Volume discounts are offered by sellers and manufacturers to those who buy in large quantities. This can result in lower prices for consumers, but may require more storage space. Small stores must offer personal service to compete with larger stores that can offer bulk discounts. Consumers should consider their actual needs before buying in bulk.
A volume discount is a method used by sellers and manufacturers to reward those who are able to buy in large quantities or in bulk quantities. For manufacturers, companies that buy more items usually get it cheaper because the manufacturer is not only interested in making a sale, but also getting rid of the manufactured goods. Companies that buy in bulk may have large warehouses to store such goods and may offer a lower price to consumers. A volume discount for merchants can inspire merchant loyalty. If a merchant buys X quantity of an item, they may be offered incentives to buy more or receive a lower purchase price in the future.
The average consumer regularly sees many types of volume discounts. More commonly, department stores like Costco offer merchandise at lower prices because they are purchased in large quantities. The major downside to this is that you may have to spend more to save some money, and your home’s storage space can quickly become scarce. It might save you some money buying canned pineapples at your local warehouse, but you may need to buy eight to ten cans to get that savings. It’s great if you have the space and eat pineapple a lot, but not so great if you only eat pineapple once a year.
Another instance of the volume discount can occur in retail stores. A certain item, such as underwear, may be priced higher for a single pair but priced lower per item if you buy a certain amount. For example, a local store might charge $8-10 US Dollars (USD) for a pair of underwear, but offer five pairs for $25 USD. Similarly, items like socks or T-shirts can be sold in bundles to give buyers a bigger discount.
Consumers can also find a volume discount on certain services or at entertainment venues. You may get cheaper ticket prices at the cinema if you can get a group rate for attending (usually at least ten people). At your local Chuck E. Cheese, you can purchase bundles that save you money and provide more video game tokens if you buy them in larger quantities. Frequent use of services such as massages, manicures, tanning or house cleaning can qualify you for a discounted price. A yoga studio might charge a set amount if you take one class and a smaller amount if you pay upfront for multiple classes.
People can benefit even when they’re not buying in bulk, if they’re buying from stores that buy such large quantities of items that they can sell to other merchants. This is a major argument against warehouse type stores or Big Box merchants. Small merchants and mom-and-pop stores pay more for items and have to impart that price to consumers, while larger stores pay a cheaper price for the same items because they buy them in larger quantities.
To compensate for the lack of volume discounts, small stores must offer something not available in a Big Box store, such as a greater degree of personal service. Some people pay higher prices if they feel particularly welcome in a shop or are well known to the owners. However, consumers are often price-driven, and stores that get a bulk discount on merchandise and are therefore able to offer lower prices can drive smaller stores out of business.
Sometimes consumers can be swayed by spending more, saving more volume discount opportunities. In order to save money, consider each bulk purchase in terms of what is actually needed. In our pineapple example above, you could certainly be paying less for pineapples per can, but you’re still paying more money, which may not serve you well if you’re not a big fan of pineapples. Even merchants can buy more items than they need and then drastically reduce prices when items don’t sell well, sometimes even below the original purchase price.
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