Sourcing products from India Profitably

How to Source products from India Profitably

When you’re running a product-based business, getting the right price for your products is crucial to making a profit and building a successful business. As the saying goes, “Profit lies in purchase, not in sale,” and it really does hold true.

And it’s all about how well you manage your purchasing process, secure the best deals, negotiate favorable terms, and accurately calculate all your costs. And it’s not just about getting the best price. While price is important, there are several other factors that can directly impact your profitability and the overall success of your business. Knowing what to negotiate, How to Negotiate and understanding common mistakes to avoid can make all the difference.

This blog is designed to guide you through the Quotation and negotiation process step by step. We’ll cover how to secure the best quotes from suppliers in India, the key elements you should always negotiate beyond price, and the mistakes to steer clear of so you don’t leave money on the table. Whether you’re new to sourcing products from India or looking to improve your skills, this is your roadmap to getting the best deals and ensuring a profitable business.

Step-by-step How to Get the Best Quote for your product when Sourcing from India

Begin professionally, providing product specifications and RFQ

When starting your sourcing journey, it’s crucial to send out a professional email along with a well-detailed RFQ (Request for Quotation) to at least 10-12 suppliers. The RFQ should clearly state all the specifications for your product, as various factors—such as the port of shipment, packaging preferences, and material details—can significantly affect the cost. Providing vague or incomplete details, or expecting suppliers to fill in the gaps, can lead to confusion and inconsistent quotes.

For instance, if you request a quote for “100% cotton cushion covers,” that alone is not enough. You need to specify the type of cotton, as each quality comes with a different price point. The more detailed you are in your RFQ, the better. By sending the same detailed requirements to multiple suppliers, you ensure that all quotes are based on identical specifications, leaving no room for assumptions. This also signals to suppliers that you are a knowledgeable buyer who knows exactly what they need, encouraging them to take your inquiries more seriously.

Establish the Standard Market Price

Once you have received quotes from Multiple suppliers, you can fairly compare the range of quotes, identify the standard market price for your product. You’ll also be able to spot suppliers who are over-quoting or under-quoting—and understand where your target price fits within the market range. Evaluate the suppliers based on their quotations and conduct a cost-profit analysis. To ensure accuracy of the calculation, focus on four key elements: product cost, packaging cost, shipping cost, and import duties. Request quotes for varying order quantities from suppliers to compare prices and understand how costs changes with different volumes.

For shipping, share precise details such as the dimensions, weight, and volume of the goods with a freight forwarder to obtain an accurate estimate. As for import duties, these are calculated on the total invoice value and can be verified with a customs broker or freight forwarder. You can also research this yourself by finding the correct HS code for your product online.

By analyzing these costs thoroughly, you’ll have a clear picture of your total expenses and potential profit margins. It will also help you determine your target price.

Request Samples

The next crucial step is to request product samples from your top three shortlisted suppliers, chosen based on their initial quotes and overall suitability. These samples allow you to evaluate the quality of their work and ensure they meet your product specifications. Thoroughly assess the samples for all aspects such as material quality, craftsmanship, and consistency with your requirements etc. This evaluation not only helps you identify which supplier can best deliver on your expectations within your expected price range.

Once you’ve reviewed the samples and established a clear baseline for pricing—factoring in your target price and overall costs—it becomes much easier to engage in meaningful negotiations with your preferred supplier.

Learn How to secure Best deals for your products when Sourcing from India

7 Things you Must Negotiate when Sourcing products from India

Negotiate Payment Terms

Negotiating payment terms is one of the most important steps in working with suppliers. It’s crucial to secure terms that fit your business needs and give you the flexibility to manage your cash flow effectively. For example, starting with a smaller upfront payment—like 10% to 50%—and paying the balance after inspection or against a Bill of Lading (B/L) can reduce risk and free up cash for other business expenses.

As you build trust and a working relationship with your supplier, you can aim for even better terms, like paying the balance against B/L.

Negotiate Minimum Order Quantity

The second aspect to consider negotiating is the Minimum Order Quantity (MOQ). Typically, in India, MOQs are reasonable and lower compared to those in China. However, there are instances where suppliers may push for higher MOQs. Particularly in the case of handmade products and materials outside of textiles, it’s often feasible to produce lower quantities. Thus, it’s essential to negotiate and only purchase the quantity that aligns with your selling capacity.

However, certain products may have fixed MOQs due to technical constraints. For instance, certain textiles may require larger volumes of raw materials or minimum dye lots. Additionally, if your product is significantly different from the supplier’s usual range, they may need to source specific items or trims at retail prices for smaller quantities. In such cases, where there are genuine technical limitations, little can be done to alter the MOQ. It’s important to understand the reasons behind a higher MOQ and negotiate accordingly, keeping in mind that smaller volumes often mean higher prices due to factors like procurement costs and supplier not benefiting from economies of scale.

Negotiate Sample Cost reimbursment

You must also negotiate for sample costs to be reimbursed upon placing the order. As you start sourcing, suppliers may request payment for sample costs or courier expenses. You must discuss with the supplier that these costs should be credited back or deducted from the total purchase order amount when you place your official order. This practice is standard, and you must ask on it. Over time, as you establish yourself as a consistent buyer, suppliers may offer samples free of charge and may cover courier expenses as well.

Negotiate Defect Compensation and Warranty Terms

Always negotiate with suppliers to compensate for any defects or quality issues that deviate from the agreed product specifications in the final production. Ideally, negotiate a warranty percentage before placing the order to avoid potential losses.

