Frugality and the Street Vendor

A few days ago, I ran across some older videos that I made during some of the work-related trips I took early in the last decade. Most of them were merely videos of presentations done by me or by coworkers, but some of them were quite nice, such as a long shot of a ship slowly departing from a harbor in New York and another one of a sunset out of the window of an airplane.

My favorite one, though, depicted a friend of mine (that I’ll call Tom) at an open air market in Mexico City in about 2003. Tom knew enough rudimentary Spanish to communicate well with the people selling in the market. In the video, he’s standing there talking to a person selling hats. As my camera pans around trying to capture the market (it was actually resting on top of an old Aztec ruin, which I found really fascinating), you can hear him negotiating in the background for one of the hats.

As my camera pans back to him, he’s holding a hat. Although the sign said 100 pesos, Tom informed me that he had only paid 50 pesos for the hat. When I asked him how, he just smiles and says that he told the vendor that all he had to spend was 50 pesos and that made the negotiation much easier.

Hot Dog Stand
Thanks to Richard Hsu for this nice picture of a hot dog stand

I didn’t realize it at the time, but that experience with Tom (and a few others while traveling with him) had a profound impact on me. He taught me that there are a lot of situations where you can negotiate, there’s nothing wrong with doing it, and you can often save money doing it.

I’m an introvert. Negotiating is something that is inherently difficult for me. In such situations, I’m much more comfortable just paying the asking price if I want the item and quietly walking away with a minimal amount of information exchanged.

What I’ve found over the years – and particularly over the last year – is that negotiating for a better price isn’t really that difficult if you just follow a few specific tactics.

First of all, when does negotiation work? Negotiation tends to work best when the person you’re negotiating with has the power to be flexible with the price you’re paying. For example, if you’re in the checkout at a large chain store, you’re likely not going to have any success negotiating because the person you’re interacting with has very little power to change your price.

Where I’ve found repeated success with negotiating is with street vendors. If you see someone selling their own wares at a stand on the street or at a market where vendors of this type are collected, you can almost always negotiate a better price.

Naschmarkt Vegetable Stand
Thanks to Gunar Grummt for this wonderful picture of a vegetable stand

Here are some basic techniques that I use. I’ve found enough success with these tactics and have done them enough that I feel quite comfortable doing them in a situation where I feel price can easily be negotiated.

First of all, have an idea of what you think you should be spending on the item before you even start. Evaluate the item a bit. Consider similar items you’ve seen recently and what their prices were. If you need to, do a bit of research on your own using a cell phone or another nearby stand. This isn’t always an exact science because many items involve what value you think the maker has added to the item.

Once you have that number in mind, ask about the item without mentioning price. This often gets the vendor to quote you a price verbally rather than you just reading a number on a sign. If necessary, I’ll ask how much the item is. I usually look at this as the opening price in the negotiation.

I usually then respond with an offer that’s below what I intend to pay for the item. This gives me some room to move up later on if needed. I’ll just say something like “How about $5 for these six?”

Sometimes, the other person will basically disengage from the negotiation at this point. If that’s the case, I don’t view it as too much of a loss. If I really want the item, I’ll pay the listed price, but most of the time, I’ll just keep walking.

NYC Street Fair, Oct 2009 - 60
Thanks to Ed Yourdon for this great picture of a corn-on-the-cob vendor

If the person says, “Sorry, I just can’t drop the price,” which sometimes happens, I’ll respond by moving up to the price I expected to pay and simply saying that I can’t afford to spend more than that on the item, so they can take the sale or leave it.

Every once in a while, they’ll take my initial offer, which is great, of course!

Most of the time, though, the person throws out a counteroffer that’s lower than their initial price but substantially higher than what I offered. Negotiation begins, in other words.

At this point, I rely on a bit of mental math. Let’s say that the item is listed at $5 and I offered $2 with an expectation of paying $3 for it. The person counter-offers $4. At that point, I try to figure out what percentage they went down from their target price toward my target price. There’s a $2 difference between their price and my target price and they went down $1, which is 50%. So, I’ll do the same i in the opposite direction – the difference between my initial offer and my target price is $1 and 50% of $1 is $0.50, so I’ll add $0.50 to my offer. Sometimes, that mental math is easy. At other times, it’s tricky and I have to just give a rough estimate.

When the price gets close to my target price, I’ll often simply “lock up” when I get to my target price. I’ll usually just say “I can’t afford to spend more than that on this” when the negotiation is close to the target I’ve set.

If you can’t seem to get the price you want, you have to be willing to walk away. That doesn’t mean the negotiation is over – many times, the vendor will agree to your request if you’re strolling away from them. It means a customer lost, and they’re better off making a bit less profit than making no profit at all.

If they let you walk away, you need to decide on your own whether you’re willing to pay the lower price, even if it’s higher than your target price. Sometimes you will, sometimes you won’t.

I have a lot of respect for street vendors. They’re out there trying to earn a living as directly as possible, selling the wares they have directly to the public. I want them to earn enough to make a living, because if they don’t, they’ll close up shop and find something else to do.

The thing to always remember in negotiations like this is that the vendor knows what the true cost of the item is. You do not. (Well, usually, you don’t know the true cost.) All you’re negotiating is how much profit the vendor will make from this sale. As I said, I want them to earn some profit from the sale, but I also want to pay a fair price for the item. They know how to negotiate already and they know what their costs are and profit margin is, so they always have that advantage in negotiation. Because of that, you should always be able to negotiate without guilt, because you’re merely negotiating to save money against the information advantage that the vendor has.

[dance with me into the colours of the dusk]
Thanks to Tanya Zagumenov for this colorful image of glass balls, possibly for sale from a vendor

Late last year, I found myself in a situation where I could really put my own negotiating skills at work. I came across a booth where a person had artistically modified glass bottles into cups, mugs, and other forms while retaining as much of the original character of the glass bottle as possible.

I really loved two of the pieces, but I found the price to be a bit high. The items were marked at $12 apiece, but the materials were recycled and a skilled person could do the modifications fairly quickly, probably while doing something else fun.

I decided that $15 for both items was a fair price – after all, there was some value added here. I asked about the price of these two items and they immediately offered me a discount if I were to buy two of them, bringing the price down to $20 for the pair.

I thought about it and offered $12 for the pair. They thought about it and counteroffered $18. I offered $13.50 in response.

The seller paused for a second and then said, “You paying with cash?” When I said yes, he responded with the magic number – $15. I accepted, and I walked away with $24 in items having paid only $15.

The seller still made a pretty nice profit, but I also saved some significant money. That’s the power of negotiation.

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