Like a lot of folks, I’ve used buying in bulk to save a lot of money over these months. Thanks to club stores like Costco and Sam’s Club, Amazon.com’s grocery section, as well as many grocery stores carrying larger quantity versions, buying in bulk has become so ingrained in our collective consciousness that many of us view the act as synonymous with saving.
But there are a few ways it can backfire and cost more. Let’s walk through them.
Sometimes the bigger packages can literally cost more per item
This should be a no-brainer, right?
I see this with cereal a lot at the grocery store when single units go on sale. For an online example, search for “Kellogg’s Frosted Mini Wheats Cinnamon Roll Flavored Little Bites” at Amazon, and you’ll be given these two options:
My first thoughts upon seeing this might be to wonder whether I could keep 10 boxes in a New York apartment without annoying my roommates and whether I could finish 10 boxes in a reasonable amount of time.
But look again: the four-pack costs $5.42 per box while the 10-pack costs $5.82. In this case, I’d be paying more to have too much cereal.
It’s pretty embarrassing when this happens. That’s why I take the extra second to whip out the calculator at the grocery story to make sure I’m not paying more for the privilege of getting a ridiculous amount of something.
Sometimes, having more of something around makes me eat it faster
There’s a psychological principle that says that, on average and in isolation, our level of consumption of some good will be directly proportional to how much of that good we have.
But I don’t need science to know this is true. Think about how much more you eat at a buffet. Or how you’ll eat nearly all of a large plate of spaghetti even though you know a small plate would have satisfied you.
For example, if I were to save 5% by buying 40 pounds of bacon at one go, but having so much made me eat twice as much bacon, then I really wouldn’t save any money.
Also, I’d need to buy bigger pants.
Things go bad
Whenever I make my way to a big grocery stores, I always sigh upon arriving at the poultry section. Buy the 10-pound “family” pack or the 40-pound “industrial” box of chicken and the unit price is cut in half or better.
And don’t get me started on leafy greens; the marginal cost of fresh, packed spinach drops pretty darn close to zero as you upgrade among the bigger sizes.
But you can see the problem here: Yes, I could buy twice as much spinach as I could eat for only a few cents more, but if I have to throw away that extra amount when it spoils, then that few cents is just wasted.
(Relevant older post: Yes, I should get smart about freezing food and otherwise slowing spoilage, and I should better understand what printed “expiration dates” on food mean.)
Having money locked up in stuff means less money liquid to pay down debt or invest
This has to do with the time value of money and is a bit tougher to see so I’ll use an example.
- Suppose I had $300 cash on hand and a weekly income of $3.
- Suppose further that I bought $300, 55-pound box of dry quinoa from Amazon.com. Dry quinoa basically lasts forever, but that much quinoa would take me two years to eat, which works out to a quinoa budget of about $2.87 per week over those two glorious, quinoa-filled years.
- Suppose that the alternative is to buy $3 packs of quinoa once a week somewhere else.
$2.87 < $3, so I should feel pretty good about myself, right?
Not so fast.
- Recall that I have student loan debt at 7.9%
- Alternately, I could have just bought weekly $3 packs of quinoa, in addition to paying off $297 of student loan debt that first week. I would also incur less interest in the process.
How much less?
Looks like $21.69.
Sure, $21.69 may not be that much to you, but that’s seven more weeks of eating I’d be able to do. Also, I didn’t have to deal with a mountain of quinoa.
When shopping in bulk, I make sure to compare unit costs, avoid eating more just because I have more, avoid buying so much that food spoils, and don’t buy more than I’ll consume in a reasonable amount of time.
Who’s got more tips on not losing money when buying in bulk?