There is an economic term, “economies of scale,” which is usually applied to manufacturing. What it means is that it’s cheaper by the dozen; well, perhaps not by the dozen, but by purchasing in bulk, the unit price diminishes.

Since we are truly no longer a manufacturing economy in America, let’s apply “economies of scale” to the consumer side of economics. For the last several years, we’ve grown fond of purchasing in very large volumes. Go to Sam’s Warehouse, or any other big box retail “club” and you’ll see mayonnaise jars for sale that you would normally see in an elementary school cafeteria. Really, does a family of four use that much mayonnaise before it expires?

However, today consumers are shifting gears and realizing they really don’t need all that product, or stuff, or whatever you want to call it. People are wising-up to the fact they don’t need to horde all that food. Okay, so you save 25% on something because you’ve bought a large volume, but in the end, you throw away 30% of it. Have you really saved any money? Plus, since you purchased it in 2005 and bought enough to last a lifetime, you are still using it, and that means it’s not as potent, or fresh, or whatever as when you purchased it half a decade ago. Oh, yeah, in this economy you feel like to have to continue using it, or you’re wasting money.

I read in the Wall Street Journal that consumers are keeping more of their cash by buying less and buying more frequently. So, manufacturers are beginning to repackage products in smaller sizes; from Proctor and Gamble to Del Monte, manufacturers are reducing the sizes of items they sell.

Not only are consumers not buying as much in bulk, but they have also cut down in other ways. SymphonyIRI, a market research firm, says the number of items kept in American pantries has fallen 20%. Additionally, according to their survey, consumers are also cutting back on the range of goods in the house; in 2006 Americans kept 404 unique goods, compared to only 369 this year. Okay, while that may not be very interesting, think about this: perhaps we don’t need to buy those huge homes any more because we aren’t storing as much.

The article further stated during this holiday season, according to Thom Blischok, President of global innovation and strategy for SymphonyIRI, “There’s going to be a pause before purchase: consumers will ask themselves, “Do I really need this, can I really afford this?”

Hmmm...perhaps this question is one we should have been asking for years.

CategoriesSaving Money