After debt payments and housing costs, groceries and household items are some of the biggest expenses our clients face. Buying in bulk is one way that many households attempt to reduce these costs. While there are certainly some items that are more affordable when purchased this way, we want to discuss four pitfalls of shopping at warehouse big-box stores (think: Costco, Sam’s Club and BJ’s) and buying in large quantities.
Base value neglect
Have you noticed that at most standard grocery stores, they make it easy to see the price per quantity on the label that shows the total price? This helps you determine which product is the best deal and is particularly helpful when choosing between multiple brands and package sizes. But without this information, it’s easy to fall victim to “base value neglect,” part of a ploy used by marketers.
Base value neglect occurs when shoppers fail to break down the cost of an item based on its quantity per package, weight or volume. this is particularly a problem at warehouse stores, because customers lose money when they presume that a super-sized “value pack” is always the better value. In addition, it’s harder to do cost comparison at these stores, because there are limited brands and sizes to choose from.
Reinforcing this neglect is the psychological effect of being an “exclusive member.” Akin to a bouncer at a trendy club, store greeters check for membership cards before allowing entrance, even though the card is required at checkout. This is all a psychological gimmick.
The solution: Be sure to calculate the cost of an item by its unit size in order to conduct a true cost comparison, and make sure you are familiar with the cost of that item if you were to buy it at a standard store with more options. In some cases, a smaller size (purchased at the warehouse store or elsewhere) is actually the better value.
Also known as the “empty-cart effect,” some consumers report that they buy more than intended at these stores. Many people fail to leave the warehouse store for less than $100, even when they only intend to pick up a few items. This happens for several reasons: lack of a list, going to the store hungry, grabbing a cart when you don’t need one, not planning a menu and not keeping good inventory at home.
The solution: Create your list based on a meal plan and an accurate inventory of your pantry. Eat before you go to the store and be aware of psychological triggers such as a big empty cart, free samples and novelty item displays. Remember that these tricks are invented by marketers. The only way to beat them is to be aware of them.
If you buy a gallon jug of peanut butter, there is a much higher chance that it will spoil or that your family will become “burnt-out” before it can all be consumed. If you ultimately throw away a portion of the product, was it really a better value in the first place? The answer is likely “no” unless the value margin was very large.
The solution: While a non-perishable item may consistently be a good buy after determining the base value, take care not to buy more food than your household can reasonably consume. Another way to prevent waste is to split items with another family or to freeze a portion of the product, if possible.
When you find yourself confronted with the decision to join a warehouse club, give careful consideration to how much you will realistically use the membership. If you choose to become a member, realize that true saving is not achieved just by walking through the door. It will require careful calculations and cost comparison. If you are not organized or fall into any of the traps we have discussed so far, the membership will likely not pay off. Don’t be convinced by a club salesman that you will be able to do all your shopping at the warehouse and that the prices will always be better.
The solution: Find a group of items that you use frequently and are always a better deal at the warehouse when compared to a standard grocery store. Carefully plan your shopping trips so that you consistently purchase these items from the warehouse club, and double check that the savings over the course of a year on these items outweigh the costs of membership.
What do you think about warehouse clubs? Are there any items you have found are always a better value there than at a regular store or vise-versa? Let us know in the comments below!