Negotiation Tactics





Your Experience
Your Solution

When retail asks for a price – how can I ensure that I negotiate a price that will maximize my sales & profits - what do I say?

First, you have to know all of your potential costs.

Secondly, you need to find the street price range of similar products in the chosen sales channels.

Thirdly, you calculate the percentage profit margin the sales channels can get. You have to hit the margin range that is expected by the retailer, so do calculations until you reach that.

If you are new to the buyer – you will probably be told that your price is too high.


What you must know before the meeting

To find the right price you first have to be clear what ALL your costs are. Here is a list of some of the potential costs to take into consideration BEFORE contacting your sales channels:

  1. Production costs
  2. Administration and alike costs
  3. Advertising/promotion costs
  4. Transportation/Distribution costs
  5. Cost of returned products
  6. Sales incentive for retail
  7. Costs of middlemen
  8. Cost of exit strategy
  9. Cost of giving retail 90 days credit (or what might be required)
  10. Minimum revenue

You now know the potential cost of your product. By going through all of these steps, you have an overview of your costs and expected profit. You can now work on the price.

The next step is to find consumer prices of similar products (see topic Category Management) in chosen sales channels (see topic Choosing sales & distribution channels). You now have a consumer price (street price).

Since retail calculate profit margin from street price and focus on margins measured in percentage (see topic Price setting) you should focus on giving them the adequate percentage margin. If this margin seems right, you also have your price.

Retail does not care if you have a loss

If you have many products in your portfolio, one of the products might be your entry product and you therefore may have to calculate with a loss for that product in the short term. However, in the long term you have to calculate with a profit. Retail only has a short-term memory and they cannot remember/understand that you had a loss with a previous product and therefore need an extra profit this time!

Not all product categories are the same – mark-up will differ

Retail has different mark-up requirements for different product categories. Purchase quantities also have an influence. However beware, you might be better off with an escalating sales success instead of risking your whole company in one BIG order.

Your price is to high

On-line retail will probably accept any of your price suggestions. They have close to none stock and buy “one” product at a time through your distributor.

Off-line retail is different. As a standard procedure, off-line retail tries to determine your final price. So if you are new to them, the first price you ask for will probably be rejected. Retail does this, not only to maximize there mark-up, but to be sure that other off-line retail chains do not get the products cheaper. In case of price wars, the big retail chains want to know what the competitor’s abilities are. Retail expects to be honored for scale of expected purchase.


It is obvious to focus on price as a sales factor. However, help yourself by highlighting the other Unique Selling Points (USP) - and at a minimum explain the price per performance compared to competitors. (See topic Category Management).

One of the strongest arguments is to refer to your success at competing sales channels. Your strategy is to build on success (see topic Choosing sales & distribution channels).

Downsides of Exclusivity

Exclusivity can be your way into the market. On the other hand, it can also be a dangerous phenomenon. You risk tiding yourself to a retail chain that does not perform well for you, and you are vulnerable to their success or failure with your product. Retail chains can be ruthless and you could end up in a situation where you loose control over your sales. One way around this is to make some cosmetic changes (i.e. on the packaging) to each retail chain. If you have to take back products, you can still repackage them and ship them to other better performing chains.

Retail chains tend to be optimistic when evaluating their ability to sell your product - this is to make you excited. There is not much to do about this but you can minimize the impact of this by having an exit strategy (see topic Exit strategy).

Jens Welling


The author of this article Jens Welling has worked with retail purchase, retail sales and retail marketing over the last 15+ years. Jens Welling has written a number of articles as a good source for any new and established company who want success with retail sales. Below are short descriptions and links to other articles.

Why You Have To Do Your Homework
Selling through retail is one of the toughest sales channels there is. Reactions come instantly. There is no mercy for mistakes in retail sales. One word covers what you need: Preparation. ...Read more

Choosing Sales And Distribution Channels
Make the right choices from the very beginning. Group the sales channels and start with the companies that fit your size and that do not compete head-on with each other. Use the distribution channels actively to get contacts inside the sales channels....Read more

Category Management
Learn to understand and use Category Management to your advantage and earn money....Read more

Unique Selling Points (USP)
Take the time to find out exactly WHOM your consumers are. You need to find your Unique Selling Points (USP). Once you get to know them, you'll know what to say to them!...Read more

Price Strategy
Right from the beginning, you have to be aware that On-line stores will “dump” your prices if you are not in control. Base your price strategy on your long-term goals: Where you want to sell the most products....Read more

What The Buyer Wants To Know
The buyer does NOT want a lot of information. He/she is living in a very high-paced environment and only wants your information in brief bullet points. Follow some simple rules and you will give the buyer what he needs....Read more

Exit Strategy
You must prepare your business for the anticipation risk of large quantities of products to be returned. You need an exit strategy. The returned products can be used to create new sales channels and partnerships, turning this somewhat hopeless situation into a profitable one....Read more

Price Setting
Consumers have psychologically priced a product with a certain amount that they are willing to pay (price point). If you exceed their psychological value, you risk failing in retail....Read more

Negotiation Tactics
It is obvious to focus on price as a sales factor. However, help yourself by prepare for negotiation tactics by highlighting the other Unique Selling Points (USP) - and at a minimum explain the price per performance compared to competitors....Read more

Rejection From Buyer
The buyer can reject you for several reasons. You must talk to the buyer to find out exactly WHY you got rejected.....Read more

Marketing Strategy
Selling to a retail chain often means you have to advertise in their catalogues, newspaper ads, etc.
This alone does not create a brand; you must also supplement the retail advertising with your own marketing strategy....Read more

Education Management
Your energy must focus on the stores (retail training). Face-to-face education is the most effective but also the most time-consuming and expensive....Read more

What retail warranties are you ready for? Depending on your sales channels, you must consider the quantity of products that may be returned...Read more

Building A Brand
You must raise the consumers' awareness and perceived value of your product through brand development.
Once you do this, consumers can and will identify your product as a brand....Read more

A high tech vendor will eventually have late delivery of products regardless of penalties. So what should a vendor do when the logistics fail?...Read more

Keeping Your Store Sales Alive
Keeping your retail store sales alive is a never-ending process....Read more

Product Development
One of the advantages to having a relationship with the sales channels is that you can discuss future product development....Read more