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Negotiating Lesson from the Streets of Shanghai

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Shilin Night Market, TaiwanA few weeks ago, I spent two+ weeks in Shanghai, China visiting family. When you go shopping anywhere outside the United States, especially in any type of open air market, capitalism is as strong there as any place in the United States. The government may be “Communist” but the markets are as free as can be.

Whenever we visit, we like to get tailor made shirts because they fit great and cost around $15 a piece. It’s a great fantastic deal for a fitted shirt. The problem is that in order to get the $15 price, you need to negotiate a good deal. This isn’t haggling a few dollars off a purchase off some knick knack, this is capitalist hand to hand combat. The vendor won’t open a price with something reasonable, like $20, it’s usually $80 or some other absurd number ($80 is not that unreasonable for a tailor made shirt in the U.S.). To get a good price, you have to know how to play the game and play it well.

How do you know it’s negotiation war? There are no prices. Prices are almost never written down anywhere. You have to ask the owner and he (or she) tells you a number, you counter, and then you dance around a little until you arrive at what is generally accepted as a good price. If you’re educated, you get there quickly. If you’re not, you overpay.

Here are some lessons we learned from our recent trip:

Know Market Price

This is easily the hardest thing to know because it’s not a tactic, it’s straight knowledge. Do you know how much a tailored shirt should cost in China? I only knew because we did this exercise five years ago. It cost us 100RMB five years ago and we negotiated it to 100RMB this year, though due to currency exchange rates the dollar price was higher today. We had insider knowledge because of my uncle, who was living in Shanghai, and he knew how much things should cost because he did this a lot for visiting friends and relatives. Prime example: you can get an iPhone charger (cord and detachable outlet plug) for around $2-3, though you’ll see people open a price at $10-15.

(as an aside, and this is kind of obvious, but know your conversion rates!)

Always Test the Market

Since no one writes down a price, since they’ll give higher prices to people they think are less knowledgeable and willing to pay higher prices, you need to constantly be asking. Even if you don’t plan on buying one right now, it’s good to know how much people are charging.

When you walk by a shop and see something you might want to buy, ask the owner for a price. They’ll give you the inflated one, you say it’s too much, they ask you how much you want to pay, and you say something you feel is absurdly low. They counter (maybe), you say no thanks. Next time you see that product, do the same thing. Eventually you find out an iPhone charger will cost you $2-3.

Negotiate Aggressively

It sounds crazy but always counter with around 10% of whatever the seller says is the price. $100? Say $10. Unless the seller thinks you’re a sucker, the price is probably around 30% of what they said. This is just a very general rule of thumb and you’ll have to use your knowledge of the market price to guide you. If you aren’t sure, just ask a lot of sellers (so many people sell the same thing) until you get enough “final prices” (which you’ll know because you walk away) to discover the market price.

Walk Away

Negotiations don’t always end in a sale and walking away is the most powerful tool you have in your kit. When you walk away, 95% of the time they will chase after you to try to get the sale. The only times they don’t do this is when your offer is too far from what they’d take. If they say $500 and you say $5, with the true price around $150… they’ll let you walk. Then you know you were too low. You can always go back.

Buy In Bulk

What works for Costco will work for any seller. They’ll take a smaller profit margin per item if you buy more. It let’s them go through inventory, keeps them busy, and makes them a higher total amount. If you arrive at a price for one, see how much lower they’ll go for two. I had five shirts made, my lovely wife had three shirts made, and my future brother in law had ten shirts made (this was in addition to six suits). We did volume and the guy cut us a good deal. (If you really want to go to the next level, negotiate the price for two items and then drop back down to one)

Everyone Negotiates

One of the hardest parts about negotiating is just getting over the social stigma of having to negotiate. When you walk into the Gap, you pay the retail price. You don’t haggle with the employee working the register (and they have limited means to help you) and so many people just aren’t used to it. If you can get over it, you can save yourself some money. If you can’t, well consider it a premium.

Another funny tidbit about Shanghai, and the rest of China, is that they joking call it a free country because you can basically do whatever you want. Driving is insane. The cities grew so quickly that cars outpaced the infrastructure and people drive like they’re insane. Being cut off is common. Running red lights is expected. If you go through an intersection with a green light, you need to slow down because someone on a moped (or in a bus) could be running that red light. That’s crazy.

