It appears to me that quantity discounting has nothing to do with the cost savings experienced or the quantity purchased, its merely a pricing strategy that the manufacturer or distributor congers up and offers…and then violates regularly, in response to market demands.

Its an understandable power move on the part of the large chains and distributors that manufacturers and prime distributors cannot resist.

Simply stated chains and smaller distributors demand the lowest price possible in consideration of the potential for larger orders, not the promise but the potential.

What really happens is they test the product in a few dozen stores, having purchased at the truck load price, making a sizable profit and yet only testing.

If it goes well they repeat the order slowly, probably never reaching full distribution potential. They will not give you wide spread forced distribution.

For reasons that remain mystical or at least difficult to understand, distributors take orders and do not pioneer new items with forced distribution…ever, despite success at the test market level. They only want to stock traditional long term successful, well supported, guaranteed best sellers.

The chains  do the same thing, buyers hedge and order minimal amounts of a new innovative item, always afraid of getting stuck with inventory or slow moving goods. They would rather miss a winner then get stuck with inventory.

Thus the demand for the lowest price is really an empty demand, as they will buy as little as they can and replace it as it moves, never buying for greater distribution, just replacing were already sold in and repeating.

The real power is in the product itself, as it alone determines retail velocity while the buyers do everything they can to limit their exposure and risk, as they are certain the new product will either bust or peak and slow down quickly, so they are reducing risk from the first purchase on.

So why should manufacturers or large distributors demand and get the lowest price possible price for very small orders, as they “test” as no real upside is guaranteed or even promised?

Good question, and I have no reason whatsoever, other then the likelihood they will not place the order unless the lowest price is offered, irrespective of order quantity, and without real promise of support and greater distribution, only what the market demands.

The point is a manufacturer or distributor must have a selling strategy and a pricing strategy to support their effort, or they will be forced to sell at the lowest possible price.

Once you violate your own discount schedule, you may as well simply always price it at the lowest price for everyone and accept that as your benchmark, as that is what the market will require.

Alternatively, if your product is good and sells off the shelf, grow slower and prove its value with demand pull from the market place which will  provoke many of the chains to buy at your appropriate pricing and quantity discount strategy and in volume, as now they see a winner and do not want to be left behind..  If the product sells and if your strong enough to say NO in the early stages and if you develop sales were you get distribution support and sell at the right price.

Since the chains and distributors want you to pay for shipping, and accept long payment terms, and accept returns for damaged goods whether there are any damages or not, and on it goes, you had best hold your selling price to your schedule or all the profits will be eroded before you get your check.

You are entitled to a larger price for smaller quantities and the larger buyers are entitled to a discount based on cost savings or large orders, a carefully designed strategy that rewards larger orders, and you should hold yourself to your plan ignoring the empty pleas and promises from distributors and chains that they will not deliver on unless the product demands it.

If the product deserves it why reward the distributor for adding nothing of value to your program.

The obvious lesson being that lower pricing does not result in larger orders, so why offer it?

If all the power comes from your product, why give in to the chains demands, they are providing little assistance to your effort and are probably not worth the deal they are demanding.

Honor the smaller distributors who will buy at published prices. Honor the small chains who will buy at published prices. Honor the large stores that will also buy at normal wholesale, and build profitably one store at a time, and soon the distributors and larger chains will come to you and be more willing to accept your published prices.

If they are buying small quantities they will pay more and you will have a profitable sale. Lets not lose money on every sale just because they appear to be willing to buy large later, until they actually offer a large order and deserve the lowest pricing available.

The chains and smaller distributors purchasing from manufacturers argue they must fit into the pricing strategy allowing them to compete with the big guys and minimize their order. Do not believe this its untrue, and just a ploy to capture more profit from your sale.

Here is my point, if there is a mutually beneficial strategy agreed upon which will support greater distribution then I am all for it, but to merely automatically assign significant discounts to modest order size, when in all reality there is no cost benefit, no real distribution benefit, it makes little sense to me and you are simply giving away the margin unnecessarily hoping that larger distribution efforts will result.

It won’t.

Every sale should be profitable, do not get trapped in the no win predicament were promises get the best price, make them earn it. Call me for help 413-549-2966.