your own research you can quickly acquire a lot of knowledge. The more knowledge you can demonstrate the more leverage you have.


6/ Don’t just focus on product price


Product price is only one of many things you can negotiate.

What about first order discount?

What about tooling amortization?

What about better payment term?

What about free bundling service?

What about warranty guarantee? Extra spare parts?

What about expedited production to get your order done faster?

… all these things have value.

Tip: when you cannot go far on the unit price, start to find OTHER valuable things

7/ Know your limit


With multiple quotes; you have an idea of the base line price.

Don’t push the negotiation TOO FAR with the suppliers that you are interested of doing business with. Leave room for the supplier to make money so the relationship is sustainable.

How do you know when you are at the push point?

Here is one example. When the supplier says, “No, we really cannot lower the price from $3.5 to $3.00 dollar”.

You ask: “Can you use a cheaper material to make it at the $3.00?” If the answer is “yes”, the $3.5 is probably a fair price for the quality you are asking for.

Tip: If you agree to the $3.5, take this opportunity to re-affirm your quality expectations for the product.


Part II – Negotiation style & manner

Be Respectful


Chinese don’t like losing face. Try not to lose your composure and make them feel dis-respected.

Even if you were extremely frustrated.

  •  Keep in mind that you are negotiating with a business partner.
  •  Listen to what they have to say and respect their points
  • “Thanks for sharing this with me. I didn’t know your material price has increased a lot lately”
  • Thank them for being patient with you.
  • “I am sorry I just need to ask one more time to be clear, by the way I really appreciate your patience….”

Tip: just because the sales rep does not speak good English, don’t treat her poorly. She will remember how you make her feel.

Be very professional


Chinese don’t like losing face.

Try not to lose your composure and make them feel dis-respected. Even if you were extremely frustrated.

  • Keep in mind that you are negotiating with a business partner.
  • Listen to what they have to say and respect their points
  • “Thanks for sharing this with me. I didn’t know your material price has increased a lot lately”
  • Thank them for being patient with you.
  • “I am sorry I just need to ask one more time to be clear, by the way I really appreciate your patience….”

Tip: just because the sales rep does not speak good English, don’t treat her poorly. She will remember how you make her feel.

Invest in relationship currency


  • The more you do business, the more you will realize, relationship is. From the very beginning, invest in building the relationship:
  • Praise and appreciate the sales person’s help.
  • Recruit your sales rep “emotionally” to be on your side.
  • Some day you may need to cash in the relationship, for example, you want to expedite the production for your order because you are running LOW on stock. This is the TIME you are cashing in the relationship.

Tip: What are your sales rep’s country holidays? How does she celebrate? What is her birthday? Is she married? How is the kid? (Only 1? Good topic – Chinese one child policy). Get to know them, appreciate their help, always and always.

Take a leadership role


If you cannot act respectfully, if you cannot act professionally, if you do not care about investing in the relationship yet…. do this:


  • You are a business owner: you are NOT AN EQUAL with the supplier sales rep.
  • You need to lead them to work with you and help you achieve your goals.

Tip: Lead, try to use “we” more than “I”.

  • Let “us” do….
  • Here is “our” goal and I think “we” can ….



Part III – Be knowledgeable


Start from understanding the 5M factors

Screen Shot 2562 09 04 at 13.14.14

MAN: All people related cost factors, workers’ wages, benefits, health & insurance … Regional labor rate factors: China inland cities’ labors are cheaper than coastal cities’ but inland city factories are not as sophisticated. Vietnam labor cost is 20% lower than Chinese labor in comparison.

MACHINE: Machine contributed cost factors. How efficient is the supplier’s machinery? E.g. a robotic-welding machine may weld 100pcs an hour vs 30pcs an hour by a man for a part. An efficient machine can make the product unit cost much cheaper. In general, the more efficient the machine is the cheaper of the unit cost BUT the higher of the setup cost. Efficient machines are designed to run at a high volume. This is one of the reasons that it is hard to negotiate a lower minimum order quantity with a large factory.

MATERIAL: Raw materials costs. Instead of lump sum the material costs, it is better if the supplier could explain what percentage of different types of materials are used in the product; what quality of each material is used. Also related to the raw material costs is the Supplier’s buying power. E.g. if a supplier is specialized in making certain product they could buy at a large volume to lower the raw material costs. If there is UNIQUE component that is used in your product, that unique component could be a big cost contributor because they my only buy a smaller quantity just for you.

METHOD: Cost factors derived from Supplier’s production method, such as production line design, process steps and production flows. A factory operates on standard operating procedures (S.O.P), with well-designed production lines is generally more efficient than a chaotic and messy factory. Different Ways/Method of making the product could make the product cost lower or higher.

