On the surface, buying goods in bulk seems like a great way to save money. When you buy a large amount of anything, the price of individual units tends to be lower. The more you buy, the less each unit actually costs you. Although this seems like a sure way to get a deal, bulk buying often costs people more than they know.
TUTORIAL: Budgeting Basics
Paying More for More Than You Need
Imagine your favorite shampoo is sold for $12 per 20-ounce bottle. You find out that you can buy a 180-ounce bottle for a mere $45. What a deal! For about four times the price, you receive six times more shampoo. So you buy it and then spend the next year and a half using the same shampoo – that’s longer than most celebrity marriages. However, you might end up using it up in less than a year because, with all this shampoo sitting in the shower, there is no point skimping, so you use twice as much as usual and are back buying another $45 bottle in six months. Or maybe you get sick of using the same shampoo and switch to a different brand before finishing off the monster bottle. These are all common problems with bulk buying.
Although the per-unit price may be low, the overall purchase price is higher than that of just buying what you need for the week or month. When people are in the store and find a year’s supply of crackers for mere pennies a package, they often forget to consider whether they need or want that many crackers. Signs like “super deal” and “unbelievable savings” may cloud their thinking. The difference to your shopping budget if you buy a $45 bottle of shampoo versus a $12 one may mean that you need to put the groceries on your credit card. And while you are doing that, why not get a year’s worth of toothpaste and peanut butter. Sure, you will have to pay down your credit card, but won’t you save in the long run when your family is still scooping out of that same four-pound peanut butter jar 12 months down the road? Probably not.
Another thing that bulk-shopping enthusiasts may not consider is the cost of storage. Bulk purchases have to be put somewhere, and your fridge alone may not be enough. While Americans have some of the largest refrigerators in the world, there is still a healthy market for freezers, dry storage bins and other food storage devices. Bulk buying may force you to purchase more storage and pay the continuing cost of storing food, such as the electricity bill for a larger fridge and a freezer.
Breaking the Budget – Breaking the Scale
Bulk buying has health-related consequences as well as financial ones. Unfortunately, over-consumption is as American as apple pie. Buying bulk only encourages this. If you have a massive jar of mayonnaise staring you down every time you open the fridge, you are going to try and find more ways to use it up, especially as the expiration date comes up. This means more mayonnaise in your sandwiches, salads, the kids’ lunches, the cat’s food and so on. Sure, you justified the purchase of the mayonnaise and saved money on the amount you consumed, but would you have eaten so much of it if you has purchased a smaller jar?
More pressing than the financial problem is what increased consumption does to the health of you and your family. While using extra shampoo doesn’t exactly harm the environment in a way that is immediately noticeable, consuming more mayonnaise, peanut butter, cereal, frozen meals and other popular items available at the bulk stores will almost certainly affect your health in a way that you will be able to see in any full-length mirror. It seems odd to talk about obesity in a financial article, but this stems from the primarily financial drive of wanting to get as much as we can and use as much as we get.
The Bottom Line
The best way to reduce expenses is not by buying more of a particular product to get the bulk discount, but by buying and using less or substituting a cheaper product. Bulk buying is often best described as something you don’t need a lot of at a price you can’t pass up. It is worth noting that bulk buying does make sense for many people, especially those with large households. However, the practice has become so widespread that people are often buying bulk based on a price point, rather than the eventual use they’ll get out of a product.
To learn how to work within a budget, see The Beauty of Budgeting.