CH04-EX02. Cosmetics Container B2B Bulk Order Case

• Related Chapter: CH04. How Channel and Customer Relationship Reshape Price Structure
• Related MN/KM: MN06 / KM048

Think it through

This is a B2B case of cosmetics containers sold to cosmetics manufacturers. The official list price and the actual selling price under bulk-order terms differ.

1. For unit price to be lowered while still keeping a margin of about 25% once an order of around 200,000 units is secured, what has to be the key premise?
2. What effect does cutting intermediate distribution steps have on fees, and what sales approach was used to do it?

Show answer and walkthrough

• What this case illustrates: In a B2B transaction, bulk order volume reshapes unit price and margin structure, and direct proposal-based sales that cut out intermediate distribution steps lower fees.

Content

In the cosmetics container B2B case, the official list price and the actual selling price under bulk-order terms differ. The structure was designed so that, once an order of around 200,000 units was secured, unit price could be lowered while still maintaining a margin of about 25%, with economies of scale from mass production as the key premise. The company reduced intermediate distribution steps and lowered fees by selling directly to cosmetics manufacturers through direct proposal-based sales.

Source: Pricing Is Strategy, pp. 208–215.