MOTHER NATURE/ ENVIRONMENT: Cost factors caused by the external environment such as government policy changes (e.g. 2017 Chinese EPA inspection lead to thousands of factory shutdowns and increased costs of production), currency fluctuations, political environment changes (e.g. Trade War, Tariff) and weather condition changes (e.g. Typhoon, Flood etc.) all of these factors could affect product cost.

Do your home work


  • Understand your product’s 5Ms Cost Factors – What Are The Key Cost Drivers For Your Product? Is your product very labor intensive to make? Is it very efficient for the machine to make? Is the material easy for the supplier to source? Your understanding of your product 5Ms cost factors will help you figure out the “ideal” supplier you need to produce your product.
  • Understand your currency buying power. If you have not been tracking the USD/YUAN exchange rate (Chinese Yuan and Chinese RMB both refer to Chinese currency), google current exchange rate

and find out if your currency is dropping or increasing in value against Chinese currency.

  • Educate yourself on your product’s key material market pricing. Research for any articles or commodity index (e.g, steel, copper, plastic…) to give you clues on overall market condition. If your product is made of one type of material, e.g. stainless steel garlic press, then your product price is very closely tied to stainless steel commodity price.

Know the seasonal factors

  • Before the Chinese New Year, raw material cost will usually go up.
  • After the Chinese New Year, due to the labor shortage, wages and production lead-time will usually go up.

Be aware of business condition changes

  • Ask your supplier, “Is anything going on in China that is affecting your business.”
  • Keep an eye on currency fluctuations.
  • Keep any eye on commodity price changes if your raw material is closely tied to it.
  • Keep an eye on any unfolding political events (eg. Trade War, Tariff).

Keep an eye on major weather issues in your supplier’s city.


Part IV: Practice Negociation


Negotiate a low moq- minimum order quanity

  •  Understand WHY the supplier asks for a MOQ? Some of the MOQs were totally made up, but some are real. Because the supplier has to buy a minimum quantity when source raw materials. In addition to this, the setup cost is a big part of MOQ. The set up cost is the same to run a quantity of 1 or quantity of 10,000. It is very inefficient to run a quantity of 1, 10,000 times vs setting the machine up once and run 10,000pcs at one time.

Please NEVER let the supplier know that you don’t have enough money to start. That is a show of weakness. They want to do business with people who has money, not wasting time with someone who cannot even afford to buy at minimum order quantity.

Timing: there is no need to go into MOQ negotiation right after you get the quote, but you can plant a seed like this: “Just so you know, our first order might be Higher or Lower than your MOQ. It depends on your sample quality.”

    • After evaluating the samples, and you are serious about getting into product improvements, customization, logo, packaging, color variations etc.… you can put the cards on the table.
    • EXAMPLE: Supplier MOQ is 1,000PCS, you want your first order to be 300PCS. 13
    • To Start:
    • “Given the improvements/customization we are making, we think it is CRITICAL we get the first production run done right. For the first order, we have decided to order 300 pcs to validate your product quality and we especially need to make sure [key specs] is done right; we also need to test packaging durability [to make sure the design is sufficient to sustain the potential damage during shipping].
    • Supplier, “Sorry, we can’t make 300, we will lose money.”
    • “I understand. We certainly don’t want you to lose money especially for the long run. In fact our company will lose WAY MORE money than your company does. To order a small QTY like this we are going to pay a lot more shipping cost. [tell her the air freight cost]. That is why we only want to do this ONE TIME just to make sure everything is done right.”

Supplier, still resists:

    • “By the way, do you know how serious we are with this product? Let me explain:

“We are going to give away all 300 units FREE to promote the product.”
“We will spend tons of money on logo design, photographer and packaging.”
“After we receive your product, we are going to spend a lot MORE money on advertisement across all sales platforms.”

    • “Now you know how much money we are investing in this product. Please let your boss know how serious we are. We will sell a lot of it because we have done it on other products. Miss, supplier, you are going to make a lot of money for yourself and for your company ?.”
    • Let your Supplier know you are willing to walk away and give them a deadline.

“Right now we are comparing two suppliers, your company is one of them. We’d love to work with you but you need to let me know by TOMORROW if 300 is OK for the first order only. I hope you don’t lose the big business because of your MOQ.”

    • If you get this, “Sorry my boss still said no, because …” . You need to listen to their “because” and you need to find out their true “No”. When you get a true no, try these strategies.


Moq strategies for “true nos”

      • Is it because of the setup fee? If it is, ask how much it is and see if it makes sense for you to SHARE 50%-50%.
      • Is it because of a unique component they are buying at a minimum QTY? If it is, ask if they can buy less, but pay a little more for that part.
      • Consider offering a slightly higher price in exchange for a lower QTY buy.
      • Consider to order 500pcs instead of 300pcs.

If all tries are failed:

      • Try to cut a draft PO at 300 pcs and see if they still say no (this is only when you are READY to make the purchase).


