Online Retailers vs. Local Distribution Part 3

This is the last in a three-part series from HESCO's Director of Strategic Initiatives, Chad DePasquale, that demystifies misconceptions about online retailers vs. local distribution.

Online Retailers vs. Local Distribution: Misconceptions Demystified, Part 3

(Think Before You Click)

Misconception #3 – All Distributors Should Be Offering Quantity Price Breaks.

By Chad DePasquale, Director of Strategic Initiatives, HESCO

“If you buy just a little more, you’ll be into a new price-break tier and save money.” This is what you may hear from the salesperson and/or in your head when you see price-breaks based on high quantities purchased. For those of you who may not be familiar with this pricing strategy, your sale price will typically decrease as you reach an arbitrary quantity of the product. For example, your price for a Bussmann LPCC5 fuse on Allied is $33.95 for one (ours is $12.89 by the way …) but if you purchase 100, your price per each goes down to $23.77 (still doesn’t beat our price!).  Allied and Mouser are known for quantity breaks, and we get the request all the time, “Price out how much it would be to buy 1, 10, 50, or 100." Our answer is always the same: “It’s the same price no matter how many you buy!”

hesco mathThat message is delivered with pride and enthusiasm because our people know we don’t play gimmicks with pricing. We don’t offer price break on quantities, because our everyday price is as competitive as we can make it! Think of this, have you ever seen Walmart offer quantity price breaks? The answer is no because they offer “Always Low Prices” out of the gate and have no room to discount prices further. When you see quantity breaks offered, be weary because if you need just one, you’re not getting the best deal. With HESCO, your one-piece price is the same as 1,000, just like Walmart’s one-piece price of detergent is the same as 1,000 of them. HESCO gives you the best pricing out of the gate.

Let’s do some simple math with the Allied example of the Bussmann fuse. If they’re selling one for $33.95 and we assume they’re making 30% margin on it, that means they’re making a profit of $33.95 * .30 = $10.19. Now, if you were to buy 100, the sales price would drop to $23.77 each, or a discount of $10.18. If we take the discount of $10.18 and subtract it from their assumed margin on a one-piece sale, we get a new profit of $0.01 meaning they are marking 1-cent profit with each piece sold at $23.77. If that were happening, then Allied would not still be in business. 

So, this can only mean one thing, they are making more profit than 30% on that 1-piece sale to you and only give you a discount when you buy in bulk. To add insult to injury, their best pricing is still not better than our everyday price at HESCO. 

Beware of the quantity breaks as most likely you think you’re getting a deal by buying more (and in one sense you are). But compared to other sellers, you could be paying less right out the gate for any quantities (ahem, HESCO). Don’t mess around with their pricing games -- let HESCO take care of you and not try to confuse you with pricing tactics, enticement of free shipping, or the misconception that being a bigger retailer equates to better prices.  Thanks for reading!

Chad DePasquale, Director of Strategic Initiatives, HESCO

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