Starting a Bulk-Buying Co-op with Your Friends, Family, and Neighbors

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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.

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44 thoughts on “Starting a Bulk-Buying Co-op with Your Friends, Family, and Neighbors

  1. Trent -

    Interesting post. The only thing I wonder about is how often Sam’s or Costco revises their pricing… is there a chance that your pricebook would become quickly obsoleted?

    Kevin

  2. Do you actually do this?

    My family (we all live fairly close) splits items (toiletries, peanut butter, and meat)from warehouses.

  3. Another way to work this is to split the membership cost with another family member or members. I split my BJ’s membership with my friend. BJ’s did not care that we did not live together. This reduces my membership cost to $22.50. I have already made that money back in savings.

    You can add another card on to your memebership for $20 if I am not mistaken. Other warehouse stores may have different policies.

    D.B.

  4. Easy, if you’ve got extra room for all the stuff until you manage to get it distributed. In my tiny apartment, we’d have piles of food in bags in the corner of the living room for two weeks after each trip.

  5. “Do you actually do this?”

    Not formally, because we don’t have enough people locally who were interested in doing it (I did the prep work anyway, for my own price book research). Having said that, I do pick up items for friends sometimes and invite people to go along with me.

  6. Since there are six of us, buying stuff in bulk isn’t really a problem for us. I can see how this would be helpful for smaller families or for single people, though.

    I think I would feel a little funky about marking up the prices, though. Sometimes I pick stuff up for my mom at Costco, and I wouldn’t feel right charging her for that.

  7. Congratulations, you’ve taken a regular household chore and turned it into a part-time JOB (and borderline retail establishment) complete with income tax consequences, inventory control management, and accounts receivable. If it works out for you, more power to you. On paper it seems like it would be a good fit for me (since I live in an apartment complex), but after I thought about it for about thirty seconds, I thought of about 1000 reasons why it would never work.

  8. Trent, have you considered starting a meetup group (perhaps on another website, meetup charges money) to do this?

    Also, I have the more expensive costco membership. It’s $100 a year for two people, but I get either 1 or 2% cash back, so if I spend $1000 in a year (I will), my membership is free. I was surprised you didn’t mention that in your post. Plus, since you’d be spending other people’s money at the store, you’d be getting _paid_ to shop for them with 2% of their purchases.

  9. WAREHOUSE CLUBS ARE a fact of life where I live. Small grocery stores ONLY are within 15 miles with exorbitant prices. When you live so far away and SEE firsthand outrageous pricing–50 rolls of toilet paper does not seems so bad! I’m thankful to these clubs because with their prices, I can feed my family a MUCh higher quality of food than I would be able to at a CLOSE store. I go twice a month and because of that fact alone, I think we save even more MONEY!

  10. The whole markup thing seems a little hinky to me. I would have my membership and would be going to the store regardless of whether a friend wanted a few items. I couldn’t justify charging them extra.

    At Sam’s, you get a free spouse card. Sam’s doesn’t seem to care whether the cardholders are actually spouses, so for years now my mom has had my extra card. We pay for the membership on alternating years. It’s a nice way to split the membership without having to shop together all the time or exchange shopping lists.

  11. I’m not at all comfortable with the idea of charging ones friends or relatives by marking up the per unit cost.

    But my Eldest Daughter and son-in-law have a Costco card and I occasionally go with ED. I pay for my own stuff (and we’re in my car so I’m paying for the gas). But we could split a big package of toilet paper or paper towels.

    I just hate going there. It’s always crowded with long lines and it often costs more than I expected.

  12. At warehouse stores, I just buy what my family will eventually use. 36 TP rolls? It’ll get used up. The nice thing about buying items like these in bulk, is I’m not schlepping it to and from every week and am saving money. Works well with most dry goods-rice, pasta, etc. However, if I was single, the membership cost probably wouldn’t be much of a benefit, except for the non-food items. A better tactic for me would be to invite a single person on a shopping trip so they could have the opportunity to buy food or non-food items at a price that they’re not normally able to get otherwise.

    My beef with warehouse clubs is that I like to buy the generic version of many items. There are too many name brands and not enough generic choices. It’s not a bargain if a case of 24 canned goods is 84 cents a unit for the brand name at the warehouse club and 50 cents a unit for the generic version at the grocery store.

