Bulk buying...savings or just sizzle?
There's no doubt that under the right circumstances, fashion businesses can save substantial amounts of money on the cost of purchasing raw materials and finished goods through buying in bulk.
But for some, these savings are based on false hopes. Instead of reduced expenses, they find the total costs of purchasing in bulk to be higher than buying regular quantities of fabrics and garments.
Choosing whether to buy in bulk can have significant financial consequences, so below are some simple guidelines to help you make bulk buying work in your fashion business.
Hidden costs
When buying in bulk, it's crucial to be aware of the other costs associated with purchasing bulk stock, such as storage costs, handling, insurance, finance, shrinkage and spoilage.
Another hidden cost is stock obsolesce, which may not be a worry if you sell timeless or essential items such as plain white socks, but selling this years hot fashion item next year may be a far greater challenge.
Saleability
It's a fundamental question - can you sell the stock, or are you going to have to discount it later and thereby negate any upfront savings? Some businesses are overly eager to discount the sale price on stock purchased cheaply, because they don't value the stock at its true worth. Sale price doesn't have any relationship with the price paid, so don't be too hasty to discount stock just because you got it at a cheap price.
Real discounts
It can be a rude shock to discover that your bulk purchases are actually priced more expensively per unit than what smaller buyers are being charged. Just because you're buying in bulk, it shouldn't be assumed that you're being offered an automatic bulk discount. Compare the prices and if in doubt, ask for the discount.
Variety
When buying in bulk, it can often mean less variety in the stock purchased. Variety isn't a big deal for some, but if you're buying a limited range and you're renowned for selling a broad selection of styles and sizes, this could be a problem.
Equally, buying in bulk also often reduces the number of suppliers you choose to purchase from. If this is likely to happen, you need to be sure that they're suitably reliable to fulfil your needs now, as you have a greater risk if they fail to deliver as expected. It's also important that you maintain relationships with an appropriate selection of suppliers to fulfil your future needs, given that you may not be able to buy in bulk from the same supplier next season.
Going broke on a bargain
Too many businesses buy inappropriate stock solely because the price is right. We all know fashion businesses that have parts of their warehouse piled up with old stock they'll never sell. View any inventory held as tying up your precious cash, so make sure there's sufficient internal cashflow or access to additional working through inventory finance or equity investment to sustain your business until the stock is converted back into cash.
High pressure sales
As we all know, when marketing to your customers the offer of saving money is a great motivator to buy now. But sometimes the pressure of having to commit to a quick discounted bulk buying opportunity can cloud your better judgement. Take the time to assess the full ramifications of making the purchase before committing. Don't be afraid to say no, as other opportunities to purchase in bulk will inevitably come your way.