Mastering bulk pricing: Grow your B2B business the smart way
Bulk pricing is a strategy that has been popular in trade and e-commerce, especially with B2B businesses. It offers a powerful incentive for customers to commit to higher volume orders in exchange for a lower cost per unit. On the suppliers’ side, this model is crucial for achieving economies of scale. As a result, purchasing in quantity is the standard for manufacturers, distributors, and bulk buyers as a whole.
But, bulk pricing goes beyond just a tool for discounts. Many businesses have used it as a crucial strategy to increase average order value and nurture partnership relations.
In this article, we look at the definition of bulk pricing, breaking down related costs, and some of the best bulk pricing strategies that merchants and big-box stores are using.
Let’s dive in!
Understanding bulk pricing: What is it?
Bulk pricing, also known as wholesale pricing or commercial pricing, is a pricing strategy where you offer more discounts to your customers the more they purchase, often in large quantities of a product or service.
The idea of bulk pricing is simple: buy more, pay less per unit. When customers place larger orders, you can reduce their per-unit costs through economies of scale, which are the cost advantages gained from increased production. These savings get passed on to customers as a lower price per unit. Since discounts increase with order size, the more customers buy, the more they will save.
Why bulk pricing works so well for B2B
Bulk pricing has been around for a while, and there are reasons for that. From your buyers’ perspective, wholesale pricing helps them:
Reduce per-unit costs: The main drive of bulk pricing. When the price per unit reduces, retailing buyers secure a better profit margin when they sell the goods or lower their operational costs if the items are for internal use.
Build inventories: With the uncertainty of economics, buying in large quantities guarantees buyers a stable inventory level for a longer period. This way, they can lock in better pricing with healthy margins and full shelves.
Simplify planning: Your buyers need time to forecast expenses and manage their budget. Transparent price lists for bulk pricing speed up this process, especially when your buyers present purchase proposals to their stakeholders.
There are also many benefits to you as a B2B business when it comes to wholesale pricing.
How bulk pricing benefits your business
Bulk pricing benefits extend far beyond the simple savings on the per-unit cost. Here's how the bulk order discount works in your favor:
Increase revenue and sales volume: When your customers see the savings per-unit cost stack up, they are more inclined to make higher quantities than planned. The result? Larger transactions, higher revenue per sale, and more predictable cash flow.
Lower inventory cost: Bulk pricing accelerates your inventory turnover. That means lower storage costs, less capital tied up in stock, and reduced risk of items becoming expired.
Improve operational efficiency: This pricing strategy allows economies of scale. For manufacturers, larger orders justify longer, more continuous production runs, which lowers the cost to produce each unit.
Strengthen customer loyalty and retention: B2B transactions are more relationship-driven when it comes to commercial pricing. Buyers often try to maximize use value and remain loyal to suppliers who consistently deliver it.
Bulk pricing strategies for success: Real-life case studies
Volume discounts
Put simply, volume discounts are a type of discount applied to all units when reaching a certain quantity threshold. This strategy works best when your buyers often make large, infrequent purchases.
Despite being popular in B2B industries, volume discounts have also made their way into B2C, with big-box stores like Costco, Sam's Club, and Home Depot leading the charge. This trend accelerated during the pandemic, when buying in bulk minimized trips to the store, stretched budgets further, and gave customers the security of having essentials on hand.
For example, Home Depot offers volume discounts on construction materials and supplies. It's a strategy that serves two distinct customer segments: Contractors stocking up for big jobs and homeowners working on weekend projects.
Tiered pricing
Bundling
You are probably more familiar with bundling in a B2C context, where two or more complementary products or services are grouped into a single offer at a discounted price.
In a B2B setting, bundling standardizes bulk pricing by offering predefined quantities, such as cases, pallets, or multi-unit bundles. The approach reflects logistical efficiency and product characteristics.
In this example, Paper Mart sells paper bags. Instead of buyers requesting random quantities that complicate fulfillment, the paper business designs its own bundle that makes more sense to their operation and logistics: 25 items per bundle and 500 per pallet.
Contract pricing
Contract pricing allows two or more parties to negotiate the price, terms, or other conditions over a period of time.
This type of pricing strategy gives both sides clarity and certainty, especially when doing budgeting and sales forecasts. It also holds both sides accountable for their obligations in fulfilling the terms of the contract.
