Different methods are used in buying goods or services. Buying may be in big or small quantity. Goods or services can be bought from one or many sellers or sources according to convenience. Method of buying depends on buyer's need, quantity of goods, seller's comfort, quality of the goods etc.
Different methods of buying can be studied classifying them on the basis of quality, quantity of goods and number of suppliers.
1. Methods Of Buying Based On The Quantity Of Goods:
Buying can be divided in four categories on the basis of quantity of the goods be purchased. They are as conservative buying, speculative buying, buying through tender and contract buying.
1. Methods Of Buying Based On The Quantity Of Goods:
Buying can be divided in four categories on the basis of quantity of the goods be purchased. They are as conservative buying, speculative buying, buying through tender and contract buying.
i. Conservative Buying
The method of buying goods in small amount only with the purpose of meeting daily necessity so that there remains minimum quantity in stock is called conservative buying. This buying is also called 'hand-to-mouth buying' or 'current need buying', 'economical buying' , or 'small order buying'. The main reason of this buying method is to avoid loss that may be caused by the decline in price of the goods in stock. Housewives buy goods in the same method to meet daily needs. Wholesalers use this method if there is possibility of decline in the price of goods to avoid loss.
ii. Speculative Buying
In speculative buying method, buyers buy more quantity than needed. The purpose of this method is to earn maximum profit from selling the goods at higher price. Wholesalers or dealers buy goods in this method. They buy goods in bulk quantity expecting that the price of goods will increase in near future and more profit can be earned by selling at high price. This method of buying is also called 'buying long' or 'forward buying'.
In speculative buying method, buyers buy more quantity than needed. The purpose of this method is to earn maximum profit from selling the goods at higher price. Wholesalers or dealers buy goods in this method. They buy goods in bulk quantity expecting that the price of goods will increase in near future and more profit can be earned by selling at high price. This method of buying is also called 'buying long' or 'forward buying'.
iii. Buying By Tender
Big producers may call tender for supply of raw materials. They open the tenders received from different suppliers and the suitable is accepted. From this the producer gets raw materials regularly at certain price. In this method of buying the producers have not to bother about searching suppliers. Government offices and other big business companies buy goods in this method.
iv. Contract Buying
Buyers may sign written contract with capable and reputed suppliers for buying huge amount of goods. In such contract, terms and conditions to be followed by both parties are mentioned. Buyers get regular supply of goods at certain price for fixed duration as mentioned in the contract. In this method, buyers need not spend time nor have to bother about searching for supply source. The supplier himself provides necessary goods at the buyer's doors.
2. Methods Of Buying Based On Number Of Suppliers
On the basis of the number of suppliers buying method can be divided in three types as concentrated buying, diversified method and reciprocal buying.
i. Concentrated Buying
Buyers can buy necessary goods from one or few sellers of a certain area. In this buying, regular contact is established with sellers. The buyers can get facilities like quality goods at cheap price and prompt delivery. In this way, if the buyers are provided with the quality, quantity and price of the goods, they feel psychologically satisfied. But depending on only one or few sellers for supply of goods, there remains risk of market. That means the buyers may not get the necessary amount of goods at the time when they need.
Big producers may call tender for supply of raw materials. They open the tenders received from different suppliers and the suitable is accepted. From this the producer gets raw materials regularly at certain price. In this method of buying the producers have not to bother about searching suppliers. Government offices and other big business companies buy goods in this method.
iv. Contract Buying
Buyers may sign written contract with capable and reputed suppliers for buying huge amount of goods. In such contract, terms and conditions to be followed by both parties are mentioned. Buyers get regular supply of goods at certain price for fixed duration as mentioned in the contract. In this method, buyers need not spend time nor have to bother about searching for supply source. The supplier himself provides necessary goods at the buyer's doors.
2. Methods Of Buying Based On Number Of Suppliers
On the basis of the number of suppliers buying method can be divided in three types as concentrated buying, diversified method and reciprocal buying.
i. Concentrated Buying
Buyers can buy necessary goods from one or few sellers of a certain area. In this buying, regular contact is established with sellers. The buyers can get facilities like quality goods at cheap price and prompt delivery. In this way, if the buyers are provided with the quality, quantity and price of the goods, they feel psychologically satisfied. But depending on only one or few sellers for supply of goods, there remains risk of market. That means the buyers may not get the necessary amount of goods at the time when they need.
ii. Diversified Or Scattered Buying
The method of buying necessary goods from scattered sellers is called diversified buying. Goods are brought fro the sources or sellers who provide facilities like reasonable price, quality of goods, transportation and facility of credit payment etc. This diversifies buying. If goods are bought in this method, the buyers need not have to depend on any seller for supply. They need not have to suffer from terms and conditions of limited suppliers. Selection facility can be fully used.
iii. Reciprocal Buying
Exchanging goods to meet mutual needs of both parties is called reciprocal buying. This is also called 'mutual buying and selling'. For this, both concerned parties should make such a mutual contract that one side become ready to buy goods of other side. This means when A is ready to buy goods of B, then B also becomes ready to buy goods of A. In this method if buying and selling, selection facility remains limited
3. Methods Of Buying Based On Quality Of Goods
Generally, in this method of buying, buyer makes buying decision only after being satisfied with the quality of goods. Buyer buys goods after carefully examining, inspecting or receiving description of the goods from seller.
i. Buying By Inspection
The easy method of buying is to buy goods by inspection. In this method, buyer inspects goods and gives order for supply only if it can meet the need. In this method, seller organizes fair or exhibition so that buyers can get chance to inspect the goods. Buyers can also visit sellers' store or collection centers or production place to inspect goods. If the goods are found satisfactory, then the buyers give order for supply of the goods.
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Elements Of Selling
ii. Buying By Sample
If there is no possibility of buying by inspecting goods, buyer can give order for goods by looking sample. After inspecting goods of different grades, buyer selects a sample for supply. Then the seller supplies the goods accordingly.
iii. Buying By Description
In this method, buyer gives purchase order on the basis of the description given by the seller. The sellers sends the goods as ordered for. Description of goods can be found in advertisement, signboards, hoarding boards or other business publications.
ii. Buying By Sample
If there is no possibility of buying by inspecting goods, buyer can give order for goods by looking sample. After inspecting goods of different grades, buyer selects a sample for supply. Then the seller supplies the goods accordingly.
iii. Buying By Description
In this method, buyer gives purchase order on the basis of the description given by the seller. The sellers sends the goods as ordered for. Description of goods can be found in advertisement, signboards, hoarding boards or other business publications.
