A common concern among those who seek our help is pricing. One of the first questions we pose to new clients is about their target pricing, yet many are either unsure or haven’t established one.
In this blog, we’ll explain what a target price is and guide you on how to determine what it should be.
What is a target price?
A target price is the amount you’re willing to pay for your product, a price that aligns with your expectations. Ideally, it encompasses all costs associated with getting the goods to your warehouse, including shipping, customs duties, and storage fees.
Why do I need a target price when buying directly from China?
Setting a target price provides a crucial reference point. Without a clear goal, how can you assess if you’ve achieved it? Having a defined target price allows you to effectively evaluate supplier quotes.
Who needs my target price?
Your sourcing team requires this target price when soliciting quotes from suppliers. It’s advisable to keep this target price confidential and instead ask suppliers for their best offers. Some may offer a lower price if they don’t know your expectations.
How do I determine my target price?
We suggest defining it as a price that maximizes your competitive edge while remaining realistic. Key steps to determine your target price include:
Identifying what your product should retail for in your market.
Researching prices of comparable products.
Understanding all costs involved in delivering your product to customers, such as freight, warehousing, and tariffs.
Considering the desired profit margin on the product.
Tip: If you’re currently sourcing from China and looking to evaluate new suppliers, consider setting your target price 10-15% below your existing cost.
Is my target price reasonable?
The reasonableness of a target price varies by product and industry, especially in the ever-changing landscape of direct buying from China. Several factors influence this, such as:
Your purchase volume: Are you buying in large quantities?
Your quality requirements: What specifications do you have?
Ultimately, many factors impact target pricing, and there’s no one-size-fits-all solution. With the information outlined above, you should be equipped to set a target for your sourcing team to work with. The execution is then in their hands.