In this episode, Tom and Tracy Hazzard talk about volume discounts in the 3D printing industry. They discuss how and why volume discounts are not applicable in 3D printing and additive manufacturing. They also talk about how shopper mindset has to change on this topic, and why that change is not going to happen overnight.

Listen to the podcast here:

3D Print Volume Discounts?

Today, we’re going to talk volume discounts. Do volume discounts exist or can they or will they exist in 3D printing or the additive manufacturing world? Because we’re in a no-tooling situation, a very low labor situation, are there really no volume discounts associated with that kind of production? I think we should really separate it into looking at the manufacturing world, what would happen if we were to be manufacturing and had a full facility with multiple printers, like a printer farm running it. Running it like an Etsy shop. You’re running it in your home. You’re running the printer. You’re just selling some prints, that kind of thing.

You may be more efficient in how many you made versus the time that you took to create that thing.

Certainly, if you look at it today, you don’t get any benefit from going on Shapeways and buying twelve of something versus buying one of them. I think when you’re using your own 3D printer at home, they don’t get any cheaper really just because you’re going to make more of them. The only benefit to printing many, many of a single object 3D printing is that whatever amount of time that you took to create that model, that file, that design that you made, which could be several hours to a hundred hours or more. You may be more efficient in how many you made versus the time that you took to create that thing. Maybe that makes some sense. In terms of cost of manufacturing something with the materials and the energy you use and the machine time, divided over maybe how much you paid for that machine. Making more of them doesn’t really make them cheaper like it does in other traditional manufacturing processes.

It’s a hard world to think about in terms of that because it is a different mindset than we were used to. People demand volume discounts. We hear it all the time in our private label service business where we helped out private labelers on Amazon get products sourced and designed and all of those things. They’re always like, “Yeah, I want to buy 200 pieces.” That’s not a volume. That’s the other problem. You’ve got to think about when there is volume discount, you hit into the tens of thousands of pieces. That’s really where I think this idea that you should get a discount for 200 pieces is really the misnomer here. It’s a consumer mindset problem.

The reality is, in any kind of traditional manufacturing or even traditional retail distribution, the only way you really

The only way you really get discounts is if the volume is so large that you can order material in a very bulk way direct from a manufacturer and cut margin out of the process.

get discounts is if the volume is so large that you can order maybe material in a very bulk way direct from a manufacturer, not from the distributor or a wholesaler, and cut margin out of the process. Certainly, if you buy more of a material in one single delivery, you save on transportation cost. You can get a cheaper price because the manufacturer doesn’t have to do as much work. They’re not having to sell you on it. In smaller quantities, one sale is a bigger quantity. There’s an efficiency there. There’s an efficiency if you’re bulk-packing something. For the most part, I think it’s probably not very safe to be bulk-packing a bunch of 3D prints unless the type of print is okay with that to be just thrown in a box for all of them together. The only other way you save is when you buy a bulk pack and there is an individual packing involved, because you’re saving boxes and materials and things like that. That’s the only other place that I see, when you get under a lower volume, that you actually can get a discount.

We had an experience in December where we had somebody that wanted to purchase 25 of our Angel ornaments for the year. I didn’t want to just print them here because we had a lot going on. We’re using our printer for a lot of other things. I went out to Voodoo Manufacturing and got a quote. It was very reasonable what they were charging for it to manufacture it. In their quote, there was no volume discount. It was like, “We can do this for this price. It really doesn’t matter how many you order, just let us know how many you want.” It’s a lead time as to how many you order. I think it was a very fair situation. I didn’t ask them for a deeper discount for more items. I really don’t think there would have been any real savings for them if they were to have offered it. They would have just been taking less margin, which isn’t fair to them.

If you find something you want at Costco, if you want to buy it there, it’s probably cheaper than it would be at any other store.

