Buying in bulk: when it pays and when it doesn’t

Margins · 4 minute read

Buying in bulk usually lowers the price you pay per unit. But a lower price per unit is not the same as a better deal. If the product sits on a shelf for months, the saving can disappear. Here is a simple way to decide.

The basic question

Will you sell it all before it expires, before it goes out of style, and before you need the cash for something else? If yes, bulk probably pays. If you are not sure, buy less.

Work out the real saving

Take an example (the numbers here are only to show the method). Say a single case costs $24 for 24 units, which is $1.00 each. A bulk pack of 5 cases costs $110, which is about $0.92 per unit. You save about $10 across 120 units. If the extra four cases take three months to sell, you have tied up about $88 for three months to save about $10. Ask yourself whether that money could have earned more elsewhere, such as in a faster-selling product.

When bulk usually pays

• Products that sell every week: drinks, snacks and basics that move quickly.
• Long shelf life: dry goods such as rice, flour, sugar, canned food and many grocery essentials keep well.
• Stable demand: staples that customers always ask for, not trends that may fade.
• Space to store it: backroom shelves that are clean, dry and easy to rotate.

When it usually does not

• Short shelf life: dairy, fresh and many refrigerated products, where expired stock is a loss.
• Slow sellers: anything you have not yet proven will sell.
• Seasonal items: a surplus after the season ends is hard to move.
• Tight cash flow: when rent, wages and other bills come first, cash on a shelf cannot pay them.
• Limited storage: cramped or damp rooms lead to damaged goods and missed rotation.

A simple rule of thumb

Estimate how many units you sell per week, and how many weeks of stock a bulk pack represents. If it covers a few weeks and the product keeps well, buying bulk is usually safe. If it covers many months, split it into smaller orders and take the smaller discount.

Combine items to reach the minimum

You do not have to buy bulk of a single product to reach a supplier's minimum order. Mix several fast movers in one order, so you get case pricing without overstocking any one item.

Compare case prices. Apply for a business account to see wholesale case and bulk pricing.