When encountering quality issues, regardless of how small or big, the supplier should provide compensation or rectify the problem at their expense. If rectifying is not possible, the supplier should supply replacement goods at their cost until the issue is resolved but you must be able to prove that it was factory’s fault.

During inspection, goods should only be shipped after any detected issues are fully addressed. In cases of minor variations that don’t significantly affect the product’s saleability or performance, consider accepting the variation with a negotiated discount. Negotiating a warranty percentage prior to ordering is the best way to minimize risk.

Negotiate Quality Control Protocols

If a third-party inspection fails to meet the required standards, request the supplier to address the issues and arrange a re-inspection at their expense. It is the supplier’s responsibility to ensure the products comply with your specifications and to conduct thorough internal quality checks before presenting them for third-party inspection.

In case of any failures, ensure the supplier resolves all problems and arranges another inspection, covering the associated costs. It’s important to communicate and agree on this process with the supplier at the time of order placement to ensure clarity and adherence to quality standards.

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Negotiate Shipping Costs

The sixth aspect to negotiate is the shipping cost with the freight forwarder. It’s essential to actively negotiate and aim for the most competitive shipping rates instead of accepting the initial quote from a single freight forwarder. Just like with product suppliers, sourcing multiple quotes allows for comparison and negotiation to secure the best deal. As your business grows and provide consistent business, you will be able to secure better deals.

Negotiate Production Lead-time

In addition to the previous six negotiation points, consider negotiating production lead-times if a supplier’s timeframe exceeds the norm. While 75-90 days is standard for customized products, some items may require longer lead-times, while others could be completed in as little as 60 days. It’s advisable to initiate the buying process early to afford suppliers sufficient production time, rather than pressuring them to expedite orders, which could compromise quality or result in other issues.

Mistakes to Avoid when Negotiating Price with suppliers in India

Accepting the first price

One of the biggest mistakes new buyers make is accepting the first price offered by a supplier. It’s important to understand that suppliers usually quote higher prices initially, leaving room for negotiation. If you don’t negotiate, you not only miss out on potential savings but may also create an impression that you are inexperienced.

On the other hand, when you negotiate with confidence, it shows that you understand the market and your product well. Suppliers are more likely to take you seriously and offer more competitive prices. So, always approach the pricing discussion with the intent to negotiate—it’s expected, and it’s essential for securing better deals.

Not Researching Market Prices or Getting Multiple Quotes

Another common mistake is jumping into sourcing without researching the standard market prices. Before contacting suppliers, take the time to understand the retail price of your product and calculate the maximum cost you can afford to pay while still making a profit.

Once you’ve done this, reach out to multiple suppliers—at least 10 to 12—and request quotes based on the same product specifications. This will give you a range of prices to compare. Patterns will emerge, and you’ll see which quotes are reasonable and which are either too high or too low.

For example, if a supplier’s price is unusually high, they may be inflating their margins. If it’s very low, there could be quality issues or missing details. By comparing quotes, you’ll have a clearer idea of the market price and will be in a better position to negotiate effectively.

Sharing Your Target Price Too Early

Suppliers often ask buyers for their target price early in the process, but it’s best to hold off on sharing this information. Let the supplier provide their quote first.

If you give your target price too soon, there’s a risk of either overpaying or losing credibility. For instance, if their actual price is $15 and you say your target is $20, they might adjust their quote to $22 and “negotiate” down to your target price of $20, leaving you with less profit. On the other hand, if your target price is too low, it might give the impression that you don’t understand the product or market well.

Wait until you’ve seen the supplier’s quote and then negotiate based on that. This ensures you’re not giving away too much information too early.

Pushing Too Hard on Price with Initial Orders

While it’s important to negotiate, being too aggressive in your first few orders can create problems. If you push too hard for a low price, the supplier may compromise on quality to make up for lost margins. This can result in issues with the final product, which could hurt your business.

Instead, aim for a fair deal in the beginning. Focus on building trust and a good working relationship with your supplier. Over time, as you place larger orders and build consistency, you’ll have more room to negotiate better prices. Strong supplier relationships are a long-term investment and can make a big difference as your business grows.

In conclusion, In product businesses, your success depends on securing the best quotes and calculating your costs accurately. Clear product specifications and RFQs (Request for Quotation) ensure suppliers fully understand your requirements, preventing costly misunderstandings. Sending RFQs to multiple suppliers helps you determine the standard market price, so you can spot overpriced or underpriced quotes easily. Accurate cost analysis considering all cost components will give you a realistic picture of your landed cost. Knowing the figures upfront lets you plan for profitability and negotiate better deals.

Also, Negotiating with suppliers isn’t just about getting the lowest price—it’s about looking at the bigger picture and ensuring your business runs efficiently and profitably. By focusing on areas like payment terms, minimum order quantities, sample costs, quality checks, shipping, and production timelines, you can reduce unnecessary costs, improve cash flow, and maintain high-quality standards. Each negotiation is an opportunity to strengthen your operations and boost your profitability.

At the same time, be careful to avoid common mistakes, like accepting the first price without negotiating or sharing your target price too early. Taking a thoughtful and strategic approach to these discussions will help you make the most of every deal and set your business up for long-term success.

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Kirti Sehrawat

I help E-commerce Entrepreneurs Source Products from India effectively and efficiently, so they can bring their brilliant Product ideas to life and Build an Online Business of their dreams.

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