    A.M.B.A.

  13. The savings are compelling, but I’m not sure my wife or I want to allocate our attention toward the household needs of our friends, when it most likely would come at the expense of the responsibilities we already have (jobs, kids, etc.).

    Not to mention, it sounds like it has the potential to turn into a cash-flow problem, if friends don’t pay up immediately.

    Thanks for the post though, because I never would have considered it on my own.

  14. WOW, I’m chocked Trent. I have a Costco card and I’m single, so whenever I go to the store I call friends and family to see if they want something and then I SHARE with them, no mark ups on the prices! We are talking about FAMILY and FRIENDS, aren’t we? What happened to just help each other without having to make a buck all te time?

  15. Your idea doesn’t really sound like a Co-op, which is short for “cooperative.” It sounds like you will be doing all the work! In a traditional co-op everyone pitches in and does some of the work of ordering, collecting money, hosting meetings, portioning out 20 lb sacks of flour into smaller bags and so on.

    My parents belonged to a food co-op in the ’70s and the co-op meetings were really fun social events. Also, we bought directly from a distributor, not from a retail establishment like Costco.

  16. Aggh. I try my best to not support big boxes. The little groceries around me that the elderly depend on and that give my town a since of community are worth the extra nickel to me. I just keep track of the sales. Too bad the Midwest is turning into one big parking lot.
    -Happy in WNY

  17. The whole markup thing seems a little hinky to me. I would have my membership and would be going to the store regardless of whether a friend wanted a few items. I couldn’t justify charging them extra.

    MES @ 5:41 pm August 22nd, 2008 (comment #11)

    Let’s look at it from another perspective. Let’s say a friend of mine comes to me asking me if he can help me buy my groceries and deliver to my doorstep while selling it at a cheaper price than if i went down to the nearby grocer. I get convenience and savings all at the same time.

    So long as the seller/friend is upfront on his markups and provides the comparisons for me, I am more than happy to free up my own time to do the things I want to do. Trust and transparency are key in this arrangement.

    This is pretty much the business model for small provision shops. They buy in bulk from the warehouse/supplier, split into smaller lots and mark up the price. Except in this case, you secure your customers before you even get the merchandise.

  18. while this wouldn’t work for me i think that this post raises some issues worth thinking about. it is one way to save money by offering a service to friends and family. i am very curious if this is permissible under the terms of a sam’s club or costco membership? are you allowed to buy products there and resell them at a mark up to people who aren’t members?

  19. I love Sam’s Club! I find that Aldi or Wal-Mart generic oatmeal variety packs are significantly cheaper than Sam’s’ Quaker Oats, but you can’t beat Sam’s’ price on diapers, even with sales and coupons. I also got baby formula there when I needed it, in much larger containers and at better prices than Wal-Mart. Not everything will be cheaper, but the things that are cheaper tend to be things that you will use eventually anyway, and are worth the space they take up. I also split the cost of the membership with my sister and, before we moved away, we always went together to shop. If something was just too big or too much, we usually split it.

  20. If you are organizing the trip, driving, putting miles on your car, paying for gas, plus all the effort of making a grocery “menu” with prices, plus taking the time to call them before you go, and then giving them substantially cheaper groceries I don’t see anything wrong with the arrangement. Trent is talking about a markup of 5 cents, he even mentions maybe just a few pennies on cheaper items. I think it’s well worth the convenience when all I have to do is answer the phone and say “yes” when my friend offers to shop for me :)

  21. The problem that I see with this is it would not work everywhere, in Utah we have just about every 3-4 months the local major grocery stores have a case lot sale in one form or another. So most people here tend to buy in bulk, if they can afford to at the time.

  22. My warehouse is closer to my job than my house so this is easy. We, co-workers and I, share coupon booklets from Costco and split items. I need the pull-ups coupons and I have a co-worker that wants the cleaning supplies. It works for us…cheap lunch too!

