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Bulk purchasing is a means of product procurement that involves large orders of the same item. Manufacturers often reduce the unit price per item based on how many items are sold together. This serves a dual purpose: major purchasers are encouraged to buy from the discounting manufacturer and the manufacture is guaranteed a large production run. Bulk purchasing is very popular for businesses and among corporate players, but can also be profitable for individuals.
In a business context, bulk purchasing usually centers on the procurement of goods that are frequently needed and used. A corporation opening a new office might look into purchasing items like desk chairs and office suites in bulk, for instance. Pharmacies often buy pharmaceuticals in bulk, and warehouse retailers buy a range of merchandise, from groceries to home goods, in bulk in order to offer their customers more competitive prices.
The science behind bulk purchasing is largely one of sales derivatives and profit tables. It almost always costs manufacturers less to make something than the selling price indicates. This is how manufacturers make a profit. Bulk purchasing is all about the profit margin.
An office desk, for instance, might be sold as an individual piece at a 100% markup over the manufacturer’s cost. If a company wants to buy 1,000 of those desks to furnish a new office, however, the manufacturer might negotiate a steep bulk discount — say, 50% of the markup. The manufacturer gets less per item than it would if the desks were sold at the individual price, but overall, after having sold 1,000 desks, the manufacturer ends up ahead.
Manufacturers usually set their bulk pricing schemes by studying their sales history over time, taking into account ordinary profit margins and expected sales returns. Bulk purchasing pricing is often tiered. A certain discount will apply to purchases of over 100 items, for instance, and another, better discount will apply to 500 items or more. Usually, the more of one item a bulk buying purchaser is willing to commit to, the less he will have to pay for each one.
Elements of bulk purchasing are also available to individual consumers. Individuals might encounter bulk purchasing schemes when ordering customized or specialty merchandise, for instance. Wholesale shopping clubs and discount food warehouses also frequently sell bulk items to the public at reduced prices.
The concept of wholesale purchasing is slightly different from bulk purchasing, although the two frequently go together. Wholesale situations involve retailing goods at cost. This usually only makes sense when selling the items in bulk, or when there are excesses of certain products that need to be quickly moved. Membership-based shopping clubs will often negotiate bulk purchases then resell purchased goods to customers either at or near wholesale.
Bulk pricing is the reason why sets of identical items — anything from ink pens to oranges — usually cost less than buying the same number of items individually. A customer who can guarantee multiple sales is often rewarded with a lower price overall. The concept applies to sales across the board, in many different market sectors.