Bulk purchasing

Bulk purchasing is the purchase of much larger quantities than the usual, for a unit price that is lower than the usual.

Wholesaling is selling goods in large quantities at a low unit price to retail merchants. The wholesaler will accept a slightly lower sales price for each unit, if the retailer will agree to purchase a much greater quantity of units, so the wholesaler can maximize profit. A wholesaler usually represents a factory where goods are produced. The factory owners can use economy of scale to increase profit as quantities sold soars.

Retailing is buying goods in a wholesale market [1] to sell them in small quantities at higher prices to consumers. Part of this profit is justified by logistics, the useful distribution function of the retailer, who delivers the goods to consumers and divides those large quantities of goods into many smaller units suitable for many transactions with many small parties of consumers. Retailers can also benefit from economy of scale to increase profit, just like a wholesaler does.

Bulk purchasing is when a consumer captures part of the benefits of economy of scale by doing with the retailer what the retailer does with the wholesaler: paying a lower price per unit in exchange for purchasing much larger quantities. This allows the consumer to satisfy more of his or her demands at a lower total cost by acquiring more use value per dollar spent.

Consumer demand for savings by bulk purchase has led to the success of big-box stores. Although effected by marginal cost, the total cost does not increase.

See also