Beginner online sellers soon discover that volume buying will lower a wholesale price. Many online sellers don’t understand why wholesalers offer a lower price for an item when one orders more frequently and in large quantities. Many small eCommerce sellers complain when competitors’ sell at lower retail prices than the wholesale prices they can buy at. It’s a understandable frustration. Almost always, the reason is because, their competitor is bigger and buys in larger quantities than they do. The competitor is getting better price breaks.
When buying from a wholesaler, your price per unit will go down as you increase your order size. For example: from 1 to 100 units of a product per purchase, the wholesale price per unit might be $5 each. When you buy from 101 to 250 units of a product, the unit price might come down to $4 each. Wholesalers only make profits when they sell in volume because they make such thin profits per unit. The more you buy per order, the better the price per item they can allow you.
The online retailers who can afford purchasing in bulk get lower prices. They can afford to price lower to their retail customer and still make a profit. Don’t be too concerned! Although many online sellers think they have to slash prices to compete, it doesn’t have to be so. There’s more to selling than having the lowest price on offer. Buyers will spend more with retailers that offer value-for-money. Successful selling depends on building a customer’s trust and providing something of value that’s worth the higher price.
You may begin by drop shipping or even buying in small quantities. As soon as you find products that sell quicker than others, start placing larger orders and negotiate for better Volume Price Breaks. This way you will grow your online business out of your own cash flow.