Lessons in Purchasing Economies from Costco, JD and Pinduoduo (142)

This week’s podcast is about economies of scale in purchasing power. I go through Walmart and Costco as traditional examples. And point to JD, Apple, and Pinduoduo as digital examples.

You can listen to this podcast here, which has the slides and graphics mentioned. Also available at iTunes and Google Podcasts.

Here are types of economies of scale.

• CA11: Fixed Operating and Capital Costs
• CA12: Purchasing Economies and Bargaining Power with Suppliers
  • Larger companies can demand cheaper prices and/or better terms from suppliers than their smaller competitors. This is about bargaining power for important and/or sizeable inputs
• CA13: Geographic and Distribution Density
• CA14: Geometry Effect
• CA15: Learning Scale

Cases of purchasing economies

• Newsfeed of offers plus C2M results in purchasing economies. Pinduoduo.
• Privileged technology access by Apple
• Purchasing economies. This was JD's biggest lever.
• Platform business models power over suppliers.

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• 3 Big Questions for GoTo (Gojek + Tokopedia) Going Forward (2 of 2)(Winning Tech Strategy – Daily Article)
• Why Netflix and Amazon Prime Don’t Have Long-Term Power. (2 of 2) (US-Asia Tech Strategy – Daily Article)

From the Concept Library, concepts for this article are:

• Competitive Advantage: Purchasing Economies and Bargaining Power with Suppliers

From the Company Library, companies for this article are:

• JD
• Pinduoduo
• Walmart
• Costco

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