If you are a seller on Amazon, at some point you’ve probably experienced a price increase request from an existing supplier in your supply chain. Whether it is your freight forwarder, factory, packaging supplier, or other service provider, it’s important to understand why they want this.
What are your options?
Step 1: Respond & Request Time
Respond to your Supplier and recognize that you’ve received their notification of the price increase. Request time to understand what it is that is contributing to the price increase so that you can prepare your company to make any changes that may need to happen before accepting this increase.
If this is completed effectively, it will help delay the timing of the price increase and will open up the conversation to potentially deflect that increase.
Step 2: Determine your Strategy
Do you have a contract in place with this Supplier? If so, review the language within the contract to determine if a price increase is allowed during the contracted term.
Get the Supplier Agreement & Purchase Order Structuring Guide
If there is no contract in place, can you recall your negotiations when signing on with this Supplier? Were there any other factors that were important to the Supplier other than pricing?
Here are a few factors that could impact your negotiations:
- Exclusivity
- Payment Terms
- Pricing
- Delivery
- Services
- Innovation
Step 3: Ask Questions and Negotiate a Solution
In order to negotiate you need to understand why pricing increased in the first place. Ask your supplier probing questions that will help reveal the underlying issue that resulted in an increase. If you can help determine a root cause, it will help you target your negotiations.
As an example, let’s say raw materials for packaging went up for your Supplier. This might not be something you can directly negotiate with them, but perhaps you could review alternative cheaper packaging options and re-vamp your packaging. Maybe you don’t need a cardboard box, maybe a poly bag will do just fine.
More often than not, your Supplier will work with you to keep the cost neutral and will listen to a proposal in which you both benefit from. So don’t worry! Just buy yourself some time, do a little homework, and make your informed decision from there.
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