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Need suggestions on quantity discount


cybersix
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Hi all, I have one question to ask.

I have the wholesale price set, and it's half of retail.

But what happens when somenoe like a hotel or restaurant wants to buy in bulk?

I though to make quantity breaks, with a discount (%) for every break, but I can't decide neither quantities breaks nor discounts..

How do you manage this?

TIA

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You could go with staggered price breaks?

For staggered, you could go by price or quantity. For example, above $100 they get 10% off, above $200 they get 20% off... above $350 they get 40% off, that sort of thing.

Or quantity, from 50-149 units, they get 20% off, from 150-499 units, they get 30% off. Only after 500 units can they get 50% off.

It's really up to you. What quantity do you think they should buy for the price break to be worth it? Staggered price breaks are good for accommodating both small and big buyers.

If it's a hotel, even 1000 should be a breeze, but they'll worry more about costs, so be wary.

Calculate for yourself how much you'll be earning per item and see if it comes up to a decent profit for you.

Some people also do a smaller discount for the first purchase, then bigger discounts for subsequent purchases.

One important thing though, is to stick to your terms (provided they're reasonable). Otherwise, good luck, Sabrina!

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Thank you very much for your answer, it could be a break for price or for quantity, I didn't decide yet. The problem I have is that i don't know at what points I have to break lol.

Really I didn't have any request until now, but according to my site visits tracking software in these days I'm having returning visits from a hotel and from a restaurant, so I thought I'd better be prepared if a request should arrive.

Need to work again with my spreadsheet, and see if my poor little brain can think of something smart and useful!

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Why wouldn't you give a hotel/restaurant your wholesale price? That's what it's for.

uhmmm because I think I have to have a wholesale price so "low" because a reseller has to make money with my products. A hotel or somewhat similar doesn't have to resell and make a profit, so if in wholeselling I have almost no choice in selling to hotels I can sell at better prices, but lower than retails.

I hope it makes sense, sorry sometimes I mess with english!!

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Actually, that would be a bigger consideration for the hotel. See, since they're not reselling and making a profit directly from your product, they'll be even more careful about how much they buy it at since they'll have to figure it into their room cost. Also, if they're a proper hotel they'll be buying in MUCH, MUCH larger quantities and on a more regular basis.

For example, assuming you're talking about supplying for rooms, if I charge $50 for a room, I have to figure in the cost of electricity, water, towels, toothbrushes, housekeeper salaries, etc. If I pay $5 for a candle, and $20 for the rest, I make about $25. This may seem alright, until you talk about large numbers. 150 rooms is somewhat small for a proper hotel, and they'll probably have to change the candle for every new guest. So say... 75% occupancy for 1 month... that's about 112 rooms.

112 rooms X 30 days = 3360 units per month

Now, 3360 X $5 = $16800 per month for you. At those quantities, you could probably work at a lower profit margin and make enough to satisfy you and the hotel as well. So say you sell to them at $4, you'd still make $13440. The hotel would save $3360.

The bigger the quantity, the lower you can afford to go - assuming you can handle the workload. But if it gets bigger, be careful not to compromise too much! Think about ALL the costs including LABOR. If the quantities get really huge, you may have to hire help and rent space for storage. Will your wholesale cost cover this? You don't want to have to suddenly raise your prices to cover labor and storage fees. Also make sure you pay yourself a nice salary!

If you haven't considered all this in your costing, Lindsay (Soaper's Workshop) has a great Product Pricing Guide on her site. http://www.soapersworkshop.com/store/index.php?page=Business%20Resources

Let's say a shop buys about 500 candles a month. 500 X $4 = $2000.

If your cost is $1.50...

At $4 per candle, you'd make $8400 compared to $1250 from the shop.

At $3 per candle to the hotel and $4 to the shop, you'd make $5040 and $1250 respectively.

At bigger quantities, you could probably buy your ingredients on larger scales, save on shipping and do larger batches at once, which will bring your costs down slightly too.

As for shops not profiting, if you can justify the cost, it shouldn't be a problem for shops to double it. Why can they charge higher? Pretty packaging? Cleaner burn? Handmade? Packaging is key in this area. You could also work with them on other fronts that may benefit them (for example, if you have a website, maybe you could feature the shop, etc).

Don't go TOO low. If your product deserves the higher price tag, don't compromise it by giving it a lower price tag. If you offer someone a free sample of a $5 cream and a $50 cream, even though the $50 is inferior (they won't know that of course) the average customer is more likely to pick the $50 one because of perceived worth. It's usually assumed that the more expensive the product, the better it is. Of course, people who research these things will know better, but Average Joe won't, especially if the $50 cream is packaged very prettily.

You should respect your wholesale terms, and so should they.

Sorry if this is somewhat long, hope this helps!

EDIT: I just realized that English isn't your native language, so if I'm being a little complicated and you need me to clarify anything, just let me know :)

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Jadryga, I can understand well written english, it's just when I have to write a complex phrase that I can mess with words!

What you are saying makes perfect sense, I never thought that for a hotel or restaurant candles can be a "dead" cost.

But yes it is, so now I'm thinking that maybe with a reasonable minimum amount for orders and with a reasonable discount (or different discounts) I could use prices similar or the same for wholesale.

Ah I always hated math!!!

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