It’s just very different. There are efficiencies in some traditional manufacturing that volume in bulk makes sense. There’s a reason why if you find something you want at Costco, if you want to buy it there, it’s probably cheaper than it would be at any other store. It’s because Costco is taking less of a margin than other stores do, and buying it in gigantic volume. Bringing in many, many containers which are essentially truckloads worth of these products over the transportation. They probably do get a bigger discount on transportation cost because they’re doing a lot more of it. It’s a lot easier if you are shipping 400 containers of something over the ocean that’s from one customer to one destination, you can imagine there’s a lot less paperwork that has to be done in terms of servicing that customer than it is if you had one container to 400 different customers. Administratively, you have a lot more work to do there. You can understand why, in those situations, they can give a discount for volume.

I think we need to flip it and think about 3D printing and additive manufacturing as a little bit different. Let’s say we start with the base price of whatever it is. Let’s use the angel as an example because that’s a perfect one. Our angel had one single message on it this year. If we were to put that and say, “I want to order 25 with 25 different messages on it.” Now, we’re talking about up charge. You started with what is the volume discount of the same, because it’s easy to run. You just start the machine back up again. You don’t have to switch the file. You don’t have to change it out. You don’t have to change the color potentially or whatever might happen in the personalization process. We have to start thinking about it like, actually one costs you more than 25. It needs to go the opposite direction and that you now need to capture the labor for creating that new design, creating the modification file, creating the labor to change that out on the machine and creating the structure to be able to do that. It’s the opposite direction in additive manufacturing. We almost have to relearn our pricing expectations as consumers.

When you see discounts for things at retail, like buy one get one half

Discounts for things at retail is not really even an efficiency or a volume discount.

price or something, there’ not really even an efficiency or a volume discount going on there. You’ve found a retailer that doesn’t want to keep that inventory in their books any longer, and they’re happy if you want to take two of them, they move through them quicker. They won’t make as much money on one, that’s okay for them. It has nothing to do with volume. It’s really the opposite of volume. They’re trying to get rid of volume. They’re trying to get rid of excess inventory. They’re actually trying to save cost. You’re taking them off their hands and paying them something for it is better than nothing when they have to toss it later. They’ve got probably too much cash tied up in their inventory and they need to get some of that cash back. That’s all that’s about.

It’s interesting that 3D may have an opposite effect where, on the one hand if you’re going to make each one a little different, you’ve got to put more labor into it. When you’re going to order more, it may cost you more. At the same time, in additive manufacturing, you certainly don’t have to worry at all about tooling costs in order to create something, which was a huge barrier to being able to make any of these kinds of products in the past. Now, you don’t have that tooling cost. You have the machine cost, and you have designer engineering time to create the file. That’s the extent of your investment in being able to do it. It’s a much lower barrier to entry for people. I think maybe people just need to get over this thought that, “If I’m going to order a lot, there should be a volume discount.”

You wouldn’t find Shapeways, you wouldn’t know what it was if you didn’t already know what 3D printing is.

It’s a shopper’s challenge. The problem is that you’re having a shopper who doesn’t really necessarily understand 3D printing or the 3D printing process. Let’s say they’re buying over in an Etsy shop or something so they don’t understand the process. As opposed to a Shapeways where they’re virtually clicking in there and they know they’re in a 3D market place or they wouldn’t go there. You wouldn’t find Shapeways, you wouldn’t know what it was if you didn’t already know what 3D printing is. To have them not offer volume discounts doesn’t seem surprising to you. But in an Amazon world, in a Target world, you’ll have shopper challenges elsewhere. That’s where you run into a bunch of issues.

Even in an Etsy shop, you think about there’s a lot of handwork and stuff done there, but if you make a bulk order in an Etsy shop, chances are good that they bought a bulk of whatever the base was. Let’s say you had decorated wine glasses or something like that, they were able to now buy cases of those wine glasses and save money. Typically, they do offer you some amount of discount. It may not be a ton but it might be 10% off or something. The idea is that they are saving in their buying and saving in the process. Here, you’re talking about the design process. It’s more complicated the more singles you do and the more variations you do. The design process is there anyway.

