This Family Used to Buy Everything on Amazon… Until They Did the Math
The way we shop for products and services continues to get faster and more convenient. Whether it’s calling an Uber or Lyft, using Instacart to get groceries delivered right to our doorsteps, or booking a restaurant reservation through OpenTable, nearly everything is now available instantaneously at the literal touch of a button.
This shift has dramatically changed the way I shop. As an avid Amazon customer, I ordered 162 items in 2016 — an average of more than three products a week.
My wife and I made the vast majority of our Amazon purchases from the mobile app as we noticed we were running out of items like shampoo and dish soap. In business terms, we were using a just-in-time inventory strategy for household items, where things arrived just as we needed them.
As working parents with two small children and a packed schedule, we loved Amazon as a quick and easy way to shop. But was this strategy cost-effective?
The Costs of Convenience
While Amazon certainly helped us save time, during my annual family budget review, I started wondering whether that came at a cost. To find out, I downloaded a spreadsheet of all the purchases we made last year from our Amazon account.
I quickly realized that in our quest for convenience, we had stopped paying attention to prices or comparison shopping and often put the first item in Amazon search results into our shopping cart. And because we usually waited until we had several items in our cart before placing orders, it was easy to overlook the price of individual items, which can fluctuate wildly day to day.
Most notably, I saw we sometimes overpaid by nearly 100% on common items. For example, on two occasions we paid $21 for a two-pack of mouthwash that costs $10.99 at Costco.
Because Amazon accounted for about two-thirds of the $1,200 we spent on household items in 2016, I figured I could cut these expenses.
To take control of our spending, I decided to start treating our household items like a business’s inventory. So over a long weekend, I created a new household inventory system that relies on planning instead of impulse buying. (Go to File and click Make a Copy to try it for yourself.)
While my inventory system is still a work in progress, here are the six steps I took to get it up and running.
1. Review All Annual Purchases
From my Amazon order history and my Mint account, which tracked credit card charges at places like Target and Walmart, I estimated we spent around $1,200 on household items in 2016. These goods fall into two broad categories: personal care items (toiletries, health and makeup) and supplies (kitchen, cleaning and miscellaneous).
Amazon accounted for more than $800 of those purchases, so my detailed online order history gave me a head start on creating an inventory spreadsheet with details of what we purchased, when we bought it and how much it cost.
I didn’t keep receipts from other stores, so some items were missing.
2. Audit Current Inventory
To ensure I accounted for those non-Amazon purchases in my master list of household items, I conducted an inventory audit of every cabinet in our kitchen, bathroom and laundry room. I added those items to the spreadsheet, along with my best guess at where we purchased them.
I also noted the size and quantity remaining for each item so I could plan what we needed to purchase in the first quarter.
3. Compare Prices and Quantities
Once I had our master inventory, I compared prices on each of the more than 60 items at Amazon, Target, Walmart, Aldi and Costco. I did this through a combination of web searches and in-store visits.
4. Estimate How Long Products Will Last
It was easy to accurately estimate how quickly we went through items we purchased multiple times on Amazon; I just had to look at the date when we ordered the next one.
Determining the inventory turnover for other items will take more tracking. But by the end of the year, I should have a ballpark estimate for how long each product lasts so I can better plan purchases in advance every quarter.
5. Plan Purchases Quarterly and Record Everything
Armed with quantity on hand and inventory-turnover estimates, I planned our purchases for the first quarter based on which items we were likely to need in the first three months of 2017. For each of those items, I did a quick price check at multiple retailer websites to see where I could get the best deal.
I entered each new item we bought into the spreadsheet with its purchase date, quantity, size, cost and store.
6. Revisit the Inventory Plan Every Quarter
We spent $236 in the first quarter. About 75% of that went toward bulk items at Costco, and we only spent $44 at Amazon. That put us $64 ahead of our budget compared to last year, and savings will likely accelerate each quarter.
I’m sure we’ll have a few unplanned purchases along the way, but we’ll use the inventory spreadsheet to plan most of our spending at the start of every quarter, filling in the details for future reference. Over time, we’ll perfect this household inventory system, eventually including almost every product we regularly use.
Based on my second-quarter inventory check, I estimate we will spend less than $150 between April and June. If the second half of the year mirrors the first, the total annual spend will be around $770, meaning my new system will save us about $430 in its first year.
Based on last year’s spending, I budgeted about $100 a month for household items this year, but I can already see we’re going to come in well under that number. Our pantry is now stocked, and we have more money in our pockets — and our Amazon shopping cart is empty.
Dave Parro is a writer and public relations executive who works with B2B technology clients that specialize in e-commerce, so he knows a lot how Amazon has changed consumer behavior. He’s on Twitter as @daveparro.