What is bulk purchasing?
The concept of bulk purchasing is to allow a retailer to acquire stock at a reduced cost. The companies that provide this stock are known as wholesalers. This is because they sell greater quantities of stock at a lower price, otherwise known as wholesale.
This style of purchasing applies to almost every product imaginable. It is the cheapest and most effective way of ensuring that retailers are always fully stocked. If a high stock count is needed, it can be bulk purchased.
Primarily, this is a business-to-business (B2B) transaction between producers and retailers. However, it has recently become common amongst individuals as specialist bulk-selling stores have popped up.
How bulk purchasing works?
The process behind bulk purchasing is simple, and along the way, is designed to help maintain the flow of production.
A wholesaler has large quantities of stock at sales cost. Generally, this is the price at which it costs the producer to make the item. The sales cost of an item is the combined total of all the various parts needed to make it. This means that little profit is made on the individual item, but its costs are recuperated for reinvestment.
These items are then sold in bulk at lower unit prices to retailers. Most wholesalers offer a deal to retailers to sell products to them at a lower price per unit. This deal is tied to the fact that they’ll buy the items in bulk. The larger turnover allows the wholesaler to earn more profits than if they sold products individually. The larger the quantity sold, the higher the profits.
The retailer then sells each item at a higher price to their customers on a per-unit basis. This price will usually take into consideration the various costs incurred throughout the process. Examples include shipping and order processing costs. This way, the retailer can be sure that they turn a profit.
The benefits of bulk purchasing
Buying products in bulk offers several benefits for both the retailer and the wholesaler.
These include:
Lower costs, better profits
Across the board, it is cheaper to buy in bulk. Bigger orders when items are bought individually will quickly mount up the costs. When they are bought wholesale, the costs drop, and profits rise. Since this is also an order for many products, that will keep stock levels high, too. All told, more stock and lower prices mean better savings in the long run. The only issue to keep in mind is keeping plenty of storage space.
Less hassle
Buying in bulk means more products in a single delivery. This will help speed up delivery times, which speeds up restock times. Not only that, but these kinds of bulk order deals usually come with order contracts. This will tie retailers and wholesalers together, meaning less hassle when placing orders for the same or newer products. Plus, any information already shared means wholesalers will know what kinds of products a retailer may need in the future.
Frequent and consistent service
Having a bulk order contract means the ability to set up regularly scheduled deliveries. If a steady, frequent amount is requested, this will ensure that regular deliveries can be made at no to minimum cost. Familiarity with a wholesaler also means knowledge of their products. The consistency of their product quality and delivery will be integral to future business. This kind of business deal means a more reliable quality of service.
Business stability
Being sure that a steady flow of stock is coming into a company means they never have to worry about running out. This doesn’t just mean having a reliable source for products. Buying wholesale means covering production costs; the two businesses involved in the deal will help keep each other going. The mutually beneficial nature of this relationship means that both companies can safely rely on each other for continued business.
Conclusion
In summary, bulk purchasing is the ideal way to build large supplies of stock for less cost. It is a great way to keep stock levels high and create a healthy flow of business. It is also far more profitable in the long run and can lead to some great supplier-retailer relationships. Buying bulk also means having a low per-unit purchase price, meaning you can pass on some savings to your customers, which can help improve your customer experience.