Two Bargaining Approaches That Work
Dear Rich Lifer,
How often do you buy second hand?
In 2019, the US market size for used goods was worth a whopping $20 billion. In recent years, this industry has outperformed the overall retail market in the country.
The main reason consumers choose to buy second hand over new is because of price. Used goods typically cost less than buying new, but the price of pre-owned items can fluctuate.
In times of economic downturn, used goods sales climb as more cost-conscious consumers fuel the market. This creates strain on the supply and prices usually rise. As the economy recovers, second hand sales begin to fall and supply levels stabilize, this is typically when prices start to come down.
Although the coronavirus pandemic has caused a great deal of economic uncertainty, the second hand goods industry experienced plummeting sales in 2020.
Likely due to strict government rules and stay-at-home orders, the movement of pre-owned goods slowed to a near halt.
Why does this matter?
If you’re looking to buy anything second hand, now is the time to start shopping. Second hand inventory levels are at an all-time high and sellers are practically giving stuff away.
Plus, if you know how to negotiate pricing, you can usually save even more money.
For many people, this is where they get stuck. The idea of negotiating seems intimidating.
Instead of asking for a lower price, it’s easier to pay whatever a seller is asking and justify the transaction later. Or if the price seems too high, forgo buying the item altogether and missing out on what could have been an excellent purchase.
You may not realize it yet but negotiating anything second hand is easier than you think.
Today we’ll show you how to get the lowest price possible for anything second hand.
Two Bargaining Approaches That Work
Before we get to the tactics, let’s talk about your bargaining approach.
First, there is no one best way to negotiate. Everyone has their own unique personality and certain bargaining approaches work better for some more than others.
Also, depending on what you are negotiating, the approach you take makes a huge difference.
Generally, there are two approaches that work best: aggressive and positive bargaining.
Here’s a quick rundown of each style:
Aggressive Bargaining: Like the name suggests, this approach is best suited for individuals with strong personalities. The idea is you make it clear to the seller you’re bargaining with why you can go elsewhere to spend your dollar. This approach is not the friendliest but it can secure great prices on items, especially if you know the seller has to move inventory quickly. If you’re looking to build long-term relationships with sellers, this is not the best approach.
Positive Bargaining: On the other end of the spectrum is positive bargaining, where you make it clear to the seller why you’re the perfect buyer for the item. The goal is the same as the aggressive bargainer, you’re trying to secure the best deal, but this approach will preserve your relationship with the seller. If you master positive bargaining, you can lock down amazing deals on items when multiple offers are on the table.
Both styles work and both offer advantages depending on the negotiation. But you’re probably wondering, how do you negotiate? What are the mechanics?
In the following section, we share five ways to negotiate a better price on anything. Follow these five tips, and you’re guaranteed to walk away with more money in your pocket.
5 Tips to Negotiate Anything
Let’s assume you have an item in mind you want to buy.
How do you make sure you get the best price for it?
- Market Research
The first step to arming yourself for a negotiation is doing a quick scan of the market. Try to find out two things:
What are others selling for?
How much is the item selling for brand new? How much is it selling for on other used-goods selling platforms? Spend at least 5 minutes researching prices. A quick scan of the market will tell you if the price a seller is asking is in the ballpark.
If the price is higher than the market average, ask yourself why? Is it because the item is in better condition, a newer model, or a rare collectible?
And if the item is priced lower than the market average, ask yourself why as well? Is it because something is missing, is there noticeable wear and tear, does the item work as advertised?
Spending time doing your research will pay off later when you start negotiating. If a seller’s price is high, you can quote other prices you’ve seen in the market and pressure them into lowering their price.
How much did the item cost the seller?
This is arguably the most important piece of information you can find. But it’s also not easy to get your hands on. When you know how much a seller paid for an item, you know the margin difference they have set with their price.
Most used goods depreciate over time, so the price is typically lower than what the seller originally paid. But how much lower?
Knowing how much an item is currently selling for in the market and how much a seller paid for an item will give you enough information to justify asking for a better price, especially if you feel the price could be lower.
Other relevant information you should try to find out:
Deadlines the seller is facing
If a homeowner is moving out of the country for work and needs to sell their house before a deadline, their motivation to negotiate on price is a lot higher than someone who can wait.
Reason for selling
Sometimes sellers are not looking to make a profit. In fact, they would be happy to breakeven or just rid themselves of the item altogether. If you know why the seller is selling, you can figure out how much room there is to negotiate on price.
- Name Your Price, Second
If you’re buying something online, the seller usually has named the first price in their advertisement. So, if you want a better price, you’ll have to put out a new number.
Sometimes, though, you can bait the seller into lowering their initial price by simply asking if the price is firm or if they can do any lower?
If the seller names a slightly lower price, use that as the anchor for which you begin negotiations. Every counteroffer from that price onward should be lower.
- Don’t Settle for the Middle
It might be tempting to ask for a slightly lower price and then have the seller counter with an offer somewhere in the middle. Don’t settle for this meet-half-way approach.
Put yourself in the seller’s shoes. How would you secure the most money? You’d set the price higher than you expect to sell for and negotiate down from that high price point.
When you act reasonable and offer only a slightly lower price, you end up negotiating from that inflated price.
Instead counter with a ridiculously low offer. This will force the seller to abandon their strategy and try to bump your offer up. Low-balling doesn’t always work but if the seller has a deadline to meet or there’s abundant supply in the market, you’ll be surprised how much you can save.
- Figure Out the Price Floor
If the seller needs to make a certain amount of money from a sale, there’s no negotiating tactics that will move the seller below their price floor. Don’t waste your time if that’s the case.
Remember, if you can find out what the seller paid for the item, this will show you how much room you have to negotiate.
- Do This Before You Walk Away
Especially right now, buyers are in a position to walk if they don’t like the price.
No seller wants to lose a sale in this economy, so don’t be afraid to tell the seller you’re going to look elsewhere before making up your mind.
Saying you’re going to think about it or look somewhere else, puts pressure on the seller to make you one final offer. To help trigger that offer, say this:
“Thanks for your time but I’m going to look elsewhere. Unless you can offer me a better price today, I want to keep my options open.”
These two sentences open the door for a final counteroffer. If the seller doesn’t budge, you should still walk away. Typically the seller will call you if they’re desperate or under a tight deadline.
Like any skill, negotiating takes time to practice and hone.
If you follow these five tips, you’ll be better at negotiating than 90% of the population and you’ll save yourself a lot of money along the way.
To a richer life,
The Rich Life Roadmap Team