Data from SoFi shows that individual consumers can save 25% to 35% by buying in bulk at wholesale outlets like Sam’s Club and Costco. The same is true for small businesses: By working with wholesale suppliers, retailers can command lower prices, manage inventory costs, and access a wider range of products. Here’s how bulk purchasing can work for your business.
What is bulk/wholesale buying?
Bulk buying and wholesale are two terms that are often used interchangeably. Bulk buying involves purchasing multiple quantities of a product in exchange for a lower price per unit. Wholesale is a business model in which a company purchases large quantities of a product directly from a manufacturer and/or distributor to sell in smaller quantities to a retailer or consumers. Wholesale companies often practice bulk buying directly from manufacturers—but that’s not always true.
“It’s important to note that even though nearly all wholesale definitions talk about bulk orders, this is not a rule that’s carved in stone, although it is very often the case,” Shopify wrote. “There are wholesalers (usually manufacturers themselves) who are happy to sell their items in smaller quantities, especially when they’re dealing with a retailer for the first time.”
Typically, small business owners work with wholesalers who do the bulk ordering on their behalf. A manufacturer will mass-produce and sell an item in bulk to wholesalers, who then sell the product in smaller batches to retailers. Some retailers may still order “in bulk,” but it will be a smaller purchase order than the wholesaler placed with the manufacturer.
There’s no specific threshold for when something is “bulk, " but the rule of thumb is that it’s a larger quantity than what you would find in your local store.
What are the benefits of bulk ordering?
Small businesses that find reliable wholesalers can benefit from better deals and buying efficiencies.
The primary benefit of bulk ordering is the ability to save money. Wholesalers offer better details on multiple product lines. “Wholesale prices are always lower than buying individual items. Buying in bulk also means fewer orders per year and therefore lower shipping costs overall,” wrote Pay.com. Fewer orders mean bulk ordering is also more environmentally friendly.
Wholesalers also help retailers manage inventory more easily. They do bulk ordering on behalf of retailers, allowing merchants to buy smaller quantities at a fair price. This advantage helps with inventory management, storage costs, and demand forecasting.
There are wholesalers (usually manufacturers themselves) who are happy to sell their items in smaller quantities, especially when they’re dealing with a retailer for the first time.Ying Lin, Shopify
Finally, bulk ordering through a wholesaler can also improve the reliability of your supply chain. “Wholesalers interact with multiple suppliers and drop the ones that are terrible,” wrote the Startup Bros. “By dealing with a wholesaler, you’re cutting out the interactions with shady or bad suppliers.”
[Read more: Big Brands’ Inventory Management Partners Share Top Tips to Slay Supply Chain Snarls]
What are the risks of bulk purchasing?
Bulk purchasing isn’t without its challenges. Bulk ordering requires retailers to order a certain minimum; if demand doesn’t match that minimum amount, inventory can expire or become obsolete.
Likewise, it’s worth noting that wholesalers often add a small markup to the manufacturer's price. While bulk ordering is more cost-efficient than ordering single products, it’s not as affordable as ordering directly from the manufacturer. Likewise, bulk purchases require more upfront investment, reducing available cash flow for other business needs.
Finally, make sure you work with a reliable wholesaler or supplier that can deliver high-quality goods on time. There are many different types of wholesalers; it can take time to find a partner with the right business model, connections, and standards to meet your needs.
How to choose a wholesaler
Selecting a wholesaler takes time and research. Consider factors such as location, pricing, and years of expertise. “Once you’ve compiled a list of wholesalers you’re interested in, Google them and read online reviews from other retailers who have worked with them. That will give you a good sense of whether or not they’re worth reaching out to,” recommended LightSpeed.
Ask about each wholesaler’s customer service, delivery record, minimum order requirements, shipping policies, and ordering process. Wholesalers should be able to show a track record of happy clients who can speak to their reliability and reputation. There are also platforms that can help you find wholesalers that meet your requirements, such as Alibaba, Faire, and Shopify Collective.
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