Successful price negotiation in global apparel sourcing
By Malcolm Newbery | 16 August 2018
Price negotiation is a critical, and often stressful, aspect of apparel sourcing â€“ but it is also integral to the health of any brand's bottom line, so getting it right is crucial. Here industry consultant Malcolm Newbery offers some key tips in negotiation tactics.
In the fashion industry, sell (what the retailer gets when the consumer buys) minus buy (what is paid to the manufacturing supplier) equals gross margin. But the buy price is influenced by open and hidden costs. The sourcing manager’s (buyer’s) job is to understand these costs and evaluate them. Examples are
- the fabric, who is buying it
- the shipping, who is responsible for it
- the payment, when will it be made
But there are also more opaque costs, such as
- supplier reliability on delivery times
- extra skills, such as design, patterns, CAD/CAM computer systems
These all affect the price negotiation, including the manufacturer’s desired profit. The essence of negotiation is to arrive at a mutually acceptable solution. This insight article explains how, using monetary examples to explain the nuances of apparel buying price negotiation.