The Economics of Milk Delivery

Today, the Wall Street Journal’s Cranky Consumer column tackled the growing industry of milk delivery. Actually a very old-fashioned industry, the milkman is staging a comeback as consumers become more interested in organic products, and in purchasing the wares of local farms. The Cranky Consumer columnists quite liked the experience, writing that “there is a sense of comfort in knowing that as many old rituals disappear, the milkman is still around.”

I like the idea for a different reason — getting milk delivered is more efficient and can actually save you money.

I know this is hard to believe, at least on the money front. When I was writing 168 Hours, one woman mentioned that she had her milk delivered. I looked it up and was rather surprised by the prices charged by, say $4.99 for a quart? Really? (To be fair, some other services charge much less — the Manhattan milk is straight from Amish farms in Pennsylvania, and practically still mooing).

But the more I thought about it, the more I could see that she had a point. Buying milk is one of those activities for which the economics and time involved in theory are much different than those seen in the real world.

Here’s what happens: Families with lots of kids go through a lot of milk. It’s most efficient to grocery shop from a list (either in person or on-line) once per week. The problem is that while milk can last 7 days, it doesn’t always last 7 days well. Plus, use is variable, and since it goes bad, you seldom buy more than you need on your weekly grocery shopping trip. Net result is that many families run out of milk at some point during the week. So it’s a common occurrence for one person to run an errand (perhaps on the way home from work) to pick up milk on, say, Thursday. But making a grocery shopping trip during rush hour, especially for one item, is about the least efficient move you can make from a time perspective.

On some level, people know this. So — perhaps to make the experience more efficient in their own minds — they don’t just buy milk. They’ll buy a basketful of other groceries that they might use, plus whatever looks nice on an end cap display, a copy of People magazine, etc. None of this stuff is really necessary. If it was, it would be on the weekly list! While the gallon of milk only costs a few dollars, it’s hard to get out of the store without spending $20. Particularly if you’re hungry. I am a sucker for the aroma of rotisserie chickens.

If you get your milk delivered in the middle of the week, however, you’ll save time (which is worth something right there) and you may save money, since the only thing you’ll be paying for is the milk. Even if the milk costs $15 a gallon you still might be coming out ahead!

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