At the time of economic crisis, both producers and consumers have to suffer. To work this out, they have to take their own actions to survive. Producers have to reduce output as well as investment and rid themselves of labour no longer needed. Consumers also bear due to increased unemployment or much lower income. Below are some tips I would like to suggest for consumers and producers to deal with the worsening economy.
CONSUMERS:
According to the consequences of the global crisis, consumers will predictably want to reduce the cost of purchasing. There are many ways for consumers to save more but still consume the same. For instant, you can take some very simple actions at home such as reducing the amount of electrical energy and water used, paying a greater care to your furniture in order to spend less for the cost of repairing them…
In addition, a very good way I want to propose for consumers is bulk purchasing. Bulk purchasing is buying products in large quantities at a lower price per item, or unit price, than is available for smaller quantities. It is so obvious that when you buy a greater amount of goods, you could save more as the price is reduced for larger consumption. Furthermore, acquiring a big amount of goods also helps you to save the transportation cost since you have to pay less than when buying things separately and suffering the transportation fee repeatedly. Moreover, bulk purchasing takes less time of yours because you don’t have to go out and collect what you need so often.
As you can see, bulk purchasing is palpably economical. However, when is best time for bulk purchasing? The tip for consumers is to take advantage of discount or promotion offered by the producers. At the time, shoppers can even benefit more. Yet, bulk purchasing is not totally applicable to every kind of goods. It strongly depends on how much you need and how often you use or consume the good. My suggestion is only buying necessaries and the goods which can be stored in a long while in bulk such as rice, drinks, toilet papers, … Other than that, another way out for customers who don’t want to purchase too much at a time is group purchasing, they can purchase goods at the same time to benefit the most from the promotion but they don’t need to store too many things at home. Also, so as to take greater advantage of bulk purchasing, shoppers had better find the best seller brands since different producers offer different discount rates for bulk purchasing.
For example of my own, when I head out to shop, it can be clearly seen that one of the most popular promotion is “Buy 2 get 1 free”! Says, you have to pay S$10 for one single Giordano T-shirt, you can pay double to get 3. In case you don’t really need 3 T-shirts at a time, you still can share with your friends in order to pay less, in this case, S$20 divides by 3,is S$6.67. In fact, bulk purchasing helps you to save more than you can expect.
PRODUCERS:
As I clearly stated above, consumers can benefit a lot from bulk purchasing. In fact, producers or business owner also gain more as people tend to buy more, leading to higher total revenue for producers. As a result, producers would surely want to encourage consumers to buy more. I want to recommend a solution for them – promotion.
Promotion, meaning lower price for product consumption, will lead to lower marginal profit. Yet, it stimulates higher rate of purchasing as people will buy more. Subsequently, the whole sale will increase, which will keep the profit of the producers stable.
According to demand concepts, at a lower price, customers tend to buy more so as to save more, resulting in higher supply because producers always want to reach the maximum total product point to get highest profit. One very well known policy related to this issue is the US$ 800 billion of stimulus packet of the US. Its main purpose is to facilitate the production process, leading to lower price of products. Therefore, consumption rate will also rise, motivating the recovery of the economy.
Moreover, Promotion or Discount also result in lower inventory cost as goods is purchased at a higher rate and no longer need space as well as other cost to preserve them. Additionally, this also helps to cut off and lower some other costs like packaging cost, overhead cost and service cost. Accordingly, producers don’t have to invest as much as before the promotion for those costs and thus, they can get a higher profit.
A particular example for successful promotion strategy is the one of Wal-Mart system. According to their annual report 2008, total nets sale for the Company were $374.5billion, an 8.6 % increased over the previous year. As we all know, 2008 is a terrible year for many firms; Wal-Mart did face with it and still get the expected total revenue by promotion strategy.
In brief, there are many solutions for both producers and consumers to deal with this stage of economy. However, I believe my suggestions can really work to some extent. The two tips stated are directly related, through which both business owners and customers can benefit, leading to a soon recovery of the economy.
