Foreword Online

Ideas, information and industry news for collegiate retailers



Cost Savings Through Scale

Posted by Liz Schulte on 6/20/17 5:30 AM
Topics: cost savings, college stores, benefits of scale

College stores are in a hard position. Stuck in the middle, everyone wants something. Students want lower costs. Faculty want their students to have their books in time for class. Administration wants to see the store make a profit. Making all three channels happy isn’t an easy task. Utilizing the principle of economy of scale can help you achieve that.

Cost Savings Through ScaleEconomy of scale is a relationship between the quantity produced and the unit cost. When you order pens, for example, you might be able to get 50 pens for $1.49 each or you can get 5000 pens for $0.93 each. Another slightly different example would be buying items at a big box store rather than at a smaller store. You could get two 26 oz. jars of Nutella for under $10 or you could buy one jar for $6.62 at another store. The quantity and value relationship is easy to see. It’s something you deal with daily when ordering spirit wear and merchandise. However, it also applies to course materials.

Buying more than you need wouldn’t be helpful with course materials. Where economy of scale comes in is with the size of your wholesale distributor. Let’s say faculty adoptions come in and you need 100 copies of a book. You are able to purchase 20 at buyback, so you let your account representative know that you need 80 more. However, they are only able to find 40 more. You contact the publisher and you can get the last 40 … in a few weeks. Classes will have already started and you aren’t able to meet the needs of the students. The students who are able to purchase their book will be happy. You will have saved them money and provided their book in time for classes. However, the rest will not be pleased. Not only will they get their books late — if they don’t choose to go elsewhere — but they will have to pay full price. The next semester those students aren’t going to choose to do business with your store.

A larger company can help you avoid the above situation. With a small company, there are fewer school partners, making it harder to fill all the inventory you need. The smaller company attends fewer buybacks, it has less inventory and doesn’t staff the necessary quantity of employees to make sure everything goes smoothly. A larger company has a wider reach to find the course materials you require and it can meet your needs as a customer. Instead of adding to the pain of being caught in the middle, the right company will help you achieve student, administrative and faculty goals.

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About Liz Schulte

Liz Schulte is an author and business owner with a background in customer service, marketing and higher education development.

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