Increasing your bottom line as business is something all business owners focus on and want to do if you don’t then you shouldn’t start your own business. However, creating growth is not as simple as it sounds and it is easier to dream of than to do. During this post, I will look at some of the ways you can do this by purchasing products in large quantities and managing effective economies of scale.
Pros of Buying in Bulk
One effective way of doing this is to reduce your costs and buying in bulk means each unit comes at a lower price thus increasing your margins when you sell the items. Whether you are a small, medium or large company you have to be careful what items you select and do the proper analysis on each product to make sure you are getting the very best returns, on the other hand, it is not always about increasing your margins to make more profit.
Buying in bulk also enables you to be very competitive on price, attaining an item at a lower price but keeping your profit margins the same means you can effectively lower the retail price, passing the savings onto your customers thus moving more stock effectively increasing turnover and developing a larger customer base.
If you are in a non-perishable goods industry then buying items in large quantities has its benefits as you are not going to have an element of waste if you don’t move the stock. This is evident with a company that trades in coconut beauty products and coconut oil, where they keep their business lean and holds a good amount of stock to deal with any inquiry promptly. You can visit their website and buy coconut oil online in bulk at wholesale prices if you become a stockist of their product or you can just buy their products at retail. As mentioned holding a large amount of stock for a popular product does bring down lead times and keeps your clients happy.
Cons of Purchasing Large Quantities
Bulk buying does come with some risks and if done incorrectly can be a drain on your finances and resources. The first downside is that you have to invest a substantial amount of capital upfront and this can be a strain on your cash flow, even though you normally recoup those costs further down the line. However, this is not always the case if, for example, you got the amounts wrong when calculating the quantities you are left with undesirable stock and in the worst case scenario in some industries that are affected by SBDs (sell by dates) and seasonal factors a complete loss on the items.
The key point to take from this is; make sure you do your calculations and research beforehand. If done correctly I have no doubt that bulk buying will effectively increase your margins and help grow your business.