If you are aware of the prices in wholesale market, you’d know that quite often retail price is more than double of the factory rate. What do you think is the reason of this huge difference between factory rates and the retail price? The reason is that a product passes through many hands (e.g. manufacturers, distributors, wholesalers, retailers, etc) before reaching to its final destination i.e. the end consumer. Having the need of so many intermediaries to reach from manufacturers to consumers, the price of a product keeps on increasing throughout this sequence because each and every party will be selling at slightly higher price (from what they’ve paid to get the product) to cover the costs and secure some profits. Only if there was some method that permits consumers to buy directly from producers, the prices would have been much lower. Then again, a market that lets all producers to sell directly to end-customers is not feasible for many reasons. Therefore, we’ve to bear this supply chain and the parties involved.

But that’s not the only factor, another aspect that adds into the price is the inability of end consumer to buy in bulk, reason being lack of resources to buy or store large quantities. Besides, there’s no point buying dozens of toothbrushes when you’ll hardly use a couple in entire year or buying food in bulk and letting it rot because you were not able to consume all of it in due time. However, when it comes to commercial purchases, one can easily buy in bulk.

Let’s take a look at how buying in bulk can facilitate both buyer and seller.

Seller:

Even though wholesalers and distributors have sufficient storage facilities, but there are a number of costs associated with the storage and inventory management. Therefore, the sooner the distributor or wholesaler can get rid of the inventory; the better it will be for their business (note that getting rid means selling or delivering it to their customers). Another advantage is saving the cost of transportation. Delivering a product in bulk is easier and much cheaper than breaking it down in smaller quantities and managing small deliveries.

Buyers:

For businesses, buying in bulk means they will get the product at discounted prices. If they are buying for reselling purposes, it will provide good profit margins and if they are buying it for their own usage, they will be able to get a cut rate. In addition to that, sellers always have a soft spot for buyers who regularly make bulk purchases and they will go out of their way to retain such customers. Therefore, you can expect exclusive services and customer service, in case you happen to be a bulk buyer.

So bulk purchase facilitates both sides of transaction and saves much cost to them.