SOURCES:
http://en.wikipedia.org/wiki/Bulk_purchasing
http://walmartstores.com/Investors/
CONSUMERS:
According to the consequences of the global crisis, consumers will predictably want to reduce the cost of purchasing. There are many ways for consumers to save more but still consume the same. For instant, you can take some very simple actions at home such as reducing the amount of electrical energy and water used, paying a greater care to your furniture in order to spend less for the cost of repairing them…
In addition, a very good way I want to propose for consumers is bulk purchasing. Bulk purchasing is buying products in large quantities at a lower price per item, or unit price, than is available for smaller quantities. It is so obvious that when you buy a greater amount of goods, you could save more as the price is reduced for larger consumption. Furthermore, acquiring a big amount of goods also helps you to save the transportation cost since you have to pay less than when buying things separately and suffering the transportation fee repeatedly. Moreover, bulk purchasing takes less time of yours because you don’t have to go out and collect what you need so often.
As you can see, bulk purchasing is palpably economical. However, when is best time for bulk purchasing? The tip for consumers is to take advantage of discount or promotion offered by the producers. At the time, shoppers can even benefit more. Yet, bulk purchasing is not totally applicable to every kind of goods. It strongly depends on how much you need and how often you use or consume the good. My suggestion is only buying necessaries and the goods which can be stored in a long while in bulk such as rice, drinks, toilet papers, … Other than that, another way out for customers who don’t want to purchase too much at a time is group purchasing, they can purchase goods at the same time to benefit the most from the promotion but they don’t need to store too many things at home. Also, so as to take greater advantage of bulk purchasing, shoppers had better find the best seller brands since different producers offer different discount rates for bulk purchasing.
For example of my own, when I head out to shop, it can be clearly seen that one of the most popular promotion is “Buy 2 get 1 free”! Says, you have to pay S$10 for one single Giordano T-shirt, you can pay double to get 3. In case you don’t really need 3 T-shirts at a time, you still can share with your friends in order to pay less, in this case, S$20 divides by 3,is S$6.67. In fact, bulk purchasing helps you to save more than you can expect.
PRODUCERS:
As I clearly stated above, consumers can benefit a lot from bulk purchasing. In fact, producers or business owner also gain more as people tend to buy more, leading to higher total revenue for producers. As a result, producers would surely want to encourage consumers to buy more. I want to recommend a solution for them – promotion.
Promotion, meaning lower price for product consumption, will lead to lower marginal profit. Yet, it stimulates higher rate of purchasing as people will buy more. Subsequently, the whole sale will increase, which will keep the profit of the producers stable.
According to demand concepts, at a lower price, customers tend to buy more so as to save more, resulting in higher supply because producers always want to reach the maximum total product point to get highest profit. One very well known policy related to this issue is the US$ 800 billion of stimulus packet of the US. Its main purpose is to facilitate the production process, leading to lower price of products. Therefore, consumption rate will also rise, motivating the recovery of the economy.
Moreover, Promotion or Discount also result in lower inventory cost as goods is purchased at a higher rate and no longer need space as well as other cost to preserve them. Additionally, this also helps to cut off and lower some other costs like packaging cost, overhead cost and service cost. Accordingly, producers don’t have to invest as much as before the promotion for those costs and thus, they can get a higher profit.
A particular example for successful promotion strategy is the one of Wal-Mart system. According to their annual report 2008, total nets sale for the Company were $374.5billion, an 8.6 % increased over the previous year. As we all know, 2008 is a terrible year for many firms; Wal-Mart did face with it and still get the expected total revenue by promotion strategy.
In brief, there are many solutions for both producers and consumers to deal with this stage of economy. However, I believe my suggestions can really work to some extent. The two tips stated are directly related, through which both business owners and customers can benefit, leading to a soon recovery of the economy.
SOURCES:
http://en.wikipedia.org/wiki/Bulk_purchasing
http://walmartstores.com/Investors/
Linking to bulk purchasing is a good idea - large sacks of rice does cost less per kg compared to small packets. However, reducing price has its consequences. If demand for the good is inelastic, and is also income elastic, total revenue would fall, hurting profits even more.
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