By Cem Perdar
There is an ancient saying in business, that you earn when you buy. This historical saying is a very important in today’s trade. As you know, competition in trade has increased tremendously, especially with the effect of digital transformation. At the end of the day, the sensitivity shown to price during purchases in such a crazy period will have a great financial return. In today’s article, we will focus on what should be considered when making a purchase, and under which conditions the commercial transaction will be more efficient.
Making a price comparison : Let’s say you are a business person based in Uganda and you want to import new new furniture for your business. You do your research about the furniture manufacturers and at the end of the day, you come up with 3 serious suppliers and you are at the phase of receiving price proposals.
So what should be done at this point? First, detailed research should be done on the furniture prices in the Ugandan market, the types of furniture are on the market and the prices. At this point, you need to determine whether the new furniture you import is able to compete with the products in your local market. The most important point left – Pricing. Here, you have to negotiate for a tight price with the 3 suppliers you have left for the final. Getting the best quality product at the most affordable price is one of the main principles in trade. Let’s consider the selling price of a 3-seater sofa as US$300 in the market. Since you are a new entrant, you should not exceed the average price in the market, but you want to get a good profit margin from the product you bring. In this case, the best move is to get the most competitive and reasonable prices from your supplier when purchasing the sofa. Your final sales price for sofa will be US$300 at Ugandan market and among your purchase options there are 3 selections. First one is US$190, the second is US$185, and the third is US$165. At this point, which product would you prefer? Of course, the US$165 one if there is no concern about the quality and service. So how did you come to this conclusion? Because you did your research by interviewing many suppliers. You have determined your candidate suppliers according to your criteria. And finally you identified 3 manufacturers that will give you the most price/quality performance. After that, it’s entirely up to your commercial target and perspective. If you want to obtain good profit margins without exceeding the average price in the market, you will start the import process by choosing the affordable product.
Give an order projection to your supplier: As I earlier mentioned, when purchasing your product, the more affordable the best quality product is, the higher your profit margin will be at the end of the day. If you are targeting more reasonable accounts in your purchase price, try to give your supplier quarterly order projections. For example, let your supplier know the first quarter orders of 2022 from today. This approach will definitely reduce your purchase prices and enable you to reach your profitability targets faster in the medium term.
Companies Rise or Fall on How Well They Renew Their LeadersNever hesitate to bargain: I know some people get embarrassed and tense while bargaining. I think bargaining would be one of the most enjoyable part of trade. We can even imagine bargaining as a way or style of life. Imagine, as a Ugandan, you go to your potential supplier and you have a huge order in your hand and money in your pocket. You are the strongest party in this business activity. Your supplier is ready to do anything to woo you. Its sole purpose is to grab the official order from you and get paid. In this case, the cards are in your hands. How would you like to deal the cards? open all at once? Or by slowly pulling down the prices with a nice negotiation? I think the strongest should take everything on the table. And you are the strong one. Please never hesitate to negotiate price.
Ultimately, the essence of trading is to profitably sell your purchased product to the market. For this reason, it should never be forgotten that the best money is earned while purchasing the product which also enables very much the personal satisfaction.
Cem Perdar is Export Sales Manager/Africa at Pakmaya, Pak Holding
Email: cperdar@gmail.com
