Economy Wars I: Bulk Vs. Tingi (Retail)

by Seph Romana

When I was a kid, which was like 10 years ago (kidding!), I would accompany my mom to the public market to buy food for the week ahead.  One of the most memorable things about such times was when she would negotiate for lower prices – “tawad” in local speak.  Most vendors she’d negotiate with would meet her in the middle – discounted price for bigger or larger orders.  Deal or no deal?  Deal!

As an adult, I have learned to love Divisoria.  For someone who hardly ever goes shopping, I’d say Divisoria – Divi as it’s fondly called – is heaven on earth.  The clothes I get from the malls, I get from Divi at half the price.  But there’s a catch – many of the shirts I love buying come in packs of six at the minimum.  Less than that, no deal.

I also love one big discount store here in the South – the Las Pinas-Alabang area.  I love it primarily for the pizza but things there are cheaper on a per-unit basis.  The catch is, I have to buy in bulk.

From the palengkes to Divi to air-conditioned discount stores – there’s one thing that stands out.  And that one thing is many – it’s bulk buying.

If you can buy 6 shirts at Divi for Php 900 only (Php 150 per piece) instead of only Php 300 per piece at the malls, do you really save money or not?  If you can buy your favorite shampoo at Php 100 per bottle in one regular grocery store but for only Php 90 per bottle for a pack of 6, is it really a steal?  If you buy 3 pairs of shoes for the price of 2, do you really save if you buy just 1 pair?  In other words, is “the more, the merrier”?

Well, it depends.

THE MORE, THE MERRIER

Buying things that you regularly use or consume with bulk discounts is indeed merrier.  Why?  Apart from the fact that most stuff sold in bulk comes out cheaper per unit, you are actually going to buy them later on, regardless.  What I mean is that if a particular item is something that you will actually use repeatedly in the future, buying in bulk is indeed “the more, the merrier.”

For example, my wife and I went to a buy her usual beauty kit supplies.  One of them, a famous brand of moisturizer, was on sale at a 37% discount.  Given that this happens once in a blue moon, I encouraged her to buy at least 3 of them.  At first, she hesitated because it seems that we’ll spend more instead of getting just one.  I explained that since she’s going to buy the same thing again a month from now might as well buy 2 more because by then, it might sell at regular price and that the expiration date’s more than a year from now.  Hence, we bought 3 of bottles of the moisturizer.

THE MORE AIN’T THE MERRIER

Buying more doesn’t necessarily translate to savings because while you may save money per unit, you’ll end up spending unnecessarily more.  Take for example my shirts.

One time, I went to Divi and saw that collared shirts were at least 50% cheaper in many of the wholesale stores.  At that time, I only needed 2 more collared shirts, which would’ve cost me only Php 600 at the mall near home.  But since I was enamored by the huge discount, paying only PHP 150 per shirt, I lost all sense of self-control and bought 6 pieces, the minimum number to get the wholesale price.  It cost me Php 900.  After sobriety returned and sensibility was back in its rightful place, I realized I really didn’t save money – I actually spent more.

You may argue that the same 6 pieces of shirt could’ve cost me Php 1,800 at the mall so technically, I saved Php 900!  Buzzzz…wrong!  Since I only needed 2 more shirts, I could’ve just spent Php 600 instead of Php 900 – a Php 300 difference.  It’s not a matter of more bang for the buck here.  It’s a matter of less buck for the needed bang only.

And that’s how many people end up going bankrupt – trying to take advantage of “deals” they really don’t need.  Buying that blouse that you really didn’t plan to buy or budgeted for at 50% off didn’t save you 50%.  It cost you 100%!  Why?  Because you didn’t need it or planned for it in the first place and by buying it, you spent 100% more!  Well, arithmetically that’s not right because you know, 100 divided by 0 is an error – but you get what I mean, eh?

Going back to the “tawad” mode in the palengke.  If a kilo of pork is only Php 150 and I only need 1 kilo to feed my family for 1 whole day, would it make sense to take on the offer of the vendor to buy 1.5 kilos at only Php 140?  No, because I’ll actually spend Php 210 for the 1.5 kilos at the discounted price instead of sticking to my budgeted 1 kilo at the regular price of Php 150.

AND THE WINNER IS:  IT’S A DRAW!

Buying in bulk wins over buying retail and helps you save money if the items in question are those that you regularly use and provided that your consumption stays the same.  If you don’t regularly use such items, you’ll just end up spending more for things you don’t need.  Even if you use such items regularly but if buying in bulk actually makes you or your family consume more of them unnecessarily, buying in bulk is trumped by buying retail.

Buying in retail works best when buying things you don’t regularly need to buy or consume, such as shoes, bags and cellphones.  It also wins over buying in bulk even if the items concerned are something your regularly need to buy or consume when buying in bulk tends to make you or your family unconsciously and unnecessarily consume more of such items.

So for the first round of economy wars – it’s a draw!

___________________

Joseph Romana, a.k.a. Seph to his friends, is the former President of Angat Pilipinas Coalition for Financial Literacy. He graduated from De La Salle University with a bachelor’s degree in Management of Financial Institutions and finished his MBA at the Pamantasan Ng Lungsod Ng Maynila early this year. Prior to becoming a full-time writer, he was a former bank examiner for a government regulatory body, a market and liquidity risk officer for one of the country’s largest universal banks, a treasury fixed income trader for another universal bank and a licensed stock broker at the Philippine Stock Exchange (PSE). For Seph’s other writings, you can check out his website sephromana.com. You can also reach him at practicalministries@gmail.com

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