Buying Bulk: The “New” Investment Strategy

By , May 30, 2013

On the news this morning, I was a bit shocked to hear someone advocating a new investment strategy: buying bulk. The person being interviewed pointed out that buying the items one always needs, in large amounts, represents a better savings, and thus “investment income” than any financial investment scheme available.

We have always bought in bulk whenever possible. We do it for a variety of reasons. Being blessed as sound financial strategy just sweetens it for us.

I hear you saying it (so many people do): “Shopping at Costco is ridiculous—I don’t need to buy a case of [name any consumer product] at a time!” This often-heard opinion may get a laugh in comedy clubs and cocktail parties, but it indicates to me that the speaker has done very little critical thinking about the state of our world. Modern society has become a hostage to the concept of just-in-time supply. Bulk suppliers such as Costco and, most likely, your local grocery store (just ask!) offer a buffer against that potentially catastrophic practice.

I admit that storage can be an issue for those who buy necessaries in bulk, particularly for urban apartment dwellers. Many families simply don’t have room to store goods until they’re needed. I address this in Finding Storage Space for Bulk Purchases.

bulkpacking

Michelle prepares to haul bulk goods over the trail (Photo: Mark Zeiger).

The trade off to crowded storage is economy and security. In almost all cases (as it were) bulk buying reduces the per-item cost of goods. As a general rule, the more packaging involved, the more a consumer pays for the product. Three 10-pound bags of flour will almost always cost more than one 30-pound bag.

Therefore, buying any commodity that your family uses regularly in bulk will save you money over the long run. Why buy a single roll of toilet paper at a time, or a pack of six, if you can manage to store a package of 36 or more? You’ll certainly need that paper soon enough. Even shaving a few pennies off each roll will save money before long.

Perhaps more importantly, buying in bulk provides security—and not just financial security.

Just-in-time supply delivers goods to consumers as needed. Instead of storing goods in a warehouse until they’re sold, the products are delivered from the factory a bit at a time. Apparently, it improves the corporate bottom line, so it tends to be presented as the best, most logical way to get goods into consumers’ hands. Inevitably, what works best for the corporations becomes the only way to do it, in “common knowledge.”

However, just-in-time supply operates on the assumption that everything will go as planned. It assumes the exact number of sales units consumers need will be produced by the factory, or farm, or wherever it comes from. It assumes that these will be delivered over roads, or rails, by sea or by air on schedule, unhindered by weather, landslides, earthquakes, traffic snarls, potholes, or myriad other conditions. It assumes that consumers will promptly buy all the available units immediately, to make room for the next shipment, which will also arrive “just in time.”

Generally, these are safe assumptions. More often than not, things go as expected.

But not always.

Two winters ago, the west coast experienced an unusually severe snowstorm. The I-5 corridor, including Seattle, Washington, Portland, Oregon, and points beyond shut down. Snow restricted road travel; ice- and snow-laden trees and power lines fell, causing power outages. The just-in-time supply line, bringing food and other commodities, and power, began to fail.

Aly’s college, within the I-5 corridor, closed down. The school’s commissaries remained open, but quickly ran out of fresh food. Suppliers couldn’t get new food into the campus, and with power disruption, what fresh food they had on hand quickly spoiled.

These conditions meant very little to Aly (see The World Turned Upside Down). Her life on the homestead prepared her for it. She and her roommate had plenty of food, and means to prepare it in their room. They improvised solutions when the power went out. All in all, they had a great time—Aly’s only regret was missing out on class, and that things never got bad enough for her to use her pocket wood stove!

We are seeing a sharp increase in obstacles to just-in-time supply. Our infrastructure is crumbling through neglect and lack of funding (did you read about the I-5 bridge collapse north of Seattle recently?). Severe weather conditions are becoming more common. Expediters in the just-in-time chain are disappearing because of economic troubles and mismanagement. There’s very little most individuals can do about this, but one simple way to create a buffer for your family is to buy in quantity from those “ridiculous” bulk suppliers. On top of all that, as we learned this morning, it may be a sound financial strategy.

4 Responses to “Buying Bulk: The “New” Investment Strategy”

  1. Judy says:

    To add some humor to buying items in bulk, one needs to be sure he/she is familiar with the product brand being purchased in quantity, such as, whether the toilet tissue is single or double ply sheets per roll, and whether the perforation line makes it easy to disengage each sheet in a square, and/or whether the quality of the sheets themselves are sand-paper grade or Puff smooth… or else the last 35 rolls might be considered a “poor” buy. How many times have you thought you were buying exactly the same brand’s 36-roll package when in fact it is labeled “new,” “softer,” or even “biodegradable” to suddenly find out the product is NOT the same as purchased beforehand. (But I will agree any toilet tissue bought off the shelf beats tearing up Sears catalog pages for the same use.)

  2. Astrid says:

    As for you, for us it is normal too, to buy bulk.
    But if you look back..I mean 100 years back, it was normal, not only buy bulk, but also prepare a year ahead.
    And we still do, we butcher in the fall, end up with enough meat, that will get us through the winter, we can and freeze veggies, store a huge supply of potatoes.
    Get a huge amount of animal food in, fill our grain hopper, with enough food for all my goats and chickens.
    Can you imagine if I have to buy that in small amounts every week? that would be more than a full time job, it is not only cheaper to buy bulk, but saves me a lot of time also.

  3. Mark Zeiger says:

    Yours must be a much bigger operation than ours, Astrid.

  4. Mark Zeiger says:

    Hi Judy, excellent point! Bulk packaging is not the only, or even the prime consideration. You need to know and trust the product before buying it in bulk!

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