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The Good, The Bad and The Ugly of Bulk Buying

Everyone loves a bargain. Manufacturers and retailers have understood that fact for decades and the result is bigger boxes with less content because it provides the impression of being a good deal. The process is simple: They offer consumers five percent more in a package that’s 10 percent larger, label it bulk economy size and charge 15 percent more than the regular size.

How to Master Buying in Bulk

Bulk By the Numbers

American’s love the prospect of getting a deal so much we’re willing to shell out more than we save to get it. That’s where bulk warehouse and wholesale clubs enter the picture. To be a member at Sam’s, BJs and Costco cost $40, $50, and $55 per year, respectively, for the ability to potentially save money.

A study by the USDA shows that the average family of four spends $206 a week on groceries. The average for childless couple spends $128 on average which amounts to $6,656 for a couple and $10,712 for a family of four per year.

Another study by the nonprofit Center for the Study of Services, showed that shopping at the big three warehouse clubs could bring substantial savings. In an item for item comparison they found that BJ’s prices were 29 percent lower, Costco’s 30 percent lower and Sam’s 33 percent lower than traditional supermarkets. The result implies that for a family that spends $150 a week on groceries annual savings from bulk shopping could range from $2,270 – $2,571 per year.

The Ugly Truth

The reality for most consumers is that they don’t save anywhere close to that amount, mostly having to do with selection. The three bulk warehouse clubs offer an average of around 5,000 items (including many non-grocery items such as books, clothes and electronics) compared to the average supermarket which has a selection 10 times as large at 50,000 items. The result is most warehouse members shop at one or more of the club stores as well as a traditional supermarket.

The fact that we shop in multiple stores in order to save needs to be tempered by Benjamin Franklin’s advice to a young tradesman, “time is money”. It’s easy to forget that our time has a value when we are outside of work where employers are ready to remind us at every turn that they don’t pay us to chat around the water cooler.  The cost of time spent visiting multiple stores to save money should be factored in to how much we consider as savings.

The Danger of Waste

Spoilage and waste are the biggest offenders when it comes to warehouse club shopping. The clubs are able to offer deeply discounted prices primarily by offering larger quantities of products, hence the reason they are called “wholesale clubs.” Now I love avocados- I slice them for sandwiches, add them to salads and make guacamole to snack on. But these fruits (yes, they are fruits) don’t have a long shelf life. After about 3 days out of the fridge or a week in the fridge, they are usually no good anymore. I use about six a week and while I can save 20 percent or more per fruit buying 10 at a time at the wholesale club, 40% of those will potentially end up spoiled before I can eat them.

Buying perishables in bulk applies to more than produce, meat and dairy products which amount to a sizable portion of most club purchases but also extends to refrigerator items and includes processed foods that have expiration dates. Buying more than you can use before it goes bad adds a hidden mark-up to the products you purchase in bulk.

The Good

Think of warehouse and wholesale clubs as the bacon of your grocery shopping routine. We love bacon but we understand that too much of it is not good for us so we limit our intake (or try to!). It’s a good idea to apply the same rule to the clubs. For example, try not going there every time you grocery shop. For instance if you are like me and grocery shop once a week, limit your visits to the club store to no more than once every two weeks or once a month.

Limiting the frequency of your visits serves two purposes, it saves you time (which is money) and it forces you to more carefully consider what you are buying. Stick to items with a long shelf life and non-perishable items like paper products and canned goods. Ideally, the majority of what you buy should be what you plan to use between now and your next trip. I go every 2-3 weeks and include a 55 lb bag of dog food on each trip, because I have two boxers and hence can use it all.

Make a List and Check it Twice

The same list rule that saves you money at the supermarket saves you even more at the warehouse club by stopping you from purchasing impulse items that seem like a bargain and are not. A list also stops you from picking up items that you may not really be out of which increases the likelihood of waste and spoilage.

Take your club list to the supermarket and compare unit pricing on the items you plan to buy in bulk at the club. This is a great way to keep your club purchases limited to what is really a cost saver and not just a bigger box. The same rule works the other way around, so periodically bring your supermarket list to the club store to look for places to stock up and save.

Just like the supermarket warehouse brands are a great way to rack up additional savings. This is especially true for non-perishable items like paper products, cleansers and things that freeze well like butter. Store brands are not always obvious given how they are branded – for example BJ’s house brand is Berkley and Jensen and Costco’s is Kirkland – and on many items is of comparable quality to brand names at substantial savings.

The Bottom Line

The absolute best warehouse club shopping practice is diligence. Never forget your place in the order of the universe. You are a source of revenue and profit for retailers and they are constantly on the lookout for ways to increase margins and improve their bottom line. This fact makes complacency the biggest enemy of warehouse club shoppers. Avoid the trap of assuming that every item in the store is a bargain or what was a great deal last month or last year is still a good deal now.

Photo Credit: flickr

Frank Addessi Born and raised in the center of the known universe, Brooklyn NY, and currently hiding out in the bucolic hills of northeast Pennsylvania writing about personal finance. His expertise includes personal loans, credit cards and retirement. It's not easy living the American Dream but someone has to do it!
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