The Just Joking Price

Note – for sake of this article I am going to use RMB, or Chinese Yuan, to quote prices. The exchange rate is approximately 6.825 RMB to 1 USD. As you will see below, doing the conversion is not necessary, and is actually ill-advised during the negotiation process. This will certainly lead you to pay too much as you justify that it's only $20, when in fact you should be paying $10).

Everything in China is negotiable….and I love it. Well, not everything, but most things. For example, our fully furnished apartment was listed for about 2,000 RMB a month more than we ended up paying for it. We were also able to get the following thrown in during the negotiation process:

1. Ayi service twice a week (basically like a maid)

2. Two-year membership to Will's Gym (similar to a LifeTime Fitness)

3. Free internet and satellite cable (although it sucks)

4. 300 RMB a month allowance to use on utilities

5. Waiver of building management fees

6. A water dispenser, a water purifier, an oven, a sofa bed, and linens for the beds.

Even my local colleagues said we got a pretty good deal. Usually that is followed by "for a westerner". In this case it wasn't.

We certainly would not qualify as expert negotiators, nor do I think we are always getting the local's price for goods. However, when it comes down to the last 5 RMB, you have to make a decision on whether it is worth your time and effort anymore. On more than one occasion, my wife has been told "you very tough customer" or ”you no live in Shanghai one month – you too good". A Chinese friend of mine has told me that this is the ultimate sign of respect. I tend to agree. The Chinese love to negotiate and respect those that demonstrate some skills in the art. The first key to being a good negotiator is being certain of what you plan to buy. Window shopping at these markets is very difficult and annoying. Any indication that you may be remotely interested in something they have to offer will result in you being harassed by people from that stand and every other stand in the area. Thus, you have to know what you want, what you are willing to pay for it, and how many different locations will carry the desired item. All three of these factors will determine the price you will ultimately pay. If you are not firm on any of them, then you will likely walk away feeling like you just got robbed… because you did.

Here is a brief overview of how the negotiations at the markets go. Let us pretend, for sake of the discussion, that we are going to buy a handbag. Not a cheap, 20 RMB hand bag. But a good quality, labels stitched on, leather hand bag.

1. Size up the competition. First are foremost, the first store you pass is probably not the place you will end up making your purchase. This is because you need to determine how many places are competing for your business. The retailers already know this. Unless you take a spin through the market, then you will have no idea. If you are looking to buy golf equipment and there is only one store, then you are kind of stuck. If you are looking to purchase a bag and there are 100 bag stores, then it is game on.

2. Determining their bottom line is essential. Regardless of what the retailers tell you, they will not sell their product at a loss. I have not figured out how they can keep track of the prices of 200 different bags, but they can. It is fascinating to me. The best strategy to determining the bottom line is going into a place that you have no intention of buying their goods. This retailer is your test market and you will only offer a ridiculously low price for the bag you are trying to buy. The key is to stick to that very low price and determine how closely they are willing to come to it. For example, they may ask for 1200 RMB. You should counter with something in the neighborhood of 50 RMB. You certainly aren't going to accept their price and they won't accept yours. But, now they realize that you are actually going to negotiate. For this first retailer though, you aren't really negotiating in good faith. They are just the retailer that you are determining what you should pay for the bag. Stick to the 50 RMB throughout the process no matter what. They will make multiple offers, usually with the assistance of a calculator, and will ultimately come down to somewhere in the neighborhood of 10% of their original price quote. For sake of argument, let's assume that price is 150 RMB. You simply ask them "best price"? They indicated that it is. And you find out if that is true by thanking them and starting to leave. If they let you go, then you know it was their best price. If they shout out lower prices, then you know they would still be willing to go lower. Store this little nugget of information in the back of your head.

3. Building long term relationships is very important. Now that you know the rough price that the retailers are willing to accept, it is time to start the real negotiation process. Much like any good business in the States, building strong relationships with customers for local Shanghai retailers is essential. They all have business cards that describe the products they sell with their "name" one them. Their name is usually something like "Penny" or "Pearl" or "Starlet" or "Jewel". I am pretty sure if I could read Chinese, then the other side of the card would say something entirely different. Either way, they want you to know who they are and they will remember you. Especially if you paid too much. They will always ask you to bring your friends and spread the word about their shops. We already have a "golf equipment guy", a "DVD lady", a "bag lady", a "tie girl", an "electronics guy", and "Jason the Tailor". This is our network of people that we do business with. These people are spread throughout numerous markets in greater Shanghai. Once we determine the price for what we are looking for, we find our go to person and the negotiations begin. So, in our bag case, we go to "The Bag Lady", or as her card says, "Junny – AAA in market best quality bag shop".

