Wholesale buying is the term used in the context of marketing; it refers to purchasing a large number of goods from a supplier in one shot instead of buying small amounts over a long period of time. Wholesale buying is often done by businesses or companies so that they can get the products they need to sell to customers at a lower cost from the supplier of the good. However, wholesale buying can also be done by individuals who want to save money by purchasing the products they need at one time. In order to understand this concept in a better way one should look at some of the advantages and disadvantages of wholesale buying –
Advantages of Wholesale Buying
Saving of Costs and Improvement in Profit Margins
The first and foremost advantage of wholesale buying is that it helps the company in saving a lot of costs because when the company decides to purchase in bulk from one supplier then that supplier is willing to offer discounts to the company which otherwise is not possible if the company is not purchasing the goods in bulk. Hence in simple words, if the company has a clear idea about the requirement of raw materials in advance then the company easily buys in bulk and saves a lot of money which in turn will result in the company improving the profit margins.
Good Relationship with Suppliers
When the company buys the products in bulk from the supplier the relationship which the company develops with the supplier can be so helpful because When you have a good relationship with your supplier the company can build trust, respect, and open communication. This can lead to better deals and more favorable terms over time from the supplier to the company besides a good relationship with the supplier can also help the company to resolve any issues or problems that may arise more quickly and efficiently and hence saving a lot of time for the company.
Convenience
Imagine if your mobile phone had a charge of only 10 percent instead of 100 percent then you had to charge your mobile phone after every hour in the same way in the absence of wholesale buying company would have to give frequent orders hence in a way buying in bulk, businesses can avoid the hassle of frequent orders and restocking, leading to a more streamlined process for the company and hence it is more convenient as far as the company is concerned.
Disadvantages of Wholesale Buying
Large Upfront Payment
The biggest problem with wholesale buying is that it involves large upfront payment on the part of the company and hence it can be a challenge for some businesses or individuals who may not have the financial resources to make such a large investment. Hence in simple words, wholesale buying is not possible for small companies having limited capital thus limiting the use of wholesale buying for small companies.
Storage Problem
While it is easy to say that wholesale buying is good as it saves a lot of costs but when it comes to storing goods purchased in bulk it can be a big headache for companies that have limited storage facilities thus companies should consider this problem before thinking of doing wholesale buying.
Quality Issues
When the company purchases products in small lots then it can properly check the quality of the product but when a company buys products in wholesale then there is no scope of checking the quality of the product and the company is completely dependent on the supplier and if the supplier provides substandard product than it can lead to a big problem for the company as far as the goodwill of the company is concerned.
As one can see from the above that wholesale buying has pros as well as cons and that is the reason why any company thinking of doing wholesale buying should carefully read the above points and then only should take any decision whether it wants to do wholesale buying or not as far as the product requirement of the company is concerned.