Minimum Order

Posted in Marketing and Strategy Terms, Total Reads: 512
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Definition: Minimum Order

Minimum Order the minimum order quantity below which seller or supplier is not willing to sell or provide its good/ materials. It benefits the retailers/suppliers in many ways:

In order to gain profit on small margin products suppliers and retailers often set a minimum order criteria for selling their products.

Also, from economy of scale it is profitable for the retailer to ship/ process a large order than a small order.

It also help in reducing the uncertainty in actual demand and demand forecasting.


Example

Ecommerce Company sells small sum products. They incur rupees 25 as delivery charge. If they sell an order of 1000 rupees, they will incur only 25 rupees for shipping this product as compared to 50 rupees if they ship 2 orders of 500 rupees (total of 1000 rupees in sales). Thus selling small orders is not profitable for them.

 

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