Let’s take Samsung for example. Buying the S23 ultra from samsung’s website (Kuwaiti region) costs around 417 Kuwaiti Dinar (≈350 after discount). However, buying the same exact phone from a vendor in Kuwait costs only 220KD. Almost half the price.
I understand that large vendors benefit from economies of scale but the difference is huge! Why is that?
In: Technology
If the vendor is legitimate, the vendor is purchasing a large quantity of a product (bulk) and gets a reduced price per unit. The reducing in price can very depending on the negotiated quantities and estimation of sales.
Simple example:
If an individual product sells for $100 through the distributor (company), the assumption is made that direct sales from the distributor will be infrequent (lack of incentives, marketing, etc). The cost to produce the item could be as cheap as $20 per, so due to infrequent direct sales, you maximize the profit and gain $80 per sale. So maybe they sell 100 units, that’s $8,000 in profit. If said product is now bought in bulk by a vendor, the distributor might sell at $80 per unit because the vendor estimates it will sell 1,000 units. The vendor then prices the product at $90 (price incentive), so the vendor makes $10 per unit, and the distributor made $60,000 from the bulk sale. The hope for the vendor is selling their inventory to make $10,000 in profit, but again the distributor already made (or was promised) $60,000, so they make more by distributing large quantities to vendors rather than individual sales.
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