The term Minimum Purchase Quantity is often used in the wholesale industry, a wholesaler purchases a large amount of the product from the manufacturer, they store the product and sell the product in a smaller amount to the retailer.
The retailer must purchase a minimum amount of the product from the wholesaler. The wholesaler usually sets a high minimum quantity to ensure a profit. The profit margin of a product that the wholesaler sells is normally quite low, therefore they need to set a high minimum purchase quantity to make a profit.
Here is an example to help you understand more clearly:
- A wholesaler purchases 10,000 bottles from the manufacturer and will sell the to retailers.
- The wholesaler has set a minimum purchase quantity limit of 100 bottles.
- The retailer must buy over 100 bottles, they cannot by 90 bottles or 50 bottles, but they can but 110 bottles or 200 bottles as long as it’s over 100 bottles.
- This is to ensure the wholesaler makes a profit.
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