Planning security and low prices with the METRO bulk price

‘Buy more, pay less’, volume discount or bulk price – three terms for a strategy that delivers long-term savings for METRO customers. The benefits for customers are obvious. But what’s in it for METRO?

The bulk price benefit for METRO customers is obvious. But what’s METRO’s objective with the buy-more-pay-less strategy?

What’s it all about?

  • With its bulk prices, METRO offers a stable pricing policy.
  • Through the buy-more-pay-less strategy, METRO is increasing the sales share for its own brands.
  • The bulk price is based on rotation and is a self-financing investment.

With the bulk price benefit,  METRO offers a stable pricing policy, giving customers planning security and guaranteeing them a profit margin. But it’s not just a win for customers. The bulk price benefit offers an advantage to METRO as a wholesaler too.

Why does METRO offer the bulk price?

The greater the quantity, the more cheaply METRO sells numerous products. At first, the volume discount  sounds like a loss-making operation for wholesalers. After all, it reduces the margins per unit. But METRO benefits from this strategy. How so? First, we must differentiate between retail and wholesale. In contrast to the retail industry, which involves trading with many consumers, the wholesale industry caters for a small group of customers. In this respect, the wholesale customer isn’t one of many but is an individual with whom METRO works closely. The bulk price, which guarantees permanently low prices, ensures long-term customer retention for METRO. And precisely this is the goal of the wholesaler: to work together with customers for the long term. Since wholesalers can’t afford to maintain large stocks of inventory or finance suppliers, stock rotation also plays a crucial role. This term describes the average storage duration of a product in the warehouse or on the shelf. Specifically, it means that the more a product rotates, the shorter its storage duration and the higher its demand. This is how rotation through ‘buy more, pay less’ supports the wholesale model.


What are the prerequisites for the bulk price?

Planning security and low prices with the METRO bulk price

To guarantee the bulk price, METRO needs significantly more products in larger quantities. The wholesaler must not only procure these via the supply chain but also store them in the METRO wholesale store. However, neither the storage duration nor the storage costs are increased by the buy-more-pay-less strategy. On the contrary, the bulk price is a means of reducing the storage duration and warehouse stocks by increasing stock rotation. This is because the bulk price is based on the rotation and is designed to promote this. METRO doesn’t sell more because there are greater quantities on the pallets, but because of the lower price and good availability. There are also central ordering functions in the METRO stores, such as the METRO Demand & Supply Planning Software (MDSP),  which enables the ordering system to learn and only order the necessary quantities.

Why does the bulk price make particular sense for METRO own brands?

Attractive prices for own brands can be found in both the retail and wholesale industries. But in contrast to the retail trade, restaurateurs and business operators from the HoReCa sector make up one of METRO’s most important customer groups. Many of them choose the own brands because of the price-performance ratio. Due to the permanently low prices of METRO own brands, METRO guarantees a high degree of planning security. METRO uses these benefits to retain customers for its stores and the product. The more own brands that are available in the product range, the better item prices METRO can offer.

For own-brand products where each pack already has a wholesale volume, for example, the 15kg block of Aro gouda, METRO guarantees consistently low prices. Instead of offering a bulk price for a 1kg block of Aro gouda, of which the customer would pick up 15 units, METRO offers the required quantity directly at a price that matches the bulk price.  If the bulk price benefit applied only to these types of large packs, only very few METRO customers would benefit from it.

Are there individual customer prices despite the bulk price?

In delivery, also known as Food Service Distribution (FSD) , there are individual customer prices so that METRO can offer its customers the best possible deals.

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Why is the bulk price benefit especially good for restaurateurs?

The hospitality industry is characterised by a great deal of fluctuation because many hospitality businesses open and close. This in turn leads to fluctuations in METRO customers. The bulk price is just the thing to offer orientation to new customers on their very first visit to a METRO wholesale store and to make them immediately aware of an attractive pricing policy. This is because customers can see straight away that the volume is large and the price low. ‘Buy more, pay less’ also gives restaurateurs stability in their cost calculations aside from special offers, as the bulk price always applies. Furthermore, the bulk price reduces the complexity of the product range. When demand for certain product brands increases, METRO can remove others from the product range. This allows METRO to offer customers clear orientation through a targeted selection.

How does the METRO bulk price affect the supply chain?

A permanently low price ensures stability in the supply chain. The easier it is to calculate costs, the simpler it is to organise a supply chain. For example, if the bulk price leads to more frequent pallet orders or even entire trucks, METRO has the option of negotiating different budgets with suppliers. Consequently, the buy-more-pay-less strategy enables METRO to further increase the efficiency of the supply chain.

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In the MORE Podcast ‘We sell more because we have a good price’, Matthias Dutschmann, Managing Director of Offer Management and Supply Chain at METRO Deutschland, explains the buy-more-pay-less strategy, which is the basic principle of the wholesale industry. He also clarifies the role the bulk price plays within METRO’s sCore growth strategy.

 

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