Friday, August 28, 2009

Negotiating in Hong Kong and China (Part 2)

Following on from our first post about negotiating in Hong Kong and China, we thought we'd do an update post.

One of the first things we found when speaking to our shoe supplier was that they weren't keen to talk about price. We raised the issue at one of our early meetings and their response was, 'Let's learn to work with each other first and build the relationship, then we can talk about price.' Obviously that's a very different approach to how negotiations would take place in Australia and thanks to Dan and Julian's comments in our first post we were prepared for something like this.

Initially we thought that not negotiating price immediately puts us in a risky situation, because if we build our shoe designer using our suppliers designs, and set up all our systems to work them, then we're in a more difficult negotiating position when it comes to price. However thinking this through some more we realised that the relationship is probably more important to us than price anyway. The key skill Mike, Jodie and I lack as a team is shoe making experience, so we need to build a strong relationship with our supplier and learn all we can about this art from them. On a personal level this approach also suits us, we'd much rather get to know our suppliers really well and have a strong, friendly relatinship with them, than be constantly bickering about price. So while the jury is still out, the Hong Kong / Chinese approach looks like it will work for us nicely. :)

We're also in the fortunate position that the Hong Kong $ to Australian $ exchange rate has moved quite strongly in our favour from when we first started the project, so even at the highest prices our supplier could charge us we could still operate a successful business. And if things go horribly wrong when it comes to price we've kept up relationships with some very good alternate suppliers who we could work with.

So whenever we meet up with our supplier we bring gifts from Australia (avoiding black label whisky and green hats - thanks Jared!) and we've got the very pleasurable task of spending a lot of time socialising with them, eating lots of local Chinese cuisine and consuming the local beverages. Mike's in Guangzhou at the moment hard at work on this important task. ;)

What do you think, have we taken the right approach? Anything we should be doing differently?


  1. Hey mate, all sounds good except you might not want to blog about how much you are willing to pay for manufacturing. Your vendor could have a read of 22 Michaels and take you to the cleaners.

    Also, what are you guys thinking on currency hedging? Would hate to see the exchange rate turn around and kill your plan.

  2. Matt, great thoughts, thanks!

    1. Your point to not blog about how much we're willing to pay our suppliers is a good one. We give quite a bit of thought to what we post on here and price we're willing to pay thought is actually a few weeks old. A few days before publishing this post we agreed with our supplier that we would pay the maximum we'd expected to in the short term, then we'd renegotiate later depending on our volume. We don't like to hold off publishing our thoughts too much, but we did in this case for the exact reason you mention.

    2. Thanks for bringing up the point about currency hedging and getting us to think about this! After thinking it through currency hedging warrants its own post, so I'll do that now and would love to hear your thoughts!

    (And which Matt is this?)