Have your suppliers put their prices up again? It’s hard to tell if the increase is genuine or they’re just trying to pull a fast one.
Today, we’ll look at some common scenarios and what you can do to stop getting ripped off!
Supplier: “Hey, our costs are going up. I’m afraid we need to increase our prices by 10%”
Does this sound familiar?
I hear it all the time and although suppliers’ motives for increasing their prices can be legit, they’re often not.
So, let’s look at some common reasons for price increases and what you can do about them.
Your supplier may cite fluctuations in the currency you use to pay for your goods as a reason to put up prices. For example, if you buy your products from China in dollars and the yuan fluctuates against the dollar, then your supplier may try to pass on any extra costs to you.
But remember, Chinese suppliers don’t buy their stock in dollars, they use yuan – so their costs haven’t gone up at all. Yes, they might receive less because of fluctuations between the dollar and yuan, but you can easily check this and see if they’re trying to rip you off.
Their cost of production has gone up
Before we get into this one, let’s clear something up.
When you buy a product from China, you’re very rarely getting it straight from a factory where the complete product has been created from scratch. In reality, your item has likely come from an assembly line where its numerous components (sourced from different manufacturers) are put together.
So, when your supplier claims that their costs have gone up by 10% and they want to pass that on to you, it’s not usually true.
What’s probably happened is that the cost of one element of the product has gone up and they’re using that as an excuse to raise your price.
For example, say the supplier of your best-selling pizza oven has told you that their costs have gone up by 10% and they’re going to pass that on to you by increasing your price by 10%
What they won’t tell you is that it’s only the cost of the handle that’s increased by 10% – NOT the total cost of the pizza oven. Yes, the cost of the finished product has now increased by a bit (maybe a cent at most) but it’d be completely unfair to charge you an extra 10% on the WHOLE product.
Here’s what I’d do. I’d ask my supplier which specific component has increased its price by 10%. I’d show them that I know what I’m talking about and hopefully, they’ll take the hint and stop ripping me off!
What if the increase is legit?
Not all products are made from numerous parts so a total increase in cost may be more legit.
Take, for example, an aluminium rolling pin that your supplier produces for $1 and sells to you for $5. A 10% increase in production costs would be 10 cents which can be fairly passed on to you, so you now pay $5.10.
But many suppliers will try to add 10% to your price and charge you $5.50.
The message of the day is, ‘Don’t take price increases as a given and ask questions.’ Your supplier may be trying to pull a fast one, but as a savvy Amazon entrepreneur, you won’t let them!
Thanks for reading guys and gals – I hope this helps someone out there.
Hugs and kisses!