4. Have a price in mind. For our example, we asked the previous retailer for 50 RMB. We negotiated down to 150 RMB and before we started walking away. Let us assume that they called out 140 RMB as we did this. Thus, we know there is room to go at least a little lower. My price point is 100 RMB for this deal. Not a single Yuan more.

5. Work the relationship angle. So, when Junny greets us at her shop front we exchange some pleasantries. She recognizes us because we have been here before and brought friends on other occasions. The relationship has been established. On the bag of Junny's card we have our notes from the last transaction. Simply put: "Good bag = 130 RMB". After exchange pleasantries – mind you my Chinese is terrible, and her English is limited to her ability to sell her products – we get down to business. I describe what I am looking for. She says "I have, I have" and escorts me through a wall that looked just like any other part of her shop two seconds ago. She doesn't stop there. A quick knock and a push on another wall and we are in the 3^rd stage of "quality". This is my sweet spot. I am not in the market for the really nice stuff in the next room. I just want to get a nice bag, which is well made for my wife. So I check the goods. It looks similar (if not better) than the first place. In reality they all probably come from the same back room. But I am convinced it is nicer! I ask how much. She knows I don't fool around, so I don't get the ridiculous 1200 RMB price the first place quoted. I get the more realistic price of 600 RMB.

6. Use a little Chinese. "Tai Gui Le!" is my immediate response to her quote of 600 RMB. This would have been my response no matter what she said. It means "too expensive". It is one of about eight phrases I know in Chinese. Junny knows the game so she asks me my price. I decline. I ask her for her "best price" instead. "Ok, Ok" and she types 300 RMB into the calculator. That is a price I can start negotiating from. I counter with my standard 50 RMB. It is my "go to" number in any instance when I expect to pay 100 RMB or more. 20 RMB is my "go to" number for anything that I expect to pay less than 100 RMB for. I don't have the nerve to make it 10 RMB….yet. Junny looks at me like I offended her. "50 RMB to low, I need more". Don't we all. I tell her, "50 RMB all my Tai Tai let me spend." I am not sure why I do this, but I feel like if I speak terrible English, then these people will understand better. It is idiotic, but I can't help myself. And it seems to work. She laughs at this. She says, "OK, OK" and types in 200 RMB. Not exactly what I was expecting. She is playing hard ball today. I got to my nest best trick, the good old "She said". This is where you quote another stores price. In my instance, I have done my homework, so I have a real price. This is not necessary though. There are so many stores and you are in a back room with a stranger that as long as your price isn't below their "cost", then they will believe you. Thus, I tell her (again in terrible English), "upstairs price was 140 RMB, I go back if you no beat". This gets a very stern look. She isn't giving in that easy. She says (and they always say), "Special day, today only, for you my friend 150 RMB". See, I told you we were friends! I ask to see the merchandise again. I pick out a flaw and show it to her. Now let's be honest. I couldn't tell you the difference between any two designer bags, but she knows it isn't real either, so she doesn't argue. You can really pick out any "flaw". Maybe the stitching is a bit different or the label isn't quite right or the strap is supposed to be longer. This tactic results in the price I was expecting her to come up with, the 140 RMB that my test market yelled out as I walked away.

7. Don't show your hand too soon. Notice that I have not changed my original price in this whole exchange. This is an important point. As soon as you start moving up, then they realize this is something you really want. There is no going back once you move off your original price. I finally offer my second price, 75 RMB (I am fully expecting to pay 100 RMB). She tells me again that she cannot do and tells me "a little more". I don't think she will sell this bag to me for 75 RMB. If I did, then I would pull the last trick right now. Instead, I ask her for her "last price". She doesn't want to come off 140 RMB, but she can tell I am not paying that price. She thinks for a minute and says, "OK, OK, 120 RMB, last price". This is when….

8. You always pull the walk away. Under no circumstance should you ever skip this step. It is critical. As soon as she gives me her "last price". I say, very politely, "no thank you" and start to leave. My arm is immediately grabbed to keep me from leaving. I pull away gently and tell her that I cannot do 120 RMB. She begs and pleads a little and I tell her no. As I am about to leave the last of the secret rooms, she pulls on my arm a little harder and says. "100 RMB, only today". I have found my price, and I am willing to pay it. I pretend like it is a hard decision, agonize over it a bit, and end up asking her "a little cheaper". She says she cannot. I am tired of this charade at this point, so I say "Ok, but don't tell my wife. It is a special gift." We settle up on the 100 RMB. She tells me to tell my friends, but not to tell them the price. For those keeping score at home. The original price for the bag was quoted at $175 USD. I paid $14.65. And I probably got ripped off.

I thank Junny for the bag. Tell her my wife will love it. And update Junny's card to say "willing to take 100 RMB". We will see just how far down I can get her from the "Just Joking Price" next time.