A minimum size order may be stipulated by a manufacturer or distributor when a retailer places an order. The minimum order size may be a unit count or a monetary value.
The minimum order size is set by the vendor, and the size will be worked out depending on many variables such as the monetary value if the product for sale. For example, when you order online you will often find that if you wish to take advantage of home delivery options there will be a minimum amount that you can spend. Also, you may also find that in order to take advantage of a home free delivery service you may have to increase the size of your order again.
From a supplier standpoint minimum order size make a lot of sense as it allows them to move their stock faster, increase profits, and weed out those who are simply bargain hunting. Minimum order quantities are set based on the wholesalers cost of inventory, and help them remain profitable, while also increasing free cash flow. And even though wholesalers might not prefer this model, in some cases they have little choice due to minimum order sizess imposed on them by manufacturers.
If you’re a buyer there are several strategies you can use to work with wholesaler minimum order quantities. The first is to make yourself look like an ideal buyer, one that the wholesaler wants to work with. Once that’s accomplished, you can often negotiate for even lower pricing. Even if the wholesaler can’t meet your request, you’ll never know until you ask. Wholesalers could be in a slow period, or have too much stock, and will be happy to lower prices just to move inventory.
You can sometimes get around minimum order size by working through a trading company. The trading company will bundle smaller orders from a group of customers to meet the minimum order requirements dictated by the wholesaler or manufacturer, thus allowing you to get around the minimum order size requirement.