Is the supplier’s overall price lower if you take out the MOQ factor?

– Is the supplier’s overall communication friendly? Or they are firm and cold? If they are firm and cold on MOQ negotiation, they might be firm and cold when you negotiate price with them.

Don’t get too stuck on a low MOQ. Your primary goal is to VALIDATE the product.

You will need to replenish inventory quickly as soon as the product starts to sell. If you don’t have money to back fill inventory you will end up wasting your money and testing the product for other people!


Part V Negotiate a new product price


Step 1: To negotiate new product price you must start by getting 5-10 quotes first


Step 2: Divide the 5-10 quotes into 2 groups:

Group A: High Potential Suppliers, pick out 2-3 suppliers:

      • Quote is detailed and matches your RFQ
      • Quote is delivered on time before your due date
      • Communication is friendly and good English skills
      • Good product image with specification details for product quoted
      • Price is WITHIN ballpark – close to the average price of all quotes received

Group B: Low Potential Supplier, pick out 2-3 suppliers: 16

      • Quote is in-complete, missing data (sales person is not very thorough)
      • Quote is in-complete, missing data (sales person is not very thorough)
      • Not very good product reference (with no image or specification for the product quoted, or quoted a very different product that you are not interested.)
      • Price is too high or too low


      •  There are no fixed rules in dividing the suppliers into 2 groups. And you can always move one supplier from one group to the other as you get to know that supplier better.
      •  The purpose of diving the initial quotes into two groups is to use one group to negotiate, educate yourself and collect as much information as possible and use the information as your leverage to negotiate with the other group.

Step3: Start negotiating with group b suppliers


“We received your quote, your quote is actually lower than we expected. It is good but we are very worried that your material quality is not as good as the others. Hope that is not the case.

      • Could you explain what material is used in your product?
      • Since you know how to make your product cheaper, help us understand all the factors could make this type of product cheaper.

We appreciate your expertise. We’d definitely love to save some money and buy from you. Look forward to your reply .”


      • Maybe ask some questions in the email, ask some questions in WeChat or Skype, and ask some over the phone.
      • Ask CASUALLY so they are not as guarded and is more willing to tell you the true answer.
      • If you ask too formally, they may make up answers for you.

By the way…

      1. How many employees work in your factory (smaller factory normally is cheaper and more flexible. Employees 20-50 = small; 80-120 medium size; >150 large)
      2. What machine do you use to produce the product? (get an idea)
      3. ARE YOU SELLING THIS SAME OR SIMILAR product to an Amazon buyer?
      4. Where is your biggest market for this product? (Mid East market generally has lower quality requirement than the EU or USA market does.)
      5. How many units do you produce every month? (how specialized they are with this type of the product.)
      6. Do you have any new designs and models that you can share with me?
      7. What is your best seller? Can you send me an image?18


YOUR GOAL IS TO GET A GOOD FEEL of the material differences, price differences, and supplier capability differences so you are more educated and ready to proceed negotiating with the GROUP A suppliers that you are most interested in doing business with.


Step 4: Start negotiating with group a supplier


IMMEDIATE PRAISE: “We are so impressed with your English skills and you are so thorough. We love how you complete our RFQ accurately and delivered to us on time. We really appreciate the good work.”

CONFIRM IF IT IS AN “APPLE”: “We are in the process of evaluating all the quotes, some quotes are high and some are low. We are finding that different suppliers are using different materials on the product. Can you explain what material is used in your product so we can compare your quote Apple to Apple with the others?”


…if the material is close to what you expected: “Interesting to hear that your material is actually the same as the other suppliers’. We appreciate working with you because you are very thorough. But before we start sampling, can you tell me the BEST PRICE you can offer to us? Your price has to be competitive enough in order for us to move forward, despite the fact that we really enjoy working with you . Trust you can make it happen.”

YOUR PRICE IS NOT THE BEST – NO MATTER WHAT Even if the quote is very good, after you get the 2nd quote back, the comment is still the same: 19

“Are you sure this is your best price? I am not a product expert but based on my discussions with other suppliers, I know a little bit about this product. For a comparable quality, your price is definitely not the best.”


“By the way… [same questions from Step 3]”

LEAVE THE PRICE NEGOTIATION UNTIL AFTER THE SAMPLE: “Let’s leave the price discussion to a later time because we need to see your product sample quality.” “Just for you know we are getting samples from 2 other suppliers. Quality is extremely important for us. We won’t need to talk about price any more if your quality doesn’t meet our expectations.”

Are you looking for the best sourcing agent in China ? If YES you must Read : How to find the best sourcing agent in China ?

Step 5: Negotiate final price for your new product



      • You might need 2 suppliers during the initial BRAIN STORMING stage to get the best customization ideas.
      • Or you can narrow down to one supplier and start the customization process.

