In the drop ship business, your profit margins are directly related to the terms offered by your wholesale suppliers. If your wholesale suppliers give you a lower price, or charge you less for the drop shipping services, you make more money. Any way you can go about reducing your costs, from choosing the right supplier to negotiating terms, will improve your bottom line.
Keep in mind, first of all, that you’re going to be dealing with trained salespeople who work hard to get what they want form you. They’re not going to just make you their best offer out of the gate, in many cases. Having said that, many wholesale suppliers are open to negotiation and may be willing to work with you to create a better deal.
Here are some things you can do to get more from your wholesale suppliers:
Be Prepared
It’s not just the scouting motto, it’s a good idea in business. Every salesperson worth her paycheck knows what it is she wants from a customer meeting long before she opens the doors or picks up the phone. She knows what she wants to achieve, and knows how short of the goal she is willing to accept. In contrast, buyers often don’t even start to think about what they want prior to going into a meeting or answering a phone, and they’re unprepared to get the best terms.
So, what can you do to be prepared? For starters, you can study a price list. Run the numbers, and see exactly how much you need the wholesale supplier to come down on the price. Think about ways you can convince the supplier. What areas are you willing to compromise in? What ancillary offerings or services can you consider buying from the supplier, or what extras can you forego for a better price? Even spending just 15 or 20 minutes preparing can make the difference in your negotiations.
Know the Rewards
Part of that preparation is more about you and your motivation than it is about convincing your supplier. Look at specific details, such as credit terms. If your credit terms are currently 30 days, could you benefit from a 60 day credit term? If you could get your product for 3% under the current cost, how much additional profit would that mean in a given month?
Knowing the benefits you hope to receive helps keep you motivated during the negotiation process. Negotiating for a 3% reduction in cost in itself isn’t particularly motivating. However, negotiating for an additional $10,000 per month in sales can be extremely motivating.
Next time, we’ll take a look at some more techniques you can use in the negotiation process.
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