Will Stockpiling Save You Money?
Kelli B. Grant / SmartMoney
After watching the price of boxed pasta climb 70% over the last six months, Kelly Moore decided to take radical action. When her local grocery chain put the boxes on sale for 16 cents each, the Whitmore, Mass., mother of three bought 50 – six months worth. Savings: $72, at the cost of a few shelves in the basement pantry.
Although experts say it’s risky, many consumers have reacted to rising prices by stocking up. It’s a hard trend to track, but enthusiastic stockpilers have been sharing more strategies on shopping sites like The Grocery Game , FatWallet and Frugal Village since the first notable round of price increases came through in September. Wholesale clubs, like BJs and Costco have reported rising sales and traffic, which analysts attribute in part to consumers buying extra. And during the holidays, surveys indicated shoppers were buying for themselves as well as others, both to take advantage of sales and to ward off higher prices in the future, says Jeff Green, an independent retail consultant.
It’s an expected reaction, says Richard Ebeling, a professor of economics at Northwood University in Midland, Mich. Consumers naturally stock up when they fear a shortage – think milk, snowstorm – or when rising prices push the boundaries of their budgets. The headlines have been screaming about rising commodities prices and food shortages for months, and retailers from Macy’s to McDonald’s have announced higher prices in the spring. The price of coffee has doubled in the last year, cotton is 80% higher than it was six months ago, and in January alone chocolate jumped 15%.
Even so, the price tags may not end up as shocking as consumers fear. Economists expect inflation to be about 2.5% this year, an increase from last year’s 1.4%, but still fairly low. Companies’ own stockpiles of raw materials, and a reluctance to pass on all of their increased costs to consumers still struggling from the recession, means that many prices won’t go up before August — and then, they may not go up by much, says Adrienne Tennant, a retail analyst at investment bank Janney Montgomery Scott.
There’s also an unintended consequence of stockpiling, says David Bell, a professor of marketing at the University of Pennsylvania’s Wharton School of Business: You’ll actually end up using more of what you’ve stockpiled than you would otherwise. In theory, doubling the number of soda cases bought would result in a supply that lasts twice as long, but it’s more likely that you’ll go through it faster, or simply be less frugal about its use with extra on hand. You could even end up throwing out food that expires, rejecting out-of-fashion items, or simply forgetting about the cans of corn stashed behind the hats and mittens in the basement.
Still, buying before prices rise can be smart – in small doses. Most supermarket and drugstore items go on sale just once every 10 to 12 weeks, says Teri Gault, founder of The Grocery Game. If you’re loyal to a certain brand, buying extra when you spot a sale is smarter than paying full price the following week when you’re actually out. On fashion, retailers sneak in bigger price increases on trend items because consumers can’t easily monitor cost like they do for wardrobe staples such as trousers and T-shirts, says Tennant. Many of those items are available now at end-of-season clearances, and can be picked up for a song. And avoiding hyped-up eBay prices on discontinued items by stocking up is usually a sound strategy, too.
Ultimately, the decision may come down to cash flow. If charging six months worth of dry goods means paying extra interest charges on credit card debt, it’s not worth the savings, says Randy Allen, an associate dean for The Johnson School at Cornell University. If not, then the savings may be more welcome. Moore says the money she has saved stocking up helps her better budget for other expenses… like the brand-name jeans her middle-schooler is sure to want for back-to-school.