Contract pricing can take many forms, depending on your transaction and industry. For example, most bulk pricing contracts may indicate that certain products must always be purchased at a specific price, despite market fluctuation. Other contracts may include discounts or other incentives based on the volume of goods or services purchased within a certain timeframe.
When you negotiate with your buyers, make sure you understand all aspects and are aware of what is expected from the other side in a contracted pricing agreement.
Setting up bulk discount pricing in Shopify
Using the native discount feature of Shopify
However, the limitation of this method is that it doesn’t let you create multiple quantity breaks under a single discount. For instance, it might support a “Buy 3, get 10% off” offer, but it does not allow for options like “Buy 2 get 5% off, Buy 3 get 10% off,” all under one product.
This means you won’t be able to have another break unless you create a separate setup, which can become cumbersome over time. In this case, you need a 3rd-party app.
Using a Shopify 3rd-party app
Breaking down bulk pricing costs
To set the right bulk pricing, you need to first understand your customer segment and how you want your audience to perceive you.
While your retailing buyer can increase their profit margin by charging more, your ceiling is much shorter when it comes to adding profit. The only way you can make more money is by selling lower-cost items in larger quantities.
That said, here are some of the costs you should be aware of to determine your wholesale pricing:
Cost | Definition | How to calculate |
|---|---|---|
Costs of goods manufactured (COGM) |
| Direct materials used + Direct labor + Manufacturing overhead = COGM |
Costs of goods sold (COGS) |
| COGM + Initial inventory of final items - Ending inventory of final items = COGS |
Overhead cost | Refer to all the indirect expenses of running a business that are not directly tied to the production process. | The sum of all indirect costs, such as office rent, executive's salary, utilities, etc. |
In addition to the main costs, be aware of these extra costs you might incur:
Customs clearance fee: A charge imposed by shipping carriers or customs brokers for handling the process of clearing imported or exported goods through customs authorities.
Fuel charge: A fee that covers fluctuations in fuel prices, as the cost of fuel directly affects the cost of delivering goods.
Storage fee: A fee that applies when goods are kept in a warehouse, port, or storage facility for longer than the allowed free period.
Bulk pricing implementation: What to avoid
Implementing bulk pricing can be a great way to boost sales, attract larger orders, and build stronger relationships with customers. However, if not done carefully, it can lead to serious damage to your business.
Here are some common mistakes to avoid when setting up your bulk pricing:
Inaccurate pricing calculations: Don’t create a volume pricing table so low that it cuts into your profit or so high that you alienate your own buyers. Always verify that the pricing is fair and profitable. If you are uncertain, refer back to your understanding of your buyers’ behaviors.
Complex pricing models: If buyers have to do math or read fine print to figure out their savings, they may lose interest and move on. Keep your bulk pricing simple, clear, and easy to follow so customers can quickly see the value of buying more.
Mismatched demand forecast: Although the demand forecast is only an estimate, you would want to make it as accurate as possible to avoid overstocking or running out of products too soon. Remember to review your sales history and market trends regularly to keep your bulk pricing strategy on track.
Conclusion
According to Grand View Research, the global B2B e-commerce market size is projected to reach nearly 60 trillion dollars by 2030. This shows that expectations in business-to-business (B2B) ecommerce are skyrocketing.
With the right bulk pricing strategies, your business can benefit from increased revenue, lower inventory costs, as well as a better relationship with your strategic buyers. Before diving in, take time to understand your business first. From the costs to make the items to your buyers’ behaviour, they are all important insights to help you build the winning strategy.
Finally, to turn your bulk pricing ideas into reality, you’ll need the right tools to support dynamic pricing. That’s where we come in, and we’re excited to help you launch a pricing strategy that fuels your growth.
FAQs
Harry Nguyen
Digital Marketing Specialist at Qikify
Hi, I’m Harry, your friendly neighborhood marketer at Qikify. I am all about providing E-commerce merchants like you with the best insights and industry tips to help you grow your online stores and drive more sales.
Out of office, I like working out at a gym and learning about all things E-commerce and Marketing.
Feel free to reach out to me on LinkedIn. I’m always up for a coffee chat with other marketing folks and store owners to exchange ideas and explore potential collaborations.
