One of the first decisions a new wholesaler has to make is how big and what form the minimum order should take. Minimum order sizes are necessary for a number of reasons: they prevent ordinary buyers from placing orders for individual products, they filter out very small order quantity that would have been more trouble than their potential business justifies, and they help streamline the ordering process by increasing the overall size of orders and eliminating small order quantity.
Both small and large minimum order sizes have their pros and cons, and the choice a wholesaler makes often depends on its business and the type of retailers it wants to attract. High-priced electronics and low-priced hair accessories have nothing in common. The minimum order sizes for both would be very different, as would the size and potential of their customer base.
As a jewellery wholesaler specialising in low-cost costume jewellery and sterling silver, I am convinced that the advantages of a small order quantity minimum order size far outweigh the disadvantages. With prices ranging from one pound to six pounds, we found that a minimum order of sixty pounds (excluding postage and tax) gave us the biggest return, but at the same time we were excluding customers we didn't want in the first place - one-off retail customers and small amateur shopkeepers for whom retail was only a part-time sideline.
For wholesale businesses, the most important thing is to find reliable, repeat customers. And to do that, these potential customers must first be convinced to place that all-important first order. This is not as easy as it sounds, especially when competition is so fierce both online and offline. We found that the minimum order size of sixty kilos was small order quantity enough to allow new customers to place a trial order of the right size without taking too much risk. If they like the jewellery and are happy with the service and speed of delivery, we are on our way to becoming a customer for life. If they don't like the jewellery, if they find it damaged in some way, or if they are not happy with the delivery arrangements or customer support, they will only have to pay a small amount. This is in contrast to the large minimum order of £1,000. The risks to the potential customer would be much higher and the number of new customers much lower.
A small minimum order size is also good for existing customers, as they can try out small order quantity of new stock kits without significant risk. Most retailers know their customers quite well - they know what they like and dislike, what they will and will not buy and what they are prepared to pay. But changing fashions mean that retailers sometimes have to take some risk in their stock choices or possibly fall behind. Being able to place small sample orders for new stock ranges minimises this risk and helps keep regular customers coming back.
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