  23. i can totally see rounding the prices up- especially to make the math easier- yikes!!

    costco is an excellent company- they pay good wages, have benefits, visit the farms they purchase from to make certain working conditions are good- i love costco. they’re the anti walmart.

    from what i’ve read, even though they pay workers more, their labor costs are lower because they have very low turnover, so they have to invest less money on training a constant influx of new employees.

    anyway…i often pick things up for friends at work, but i never did a formal items list.

    and we just bought a house- before we contacted a real estate agent, we used the costco referral service- so we got a $100 gift card, and then an almost $1500 rebate check because the lender was part of the referral too. our mortgage was just shy of $225,000.

    my membership was free anyway- i do the $100 annual membership which gives back 2% on each purchase. you can get 3% if you get an amex card, but i don’t want to. anyway, my yearly purchases are high enough so my annual rebate always pays for the next year’s membership.

    but that gift card and rebate check were such a huge blessing- and they referred us to a century 21 real estate agent who was fantastic, and our mortgage guy was great too.

    i could say it is like getting a free lifetime membership, but our membership really already works out to being free.

    back before, when i was a single mom of just one child a friend and i used to go and park next to each other and then split things up as we were packing the trunks of our cars.

    now i have a larger family, and my little boy is now a ravenous teenager, so we can just shop for ourselves if we have to.

  24. while this is definitely a way to make extra cash, it’s also illegal. Even if you don’t charge a penny extra to your friends, not only are most of the packages marked “not for resale” but the agreement you sign when buying the membership says you will not use the purchases for resale or commercial means. That’s why these big box retailers have special(more expensive) business memberships. And just because we all know people who resell stuff from costco, from neighbors following this plan to the corner coffee shop selling muffins at a mark up, that doesn’t make it right. Even if you don’t make a penny — or even sell the products at a loss, it is still considered resale and it is still illegal. Hate to take away the punch bowl just as the party is getting started…

  25. 4-pack of toilet paper at Sam’s Club is $1.88 (or 47 cents a roll)

    HA it’s cheaper over here 30 cents a double roll :)

  26. If you mark it up shouldn’t you be keeping track of your “profits” and paying taxes on them?

    On the other hand you could probably also write off some expenses…

  27. i am very curious if this is permissible under the terms of a sam’s club or costco membership? are you allowed to buy products there and resell them at a mark up to people who aren’t members?

    A number of the people you see at Costco are the proprietors of small corner groceries. You didn’t think the guy with a cart full of 6 different brands of smokes was really going to use them himself did you?

  28. I think this whole thing is rather silly and it wouldn’t be anything that I would ever take part in….but…just for laughs, you forgot to consider the “free meal” that you can consume while you are there…. with all the free samples…..hahaha.

  29. Why not form a real co-op and order the items direct from the wholesaler, thereby not paying a membership fee at all?

  30. #14 Hi Dave, I did just that during my collage years. 14m2 room and build a armchair , table, stools with boxes of different items. and when a box was removed the time for rearranging the “furnitures” made variation during the semester…

  31. There is nothing in the Costco Terms of Service that would prevent you from doing this. I would be more curious about the legal implications of doing this.

  32. @Karl – I can’t see a reason there would be a problem. What you do with items you purchase is your own business. And anything that improves sales for Costco or Sams benefits them!

  33. I don’t think I would mark up the prices: I would either ask for a flat $3 for gas, or I would just settle for the benefits of increased cash flow through a credit card that offers spending rewards. (Though I know at least one of mine does not offer rewards when you buy at a club/warehouse)

  34. Well, if you get the business membership they assume you will be selling the stuff, and a lot of it is marked for resale. Technically though I think you should be paying taxes on your income, and a lot of the stuff that I would really want to split up (50lb bag of popcorn, giant sack of rice, etc.) is definitely not set up for resale as is, it is meant for foodservice. I suppose you would be looking at probably breaking some rules here or there if you set it up as a business this way.
    Why not find a few friends and get the “spouse” card and then either take turns buying large items that both families use or pay halfsies to begin with. Seems like much less potential issues, although I doubt you’d get caught running this small business unless you started making a huge amount of money, not the tens of dollars a year I suppose you could expect from this venture.

  35. We did something similar to this when the children were younger and all at home. There was a local supplier for health food stores who would help set up group co-ops. All deliveries were made to one family and we would go break things down, perhaps splitting a 50 lb bag of oatmeal between 5 families, or something similar. Beyond the obvious benefits of buying bulk organic products and saving money, we had a community who gathered together for an evening every two weeks, which was priceless.

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