We do our design work and we do all of that, but we know at the end of the day, or the companies that hire us know at the end of the day there will be volume to support the cost of what we were in, in terms of investment. Today, that has no basis. There is no cost return on investment for time and design right now because you might buy one or two and not 10,000. They know what the volume should be. There’s no expectation for any understanding of volume elsewhere. That’s why the investment is lacking in terms of design and time.

The manufacturer can maintain the same price because the labor to make the change is actually being done by the consumer.

I think that’s why actually certain tools that allow consumers online to do some of those modifications if they want each one a little different. You’re doing a whole bunch of napkin rings maybe coming up to holiday time in fourth quarter and you want to personalize them and you want everybody’s initials on the napkin ring. If you have sites available that are using some plug-in, like digital forming where it allows you to modify changes as a user, I think everything can still be the same price because you’re using about the same material for all of them. But you certainly still are not going to get a volume discount. In that sense, the manufacturer can maintain the same price because the labor to make the change is actually being done by the consumer. It’s automated. It’s like the IKEA model. They can offer you cheaper furniture because you the consumer are paying for the labor to put it together. It’s your own time.

I think it’s an interesting conundrum though that we have here as the shopper challenge. We have shopper mindsets and we’re not going to just overcome them because we want them to accept 3D printing. It’s not going to happen. It’s a barrier that we have to figure out a way to modify their behavior and educate them. That’s an extremely expensive and time-consuming and a hard thing to do. The best way to do it is not to modify that. At the same time, we then have to figure out a way to create volume discounts if you’re going to do that. How do you that?

All of those paradigms, they all have to be resolved. This isn’t just something that’s going to happen overnight.

How do you play by rules that have been established for times that existed prior to additive manufacturing? I think you’re right. I think at the end of the day, consumers are going to want what they want. They’re not going to care if it’s 3D printed or not. They may care if they can get it a little bit their way, if they can get it made a little bit personalized for them, if they’re not buying something vanilla that anybody can get in other store out there. There are a lot of paradigms that we have to deal with and they don’t shift quickly. We’ve been talking about a lot of them lately with our manufacturing mindset shifts, like the Six Sigma and lean manufacturing model. Now, we’re talking about them from a pricing standpoint. We’ve been talking about it from a material and finish standpoint as well. All of those paradigms, they all have to be resolved. This isn’t just something that’s going to happen overnight. You have to look at each one of those things as a challenge and you can’t just say, “They will accept this.” That is flawed thinking.

I also think it’s flawed to think you can just explain it away to the consumer. I think you’ll lose there. I think you need to focus on what are the advantages for the consumer and what you’re doing in the way you’re manufacturing it. You’re 3D printing something or additive manufacturing and you’re not taking advantage of that process to offer the consumer some benefit, some advantage, then I think that your plan is flawed. You have to take advantage of those things that are available to you. Provide a genuine value and benefit for the consumer. But then you can’t bother to argue away why there isn’t a volume discount or whatever else it might be. It has to sell itself. You’ve got to work around the problems. I think the way is, it’s probably misdirection. “Focus over here. On here, what’s made it unique? Look at all the good things you wanted so badly. You’re getting them.” They’ll overlook the expectations that they had that they always get this. It will be in a new shift. They really got something else that was so much more important that they didn’t care that they didn’t get the volume discount at the end of the day.

Anyway, this type of episode and these types of topics help you as much as they do for us to talk about them, because I always think it refines our thinking and clarifies where we’re going and what we’re looking into. If you guys have any suggestions for future episodes, we’re always looking for them. Please suggest them on 3DStartPoint.com or on Facebook @3DStartPoint. Thanks so much for listening everybody. We’ll be back tomorrow with another episode. This has been Tom and Tracy on the WTFFF 3D Printing podcast.

Important Links

Listen | Download | View

Hear the episode of the WTFFF?! Podcast by using the player above OR click to download any episode.

Listen to the podcast here:

3D Print Volume Discounts?

Important Links

Listen | Download | View

Help Us Help You!