Think bigger Is better? Learn why bulk buying may not save your company as much as you think.
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Bulk-buying can be a tempting proposition for small business owners who are trying to pinch their pennies. Warehouse stores like Sam's Club, Costco and BJ's have successfully convinced many entrepreneurs that bigger really is better - or at least less expensive.
But what do the numbers say? Can you really achieve noticeable savings through bulk purchasing?
The jury is in and the verdict on bulk buying is a definite . . . maybe.
Under the right circumstances businesses and individuals can save money by buying large quantities of supplies and other merchandise.
But sometimes, bulk buying can actually end up costing you more than if you had purchased a normal quantity of items. Navigating the bulk-buying landscape can be tricky, so we've compiled some guidelines to help you decide if - and when - it pays to buy in bulk.
Bulk purchasing is based on the assumption that the per unit cost of items decreases as the quantity of items purchased increases. Simple economics, right? In many bulk buying scenarios, the equation holds true. You will save money by purchasing a larger package of certain items. But that isn't always the case. You might be surprised to learn that bulk retailers and wholesalers don't discount the bulk price on some items. In fact, occasionally the per unit bulk price may actually be higher than the normal price. The only way to know for sure is to do your own research. Compare the per unit prices of identical products and decide whether buying the product in bulk is actually less expensive.
Space & Use
Another consideration when buying in bulk is storage. If you don't have space to store the products you buy, then bulk purchasing is probably not a viable option for your business. Likewise, when buying perishable goods you need to be confident that you will use the products before they expire. The money you save by purchasing in bulk will all be lost if you have to throw the products away before you use them.
If you buy in bulk, you will invariably sacrifice in the variety department. Frequently, your choices in bulk products will be fewer than the number of options available when you purchase in normal quantities. For some buyers, variety isn't a big deal. One yellow sticky note is pretty much the same as the next. But for other buyers, variety and quality are critical. That's why it's important to assess your purchasing priorities before making any bulk purchasing decisions.
Saving money is a great motivator. Sometimes it can be a little too great, especially if it causes you to buy things you don't need solely because the price was right. Too many small business owners have storage closets full of things they'll never use simply because they couldn't pass up a good deal. If you don't need it, don't buy it - period.