Starting a Bulk-Buying Co-op

Good Times at CostCo by Orin Optiglot at Flickr!One of the biggest knocks against warehouse stores like Sam’s Club and Costco is that you have to buy many items in large bulk quantities. The price per unit is low, but what exactly are you going to do with 36 rolls of toilet paper? While I personally don’t mind this (we have a ton of closet space we use for this), such bulk makes shopping at those places really inconvenient for some people.

The solution, often suggested in personal finance books, is to start a bulk-buying co-operative with family and friends. If you go in four ways on a jumbo package of toilet paper, for example, splitting the cost four ways as well as splitting the rolls four ways, you can all save significant money on the purchase. Do this often enough with most of your staples and you’ll save significant money and get higher quality items.

The only problem with that is such books never tell you how to get one started. For me at least, the idea of starting a bulk buying co-operative seemed a lot like herding cats - a lot of work without a whole lot of reward.

The truth is that it’s not actually that hard at all. You just need to do some up-front planning yourself to make it work.

This seems like a lot of work just to save a little money… It’s not really much additional effort at all once you’ve got the prices down, and the savings really add up. Here’s a brief example to show what I mean.

At Sam’s Club, I can get a 36 pack of Quilted Northern toilet paper for $16.88, and I can also get a 55 count variety pack of instant oatmeal for $10.28. Alternately, our local grocery store sells a 4 pack of Quilted Northern for $3.29 and a 10 count oatmeal variety pack for $3.99.

So, let’s break down the Sam’s Club price into packages equivalent to the store. The cost per 4-pack of toilet paper at Sam’s Club is $1.88, versus $3.29 at the local grocery store. The cost per 10-pack of oatmeal is $1.87 versus $3.99 at the grocery store.

So, I just adjust the prices up a bit to still keep them way lower than the grocery store, but help cover my costs and effort. I write down $2.25 for the toilet paper on my price list, and $2.50 for the oatmeal variety pack. I pocket $0.37 each time someone wants me to grab toilet paper for them, and pocket $0.63 each time someone asks me to get a variety pack of oatmeal for them. Each time. And that’s just two items.

Let’s say two different people want two boxes each of the oatmeal variety packs, and four people each want two packages of toilet paper. You buy one big box of oatmeal variety packs at $10.28, divide that into four boxes of 10 packs each, and there’s 15 left over. You charge them each $2.50 for those oatmeal pack boxes, leaving you with 15 packs that cost you a total of $0.28. You divvy up the toilet paper, getting rid of eight four-packs packs at $2.25 a pop, leaving you with four rolls for free and pocket $1.12. Overall, you have almost a dollar in your pocket you didn’t have before, plus fifteen packets of oatmeal for breakfast and four rolls of toilet paper. All for the effort of ringing a few friends before you go.

Given that you can do lots of these on just a single warehouse trip, it’s easy to see how it can drastically reduce your personal household shopping bill and help your friends out, too, by getting them cheaper stuff.

Here’s the game plan for making a bulk-buying co-operative work with your family and friends.

Get a membership for yourself. If you’re the one with the initiative to make a bulk-buying cooperative work, you’ll have to step up to the plate and get that membership for yourself. Go visit your local warehouse store and put up the money for the membership. Don’t worry - if you follow the rest of these steps, you’ll recoup that cost and much more over the course of a year.

Create a detailed pricebook of everything you’d buy there. This will be your biggest time investment. Go through the store and make a big list of all of the items you might buy - or items you know that someone else would buy. Write down the quantity and price of the items in a notebook. If someone asks you what you’re doing, just flat-out tell them you’re making a price book to help you with your shopping later on.

This doesn’t take as long as you might think, and isn’t as boring, either. When I attempted to make a pricebook in a warehouse store a while back, it took me about two hours and pointed out several big, useful bargains to me along the way. I also got a nice, healthy load of shopping out of the way, too.

Break that pricebook down into cost per unit. Once you get the pricebook home, break down the pricebook entries into reasonable units. For example, if you can buy a three-pack of Aquafresh, divide that cost by three to get the actual cost per tube. If you’ve spotted a 36-roll jumbo pack of toilet paper, divide that by nine to get the cost per four-pack. Make sure you include sales tax in the adjustments, of course - non-food items need to have the sales tax cost added on.

Add a small amount to each unit to cover your own risk. Once you’ve divided things up, add a bit to each smaller item to cover your own risk, time, and effort. Add a nickel to each item, perhaps, or just a penny or two to the cheaper items. This basically helps pay for your time, your membership, and your risk (in the event that someone doesn’t pay for the items). The extra pennies and nickels will first pay for your membership, then later help you get your own items for much cheaper.

Then, create a flyer listing the prices per unit of each of the items. Once you’ve figured out that final per-unit cost for each item, make a flyer for the items and give a copy to your family and friends, just so they can use it on their own. They can take the flyer to the grocery store with them, see that the warehouse prices are cheaper, and will then be willing to give you the money to pick up the items.

Keep the number reasonably low - 5 to 10 “partners”. Don’t invite so many people that you’re burning tons of time managing the co-operative - keep the number low. Focus on people you actually trust and who are interested in saving money. If you get much beyond ten members, you’ll end up wasting a lot of time.

Whenever you’re planning a trip, give some of them a ring. I usually go to Sam’s Club once every two weeks or so. When I’m getting ready to go, I’ll give some of my friends a ring and ask if they need me to pick anything up for them, since I’m already going. Invite those friends to go along, too, until you find someone who will go along as a “shopping buddy.” Jot down the items they want on your list and then pick them up - let them know that you may buy them two or three units of the item, depending on how many people want it. Then, when you get home, just divide the stuff up into sacks for each person, total up what they owe you, and let it sit until the next time you see them. Easy as pie.

Good luck setting up a bulk-buying co-op. It can not only save you money, but can actually put some pennies in your pocket and help your friends with surprisingly little effort.


The Simple Dollar chronicles a man's road to recovery from "total financial meltdown." As author Trent Hamm puts it, "The Simple Dollar is a blog for those of us who need both cents and sense: people fighting debt and bad spending habits while building a financially secure future and still affording a latte or two." We'll post a couple of entries a week, but you can check out his writing daily at www.thesimpledollar.com

 

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joeAnne
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joeAnne 11/27/08 - 06:33 pm
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It seems logical to me. If

It seems logical to me. If you want sure results in what you are doing then you must do whatever it take to make this possible. I am sure that you can handle it if you do what it says.

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