Negotiating Business Deals/Raw materials
I have a dehydrating business and one of my products is made from Malanga Lila.
I am located in Montreal and i buy from 2 local suppliers, they buy from importers from Toronto. These importers import from costa rica. The local distributors buy other products also.
From what i can see my local distributors sell around 2 pallets of 60 boxes . So the local market is about 4 pallets in total monthly.
I really need to have my raw material at the lowest price. Because i am drying and turned to powder i can stock my end product easily.
I am able to buy one pallet at a time. How can i get rid of the middlemen ?
How can i negociate with the importers from Toronto if i do not know what price i can get and i am buying just one product? I need informations to be able to negotiate, how can i get the best price possible?
I need leverage and info to be able to have a good deal. How can i get them?
Hello Claude and thank you for your question.
You are right - information is what you need to negotiate any good deal!
There may be restrictions to buying directly from the importers. Usually importers will have agreements with the distributors that restrict the importers from going around them to sell directly to the end user, which in this case would be you. But I am not sure about this; there may not be a problem with it in your particular area.
If you can go directly to the importers, you will get a better deal. Obviously, no middleman means no markup on the raw material. But a few things to consider are:
- how will you get the product from the importers to you (if now it is delivered to your local distributors)?
- do you buy enough product to make it worth the importers giving you direct access to their supply? Will they only agree if larger quantities are bought?
If you can contact the importers and make an offer, you should think about ways in which it would be easier and profitable
for them to sell to you. THESE are your points of negotiation. You might consider these:
1. Offer to pay them cash instead of paying on credit. If you can do this, you will be able to negotiate the purchase price. Cash is always cheaper than credit. Of course this assumes you have the cash flow to do it.
2. Offer to transfer the product yourself, if currently moving the product to Montreal is part of their current deal with the distributors. This assumes of course that you are able to do that.
3. Offer a higher price (even if only a little) than the distributors are paying them now. Chances are you will still be saving a lot of money. This assumes you can find out what the distributors are paying.
You might simply have to ask the importers what the distributors are paying. Or better yet, determine what a standard mark up is for imports in Canada. Do some research, and you will likely get a good idea what the distributors are paying, even if not exactly. You know they have to be making money, so what is that margin they need to make to continue their distribution business?
I hope this is helpful. My best wishes for you business,