Does Buying in Bulk Really Save You Money?
- Matthew Pryor Sound Mind Investing
- 2005 27 Jul
"The more you buy, the more you save!" I hate this kind of marketing spin. It draws us in because, after all, who doesn't like to save money? But it conveniently focuses on only one part of the picture. A sale might entice you to buy three shirts for $30 rather than at $12 each. Obviously, a $10 shirt is cheaper than a $12 shirt. But they've gotten $18 more of your money. Did you really go out intending to buy three shirts? The commercial should say, "The more you buy, the more you spend."
The idea of saving money by buying in greater quantities is also the appeal made by warehouse clubs. These huge member-only warehouses claim to offer great savings partly due to the fact that you're buying in bulk (and partly due to the no-frills environment). But are the savings more than offset by the fact that I may spend more than needed? And is buying in bulk really a money-saving strategy? I went on a crusade to find out!
I started my quest at Sam's, the dominant warehouse club locally. I thoroughly enjoy walking down aisle upon giant aisle of everything from tube socks to hot sauce. I mean really, who couldn't use a 48-bottle case of Tobasco? With apparent bargains all around, it's hard not to love the clubs.
I decided to primarily focus my research on the goods we buy regularly from the grocery store. Though it wasn't mandatory for the items to be food, the food items I did pick were not quickly perishable. And since we already know that generics cost less, it was mandatory to compare like brands. I compared the cheapest version—even if on sale—since the goal was to find the lowest unit price. With clipboard in hand, I wrote down the prices on over 70 items. Later, I went through the same process at two of our leading grocery chains, Kroger and Meijer. After crunching the numbers, I found that a great majority of the items were indeed cheaper at Sam's. On average, the savings amounted to 20%. Not too shabby.
To see if there were patterns to where the savings would be found, I broke down the data into categories: condiments, pasta, cereal, canned goods, frozen foods, juices, toiletries and household supplies (cleansers, garbage bags, toilet paper, etc.). The big winners: condiments, cereal, juice, and household supplies averaged savings of 36%. Impressive, huh? And on some items, buying in bulk can save you even more—up to 50% for things like olive oil, salsa, and preserves.
It may never have crossed your mind that your child's glass of OJ could cost you a quarter more than necessary. You shrug off a quarter? If you're determined to get Junior's daily dose of vitamin C in, you would be shrugging off about $90 a year.
Or, how about this—you can save 20 cents a bowl on Raisin Bran. What's 20 cents? For a family of four that has a bowl every weekday, it's $208 a year. That's $208 that could be paying off a debt (and the high interest rate that comes with it).
"I don't eat cereal," you say. Oh no? Do you eat chicken? Do you like snack crackers? Do you use tooth paste? Hopefully you answered "yes" to at least one of these questions, in which case you can save an average of 35%. And none of these examples include the additional savings on sales tax!
Savings aren't necessarily limited to groceries. In his book, Saving Money Any Way You Can, Mike Yorkey cites warehouse clubs as being great places to shop for small appliances, car tires and prescription eyewear. And I personally have saved money when buying books, computer software, and even flowers for my wife.
But it wasn't a complete sweep for the warehouse club. Keep in mind that:
• Not everything at warehouse clubs is sold in bulk. You can buy a single gallon of milk or one ink jet printer. In those instances, the savings may not amount to much, so be sure to compare prices first.
• Strangely, some items cost more, even in bulk!
• The variety is limited.
• I surveyed items that wouldn't perish quickly. You're not saving money if the product goes to waste.
• You might save some money buying items you use less often, like cat shampoo, but you'd be tying up money that would probably be better used elsewhere.
• When the grocery chains came out ahead, often times it was because there was a sale. Their advantage can disappear when the promotions end. Furthermore, keep in mind that grocery prices are regional — what's cheaper for me in Kentucky may cost more where you live, or vice versa.
• You need plenty of storage space.
Even still, warehouse clubs are a great place to find really good savings. But to truly win at the cost-cutting game, you'll need to take some time investigating the pricing patterns of the chains in your area. And you never know, you might bump into me one of these days — I'll be the one with the clipboard and Tobasco.
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