Do you have any negotiating tips one can use in the chaos of street markets? (or anywhere else)

(Photo: kayone73, of Shilin Night Market in Taiwan, we went there too but negotiation wasn’t as aggressive in Taiwan)

{ 9 comments, please add your thoughts now! }

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9 Responses to “Negotiating Lesson from the Streets of Shanghai”

  1. Frugal says:

    I believe above is true for almost all “developing” countries. Not just that, the sellers WILL know that you are a visitor and will go with higher prices.

    You need to go with a local person or you are almost guaranteed to pay higher prices. Even if you are going back to your native country, the sellers will know by the way you act, talk etc.

  2. I had heard tailoring in china was very cheap, but $15 for a fitted shirt is insanely good. The only local place that does good made to measure shirts costs $160. I could probably get that down some online, but $15 is great.

  3. Megan E. says:

    In India, this is a common thing as well. I like a lot of these tips and have used a few of them (being a white “American” – white=American there, I don’t always get the best deal, but I try).

    A few tips I’ve picked up:

    1. Sometimes the store owner doesn’t want people to know how far down he/she will go – try and take them to the corner and keep your voice down and they may be willing to go lower.

    2. Offer to throw something else in “I’ll pay your price for these shoes if you also throw in this bracelet” – it usually helps them if you agree to a higher price, even if you end up with more stuff, since they can share that price without the deal to others.

    3. Be male – I know it’s a horrible thought, but usually in these countries, men do the business and will get better deals. Try having a brother/father/husband do the negotiating.

    4. Speak a bit of the language, even “yes”, “no”, “thank you” in a native tongue will get you further.

    Bonus: Always remain polite – it is a business and if you feel cheated, just walk away, don’t yell or hit.

  4. Tummy says:

    Good to know that 10% of the asking is where you should start.

    What if you don’t necessarily want to get the best price, but a fair price where the vendor can make a living? Is it worth arguing over what could be an equivalent of a dollar or two for some low cost items?

  5. James says:

    My wife and I live in China and we have learned that if we know a few negotiating phrases in Chinese they take us much more seriously. Not sure if that would be the case in other countries, but it can’t hurt. My wife also learned a few compliments as well.

  6. JP Adams says:

    Interesting stuff Jim. It’s surprising how similar your approach is to many business negotiations.

    One of the areas that I get really jazzed about is salary negotiations. I spoke with a friend last weekend who is thinking about asking for a raise with a recent promotion.

    Here are the steps we discussed.

    Step 1: Ask
    Its amazing how many people never ask for a raise. They expect their boss to give it to them. This is just plane wrong. You need to make a compelling case for why you have contributed and why you deserve to be financially rewarded. Bring it up.

    Step 2: Prepare
    I think 70% of salary negotiation is preparation. This means knowing the market price for your job and position, identifying what range you want, but MOST importantly practice the conversation with a friend. This is critical. Salary negotiations are emotionally very challenging. You need to be able to look the person in the eye and remain confident.

    Step 3: Have A Plan B
    The company may not be able to meet your expectation. Have a method of saying “It’s ok, let’s talk about it next performance review.’ or an alternate job to transition to.

    Step 4: Be Congenial
    At all costs be polite. It frankly helps you get what you want in addition to being the right thing to do. You will look mature and confident.

    Step 5: Ask
    Remember, it starts with walking across the bar and asking if you can buy the girl a drink. Like dating, salary negotiation all starts with swallowing your fear and pride and taking the plunge.

  7. Evan says:

    Greece is the same exact way! It is very hard to jump into the mentality when you are visiting there for a week or two.

  8. JL says:

    I’ll add one other thing.

    Sometimes, just let them “win.”

    As a privileged person from a first-world country, I often don’t see the need to be so aggressive with negotiating.

    I understand that some of the markups are ridiculous and that’s why you should definite bargain it down, but I just feel there’s no need to waste too much time and effort.

    They’re trying to support a family (even if they’re single, they often need to help support their parents and extended family) and so if it’s a reasonable price, then I just go for it.

    Besides, it’s a vacation and you shouldn’t stress out too much 🙂

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