What is my target price when sourcing from China?
April 6, 2023
We have been helping importers with their China supply chain management for 45 years now. And many businesses that come to us for help share a common concern – pricing. However, one of the very first questions we ask new clients – what is your target pricing? Many of them are either not sure or don’t have one.
What is a target price?
A target price is the price you would like to pay for your product to be made – one that would make you happy. Ideally, this price is what you would pay for the goods in your warehouse that would include: landed cost – i.e. shipping costs from the factory, customs tax and duties, warehouse storage fees, etc.
Why do I need a target price?
Developing a target price helps to give you a point of reference. Without setting a clear and attainable goal, how do you know you have reached it? With a clear target price in mind you are able to evaluate quotes from suppliers and track the costs of your supply chain management in China.
Who needs my target price?
Your China sourcing agent will need this target price when they are collecting quotes from suppliers. Obviously, it would be best to withhold this pricing from suppliers and ask them instead to provide their best possible quote. Some may be able to offer an even lower price but will not do so if your target price is higher than their quoted price.
How do I determine my target price?
We describe it as a price that would give you as large a competitive edge as possible, but is still realistic.
Determining your target price involves:
- Being clear about what your product should be sold for in your chosen marketplace
- Being clear about what competitive products (if any) are selling for
- Understanding all the costs related to getting your product to the customer (Including freight, warehousing, tariffs etc.)
- Understanding the desired margin you need to make on the product
Tip: If you are already sourcing from China but you want to benchmark new sources, your target price could be 10-15% below your current price.
Is my target price reasonable?
This varies from product to product and industry to industry. Determining a reasonable cost depends on many factors:
- Your volume: Are you buying huge quantities?
- Your quality requirements: What are your specs?
Generally, there are many factors at play when it comes to target pricing, and there is no one-size-fits-all answer. If you are considering sourcing from China, it is important to have a clear target price in mind. This will help you evaluate quotes from suppliers and ensure you get the best value for your money. Whether you use a China sourcing agent or buy direct from China independently, understanding target pricing is a useful tactic in sourcing.
Editor’s Note: This blog was originally published in September 2019.