Who Decides On Package Size For Warehouse Stores?

Everyone knows the warehouse clubs have large, almost ridiculous, package sizes – buying in bulk is part of the economy-of-scale for both store and buyer, and I get that. But – who is making the call as to what the unit size is?

I ask because at least from my perspective, there’s some inconsistency as to the how-much-bigger (or, “Is that just too ridiculously big a quantity for me to use?”) determination.

Now, I get too that some of this is dependent on what you’re buying it for. If it’s for your neighborhood cafe (warehouse stores are extremely popular with small business/restaurant owners who aren’t quite big enough to use wholesale distributors), a bundle of two 128 ounce bottles of dish soap makes sense. If you’ve got a Mormon family of nine to feed, two gallons of milk is nothing. But for me, with a much smaller household, I get that some of the unit sizes just aren’t meant for the likes of me – what I don’t totally get is why some are. A sixty ounce thing of almonds? I snack here and there at work, co-workers know I have them and are welcome to take some, I get through the jar in not that long a time. Two dozen eggs? My ex and I could go through that in a week (we did like our eggs). 40 ounces of shampoo? That’s only about 1.75 times the size of a regular big bottle.

So – and given that I know these places are not run by dummies, given that they make money with super-low prices – who decides which products are sold in a big unit size, and which sold in a really really big, too big for one person ever to think about buying, size? I know the warehouses, which account for huge percentages of some manufacturers’ sales volumes, have a lot of say in product lines – so I am assuming this is not just random decisions by different manufacturers. And what’s the rationale behind it?

Don’t assume everything at those stores are super low prices. They really want you to think that.

My family was in the restaurant business when I was a kid and I noticed that some of the stuff we bought commercially ended up in these warehouse stores. So the rational is for commercial buyers not home buyers, such as yourself. Almonds, for instance, hold forever so a big bag makes sense for a restaurant or cafeteria. A small shop may only need to buy almonds weekly, but for your home its overkill. The home buyer is an afterthought for a lot of these products. They’re tooled to max 60oz bags of almonds not 25 or 30. Theyre not going to retool everything just because you dont like it.

I have not worked as a buyer for a warehouse store, but I have worked for one. Although I am sure many factors determined the package size of items, there were at least three things I noticed that came into play when determining SKUs (not always relevant to grocery items):

  1. Price point. They often wanted items that sold for $10, $20, $50 or whatever regardless of quantity. If research said people would be willing to spend $20 on almonds, then they would sell a $20 bag of almonds. There were always price tiers that they were trying to hit.

  2. Non-competitiveness. It was highly undesirable to stock a product that was commonly available at retail outlets in a particular size or quantity. Items would always have to be either larger, only be sold in multi-packs, or only sold bundled with other products. I imagine that this was done to minimize price comparisons.

  3. Working around fixed prices. To prevent eroding their brand, some manufacturers prevent you from selling their goods below a certain set price. That can be circumvented somewhat by creating bundles with other products.

When I worked in a hotel, my office was next to the sale department and a lot of the sales managers would go to warehouses and buy huge things to keep on their desks in their offices as they had clients come in and out.

People would by York Pepperming Patties, Nuts, etc.

So there are a lot of uses for them. I think smaller offices are ideal for that. We used to go buy Coke or whatever pop and charge cost in one office I worked at. It worked out good.

My issue with those places is whenever I buy a lot of something I’ll just eat the box whether I want to or not. :slight_smile:

Once upon a time, I worked for a large consumer products company. They had a sales division that focused on sales to restaurants, hotels, etc. They also did sales to the military. In the eighties this also became a conduit for sales to these “membership warehouse”. Originally the membership warehouse business was focused on selling to smaller retail outlets. You couldn’t just walk in and become a member, you had to have some connection, even if tenuous, with a group that was allowed membership (like a credit union) or show that you owned a business (by presenting a tax ID). I think the main reason for this was so that the traditional retail chains wouldn’t freak out.

Now, of course, the Membership Clubs (Sam’s, Costco, BJs, etc) have all become a distinct retail segment that is still used by mom and pop businesses, but I would guess does more business selling to Americans who like to buy mass quantities - similar to the Coneheads.