Price Change Shock in China Sourcing
“Suppliers cannot be trusted; they change the price in the middle of the project!”
“They quoted the low price and then did the ol’ switcheroo, just to get me in!”
These are common laments you may hear from folks who source and import from China. Although there is truth to these statements, it’s not the whole truth.
With a bit of effort, you can avoid price change shocks.
“But what’s the deal, suppliers do change the price, right?”
Yes and no.
Many times, importers are given a price in passing or in an unofficial capacity. Many aspects change from that moment, perhaps further specs are nailed down or even physical sampling is completed.
(for the sake of this post, the “price changes” referred to are only before the order starts. I’m not referring to price changes after the purchase order is issued or the deposit made. That’s a different situation).
Buyers, especially those of the inexperienced persuasion, tend to wish and hope something is true, therefore in their mind it is true.
Yes, suppliers could be more helpful and proactively communicate, aggressively remind and even spell a few things out now and then…but that’s not going to happen. Don’t hold your breath in thinking the supplier is going to be proactive and demonstrate to you the entire project path and history.
Make it YOUR duty to hover over that price. Treat it like a novice gardener would treat their first seedling; watch over your quote, question your quote, make sure what was quoted is what’s being implemented.
Once you realize something new is added to the mix, then make sure the previous quote still stands.
Let’s pause right there…
What “new thing” could happen that would change what you think you were quoted? Here are a few examples:
-Time: after the passing of time, things change in China. It’s a fast-paced place and things rapidly change from 1 day to the next. That includes the physical things as well as the mental things. People’s thinking can be more fickle and truth can be more “fluid” in a place that’s so fast paced.
Material prices go up, 3rd party vendors raise prices, price of workers, logistics, whatever… If you’ve allowed time to pass from the initial price quote, go back and reconfirm instead of assuming. It’s possible the sales person who quoted you is no longer with the company, their quotes were not solid and will not be honored by their boss.
-Sampling: here is a rule of thumb. Be prepared for price changes after sampling. Especially if the factory is sampling a developed item or a customized item, be prepared for a price change.
I guess, but that’s really irrelevant if we point fingers and talk about should, could and would. The better scenario is to consider that their first quote is an estimation. Consider that after sampling, when the job seems more likely to come to fruition, THEN the supplier will sharpen their pencils and really quote.
Surprises are minimized and problems avoided if you consider price as subject to change after a milestone stage of the process.
-Change of specs: Buyers tend to forget that spec changes bring price changes. What may seem like some benign spec change from your side of the globe, may warrant a price change from the manufacturing side of the globe.
A buyer nonchalantly changes a spec, let’s say color of material. But it turns out that the original color discussed was in stock and what may seem like a small change actually adds more cost on to the job.
…The buyer becomes exasperated because the factory didn’t clearly explain all color contingencies from the beginning. But that’s a high request that I don’t think your supplier signed up for. Remember that the vendor isn’t your personal assistant.
Because of the spec change, the factory has every right to change the price, but the buyer now has a bad taste in their mouth and considers this a random price change.
Keep in mind, that with every change, you need to check to see if it has a bearing on the price.
In the Chinese mind, all things are fluid. Nothing is nailed down and all aspects are a continual process. What us Westerners think is a “done deal”, to the Chinese, is still evolving.