BUILD INTIMATE RELATIONSHIP During the customization process, you have to work with them as if they are your design and engineering team. Compliment their ideas and suggestions AS OFTEN AS POSSIBLE. If the ideas they proposed are not practical, tell them, “We love that you continue to give us good ideas, for now let’s focus on XYZ.”

WHAT IS THE FINAL PRICE? As you go through design and sample iterations, your product price may change. Each little modification could add cost to the product. After your design is finalized, you then have a final price.

This is the point where you begin the FINAL PRICE NEGOTIATION. 20


      • BUILD “US” AND “WE” Create a sense of togetherness and collective ownership of the final product. Use “We” and “Us” in your communication.“Thank to all your talent and patience, we are now have a fantastic product to sell!!! Can we take one more look at the final pricing? I think we have gone a little wild with all the changes we made on this product.”
      • DO ONE MORE ROUND OF HOMEWORK ON 5Ms COST FACTORS has anything has changed compared to when you first started? After you have done your homework:“Here is my thought, and I welcome your input on this.The final price now is $. My initial price target was $. The price has gone up x%. To make this new product launch as successful possible, can we get this product price set at $?After all the hard work we put into the product, I really hope we can get it produced at $. I am confident that our volume will deliver all the profit you need for your sales target.I will draft up a PO as soon as I get your OK with this price.”


If the supplier doesn’t agree to your target final price, then proceed to:


“I understand what you are saying and I respect that. How about this, give us a onetime discount at x% for the first PO, this will really help with the product launch and help building the new sales momentum.

I actually have the PO drafted up; I can send it to you right away and get the business started.”

If your products sells, and you are ready to release the 2nd order, here is:

SECOND PO STRATEGY: “ I am excited to tell you, the product is selling. Your hard work is paying off! I need to make a 2nd order soon. Please keep it at the same price. Let’s continue to push the sales.”

If the supplier could give you a discount for the first order, it is very possible they could give you the same price when you re-order.

If your 2nd order is at a LARGER quantity, here is:

LARGER QTY STRATEGY: “I am so excited to tell you, the product is selling. Your hard work is paying off! I need to make a 2nd order soon, AND THE ORDER IS MUCH BIGGER. Can we talk about price? At this order quantity can we bring the cost down to $? Let’s continue to push the sales. Our target annual sales volume is now XX quantity. So excited for the growth and I am so happy to bring you more business.”




      • When you hear this: “Dear customer, the new price is ….”
      • Your answer is: Always, and always “No”


“Unfortunately, we cannot take any price increase. Help me understand what is driving your cost up? I have not received any price increase notice from other suppliers, what is going on with your company?”

      • As you push back, do your homework immediately. Negotiation STEP 2.
      • In addition, immediately send 2 or 3 inquires either to the old suppliers (who quoted the same item before) or to the new supplier who is selling comparable items to get comparable quotes.
      • In the quote inquiry, you ask, “I want to make a purchase as soon as possible in case of price changes. By the way have you seen any price changes lately, has the price been stable?” Get some insights from other supplier sources.
      • After knowing what other suppliers can or cannot do:

YOUR “MAKE AN EXCEPTION” “No!”: “Miss, we do have a backup supplier for this product, their cost is this XX. With your price increase, you are forcing me to move our business to them. Are you serious about this price increase? Tell me why?!”

– Answer, “yes we have to implement the price increase. Reason X.”

“You know we can buy this product from somewhere else, but we want to continue to do business with your company. Please ask your boss to make one exception for our company only. I know he can, and you can help convincing him too because we are a good customer. I look forward to your good news.”

– Still a no, “sorry my boss said we can’t. Reason Y.”

YOUR LAST ORDER “No!”: “This is my last PO, please make an exception for this order at the old price.” Send the DRAFT PO in. When money is dangling in front of their face, sometimes it is hard for them to say no.


“We understand your challenges; we will take the price increase to support you because we are partners.” Here is what we suggest on how we implement the new pricing:

      1. DEFER: “Right now we just loaded the product listing/price book/catalog, can we implement this increase on XX date?” Your XX date could be 3 -6 months later, make sure within that period you can squeeze in one last order at the old price.
      2. SPLIT: “How about we absorb %, you absorb %?”
      3. SPLIT AND DEFER: “We will take the price increase, but we can only take X % now; another X% 6 months later; this will give us time to implement 2 price increases in 6 months.”24


      • Depending on the situation, if you have to take the price increase, take it. Supplier has to make money in order do business with you.
      • However, going through the negotiations exercises is a MUST because it will help you:

1. Get a better insight into supplier’s cost structure.

2. Learn more about the supplier negotiation style.

3. Set a tone for future – you wont take it unless it is justified.

4. You may actually find a cheaper and better supplier.

Step 6 – Reflect on what you learned



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