It’s expensive to be poor.
A study from the University of Michigan is providing more evidence that low-income households are less able to take advantage of deals and saving opportunities, reports Michigan Radio.
The nearly-completed study indicates that poorer consumers are often stuck buying products at higher prices because they lack the resources to buy in bulk or wait for sales.
When low-income households have cash on hand (right after pay day, for example), they shop efficiently. However, poorer shoppers often find themselves in a vicious cycle of paying more for necessities, then lacking the finances to buy the same items on sale or in greater quantity.
Take toilet paper. The ideal situation is buying in bulk — even if that means spending more money at a single point in time. However, lower-income consumers often don’t have the money to buy bulk. And, when you need toilet paper, there isn’t much of an option except to go out and buy some, no matter the cost.
Lower-income shoppers provide an important customer base for bargain retailers, as they are seeking low prices but often ironically willing to pay more than more affluent consumers.
“These customers are actually pretty profitable, because, as our study shows, they pay more than middle-income consumers do at a per-unit base,” Yesim Orhun, a professor at the Ross School of Business, told Michigan Radio.
Consumers are eager for deals, as discount retailers beat out full-price counterparts. One in six Walmart customers received food stamps in 2013, with an estimated average household income of $40,000 or less.
However, in retail, many of these bargains aren’t accessible to those who need them most.
The rise of ecommerce has created a retail environment focused on creating deals — for online shoppers. Online shoppers tend to be more affluent, with 55% of ecommerce shoppers living in households with incomes greater than $75,000.
Then, there’s vast evidence outside of the University of Michigan study that lower-income consumers are unable to take advantage of retailers’ deals.
Lower-income households have to spend more time and money on average to get to supermarkets or retailers selling lower-priced necessities. Even if these households have the option to buy groceries in bulk, it is meaningless if they lack a refrigerator, kitchen, or a flexible schedule that allows time to prepare food.
Plus, membership fees at places like Costco and Sam’s Club can be insurmountable barriers to entry, even if membership would pay for itself over time in saved costs.
The disappearing middle class is impacting how the retailers offer deals, as some (including Walmart) are beginning to tailor bargains to upper-income households.
“The nature of e-commerce, the nature of the Neighbourhood Markets and other things we’re doing do create an opportunity for us to be even more relevant to customers that are at the higher end of the scale,” Walmart CEO Doug McMillon said at an investor meeting last October, according to Fortune.
Bargain shopping may be on the rise, but don’t expect low-income household to reap many of the rewards.
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