Lessons on Negotiation from Hong Kong Shop Aunties
By Christy Hirai
A Hong Kong shop aunty in her store
Negotiation is an important skill. Executives negotiate business deals, lawyers negotiate better terms for their clients, diplomats negotiate on behalf of their countries, and top negotiators are often highly-prized. But some of the best negotiators can also be found in the most unassuming locations – in street stalls and humble stores selling cheap goods. In search of some of these people, I visited Sham Shui Po, one of the densest neighborhoods in Hong Kong, known for its shops offering cheap clothing, accessories, and electronics. The proprietors of these establishments are some of the shrewdest negotiators in the world – shop aunties: hard-bargaining older women for whom haggling is second nature.
Why do people haggle? Sometimes we haggle out of necessity, when we want to buy something that’s beyond our means. Other times, though, it’s more of a habit. We inquire about the price, then we automatically make a counteroffer that’s slightly lower than the price we’re willing to pay. Perhaps we just like to feel that we’ve gotten a bargain, that we’ve asserted our agency and it’s paid off. Whatever our reasons for haggling, there are few who are better at it than these shop aunties.
One such shop aunty is Mrs Hung, who runs a small store selling wholesale denim jeans with her husband on Cheung Sha Wan Road. Their store has seen the handover of Hong Kong to China and the influx of mainland tourists that came with it, the SARS epidemic, and the rise, decline, and comeback of wide-leg jeans. Mrs Hung is tanned, with high cheekbones, and her dyed brown hair is streaked with gold. Wearing her shop’s denim jeans and a measuring tape round her neck, she jests that she is 3-in-1: a model, a tailor, and a salesperson.
A denim shop in Sham Shui Po
On Ap Liu Street, just a few blocks from Mrs Hung’s shop, is an audio-visual equipment store that Ms Poon and her two brothers have owned and run for the past 15 years. Most products in sight, predominantly packaged cables that would be indistinguishable to a layman, are hung on rows of wall-mounted hooks, and taped to each is a neon card stating its price, handwritten by Ms Poon. Ms Poon herself is petite, her short hair is tied into a neat bob, and she speaks with a quiet confidence.
Electronics shops in Sham Shui Po
These two women have eked out a living on the streets of Sham Shui Po, serving some of the most cost-conscious consumers in the city. What lessons on negotiation can we learn from them?
1) Desire is Everything
How do these shop aunties size up customers? Can they tell how much they’d be willing to pay as soon as they enter?
Apparently not. “The first impression a customer gives provide little indication of how the negotiation will unfold,” said Mrs Hung. “Their demographics and how they carry themselves are irrelevant. The only question is: How much does the customer desire the product?”
Of course, many customers try to disguise their desire, but certain things will give it away – a glint in the eye, a restlessness in their speech, a clenched fist. And, if desire is detected, sometimes all it takes to seal the deal is a small nudge – like Mrs Hung remarking to a female customer how her already tiny waist looks even tinier in a certain pair of jeans.
2) Know Your Stuff
I noticed that, while most items in Ms Poon’s store had price tags on them, there were some that did not. One of these was a pair of walnut standing speakers locked in a glass cabinet.
“They were handcrafted by our longest-serving technician,” said Ms Poon, who noted that here there was an imbalance of information, since no customer could know the exact value of those speakers, whilst she did. This gives her more leeway to sell them for a higher profit, something she doesn’t bother to try to do with more standard items like cables, since it’s easy to check their prices. “The principle I stand by is always try to be the one who knows more in a negotiation,” she said.
3) Preserve Your Counterpart’s Pride, and Your Own
The article “Being Tough or Being Nice? A Meta-Analysis on the Impact of Hard- and Softline Strategies in Distributive Negotiations” by Joachim Huffmeier of the Technical University of Dortmund, and others, defines a hardline bargaining strategy as “making extreme first offers and/or minimising one’s own concessions” and a softline bargaining strategy as “employing one’s own concessions to induce more concessions from the other party in a negotiation.” It concludes that hardline bargaining strategies, “yield better economic outcomes” than softline ones but “lead to worse socioemotional outcomes.”
But Ms Poon found it implausible that being extremely tough would yield better economic outcomes. “As the Chinese saying goes,” she said, “‘chiruan bu chiying’ [which can be roughly translated as ‘submitting to benevolence rather than force’]. No one succumbs to pressure voluntarily unless it is absolutely inevitable.”
Ms Poon found it implausible that being extremely tough would yield better economic outcomes.
Mrs Hung, a salesperson for eight years before opening her shop, highlighted the correlation between “socioemotional” and “economic” outcomes, stressing that nothing good, economically or otherwise, can come from bruising the customer’s ego.
However, she regards herself as more of a hard negotiator than a soft one. More than half of her customers try to haggle with her, she said, but most end up paying the original price. “I’m tough in the sense that I have an unwavering stance, but at the same time I’m always mindful of maintaining a smile,” she said with a grin, “and where the circumstance allows, a touch of humor.” Be tough and nice, she advises, and by doing so, preserve your counterpart’s pride as well as your own.
Likewise, when I asked Ms Poon how often she sold her products for cheaper than the handwritten price, she thought about it at length. “I’m just trying to recall the last time I did not sell at the established price,” she said after a while. “Hmm,” she observed, neither smirking nor frowning, “I suppose that answers the question.”
4) Be Willing to Let them Walk Away
“What do you do when the customer walks away from the negotiation?” I asked Mrs Hung.
“Let them,” she replied, laughing softly.
Mrs Hung said that she’s never tried to stop a customer from leaving emptyhanded, and yet, about two-thirds of those who left returned later that day and bought the product at the full price. Her confidence is backed by her knowledge of her goods and her competition.
“Would they be able to find a pair of jeans of that quality at that price anywhere else in Sham Shui Po?” she asked. “Doubtful.”
I found it rather hard to believe that not once had she tried to stop a customer from walking away. Surely there must have been times when she felt desperate?
Mrs Hung, however, said she never gave in to desperation, because she regards desperation as toxic to goodwill.
Mrs Hung regards desperation as toxic to goodwill.
“I’d rather lose the transaction than undermine the trust that a potential customer may have in my products. The fact that they choose to leave my shop emptyhanded today does not necessarily mean that they won’t visit again tomorrow, or the week after.”
5) Beware of Protracted Negotiations
Economics teaches us that the time we invest in anything – be it an underwhelming movie, an unusually long queue, or a fraying relationship – is a sunk cost, a cost that is irrecoverable and therefore irrelevant to rational decision-making. Nonetheless, people have a tendency to let sunk costs influence their future decisions, investing more time into something since they regard it as “a waste” of their previous efforts if they give up, something known as the sunk cost fallacy.
Ms Poon acknowledges that she’s sometimes made this mistake. “The longer the negotiation, the more likely that someone will concede in the end. It can get awfully tiring for both sides. For that, I make a conscious effort to focus and stay on guard when a negotiation drags on.”
Mrs Hung is also wary of protracted negotiations, regarding them as indicators of a mismatch of expectations. “Like couples that keep breaking up and reuniting, things don’t usually work out in the end,” she said. She related an experience with a customer years ago. The customer, a Japanese department store, insisted on a price that was substantially lower than her acceptable range. After weeks of protracted negotiations, the customer reluctantly agreed to pay the price she asked for. But the amount of goods the customer ordered was minimal, for it was overspending. Naturally, she never heard from the customer again after that.
“When a negotiation is going around in circles, the reason may simply be the absence of common ground between the two parties,” she said, “and that’s ok. Revisit your objectives, regroup, and move on.”