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Does Buying in Bulk Really Save You Money?

By Matthew Pryor
Sound Mind Investing"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 dollars. 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 you may buy 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 Tabasco? With apparent bargains all around, it's hard not to love the clubs.

I decided to primarily focus my research on goods one would buy regularly from the grocery store. Though it wasn't mandatory for the items to be food, the food items I did pick were in a quantity that would not quickly perish. So with my clipboard in hand, I wrote down the prices of 175 items at Sam's, and then went to two of our leading grocery chains, Kroger and Meijer,* and wrote down the prices for those same 175 items.

Most of the time, I was able to compare items of the same container size. In other words, if a package of four 32-ounce bottles of Mott's Apple Juice could be purchased at Sam's, I priced the same Mott's Apple Juice, but in a single 32-ounce bottle from the two grocery stores. When this was not possible, I wrote down the price of a comparable size. 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 31%, more than enough to easily offset the $35-45 annual membership fee.

To see if there were patterns to where the savings would be found, I broke down the data into categories: baby, can goods, cereal/bread, cooking/baking, dairy, frozen, health/hygiene, household (cleansers, paper and plastic products, etc.), snacks, soup/sauce, and other (peanut butter, stuffing, salad dressing, etc.). The big winners: cereal/bread, cooking/baking, snacks, and other averaged nearly 40% savings. Still not impressed? Buy some raisins, syrup, bottled water, and sandwich bags and you can save an average of 66%.

And it doesn't stop there. You can rack up even more savings by buying generics in bulk, where I found savings of up to 83% on items like aspirin and hand sanitizer.

So how does this translate into your daily life? 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 snacks? 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 38%. (And none of these examples include the additional savings on sales tax!)

To take the study a step further, I compared the Sam's price of an item to the cheapest current sales price available at the grocery chains. The warehouse club still wins, saving you 22%.

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.

However, there are a few things to keep in mind when shopping at a wholesale club:

• 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 in bulk (and even at the grocery store, I came across a number of items that cost more per unit of measurement when bought in the bigger container).

• 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.

• Depending on how you categorize items, you may experience different category savings as some items could be in more than one category.

• 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 have to account for storage of these items.

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 investigate 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 case of Tabasco.

NOTE: Specific mention of particular store chains in this article is meant for educational purposes only, and in no way reflects an endorsement of or discredit to these individual grocery outlets. Your results may differ, depending on where you live and what store chains are in your area; therefore, you may wish to conduct your own study for a more accurate picture of grocery price comparisons.

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