The Real Cost of Costco

I’m beginning a new series of discussions to determine if membership to Costco really is worth the savings they state. We have been a member to Costco for a little over a year as of this post. I won our initial basic Gold membership through my work. We happen to have a new Costco open in the area, so when we initially signed up in 2009, we also received a bonus $10 gift card. Over the years we have learned that there are various pluses and minuses to shopping at Costco (or other Wholesale stores).

I have three major gripes with the big box, Costco.
1) I hate having to show a member card at the door just to get in. Seriously, what is the point? Even if I wasn’t a member, you would still let me in to look around. On top of it, I can’t even buy anything without scanning my card, so there is no reason to inconvenience me at the door to see my card.

Every time we visit Costco, I ask my wife if I can walk right through without showing my card. She never seems to willing to be seen with my tough guy persona, or to deal with the ramifications, so I pull out my card and give the greeter a fake smile, like I’m going to enjoy the onslaught my bank account is going to feel at the end of this shopping experience.

Even though I don’t like being stopped on the way out of the store either, I at least understand the concept. It’s usually a quick count of the items in my cart and to make sure all items have been accounted for on the receipt.

2) Why do I have to pay a membership fee to shop at your store? I’ve never understood why Sam’s Club, BJ’s, Costco, etc. decide to charge me admission just for the privilege to shop. I’m coming to your store to spend money, and yet I need to shell out $50/yr. We need to save a substantial amount of money, and thus spend a lot of money, to make up the $50 annual fee. I’ve evaluated the benefits of the Executive Membership, but we do not spend enough there in a year to make it worth our while.

3) My third major issue with Costco, and what I will be evaluating in this and in future posts is, is there really a savings by buying in bulk? Since becoming members at Costco, every month when we go in to shop, (because the coupons draw us in) I feel a sense of buyer remorse as I leave. We never seem to get out of the store without spending under $200. I find myself picturing what $200 could buy at equivalent grocery/general merchandise stores.

We normally go into Costco anticipating buying only items we have coupons for, but then end up buying all kinds of other items that entice us. We are big fans of food and don’t mind paying a premium for better, healthier options, especially when it comes to organic. So if there is something that looks good or is different and convenient, we definitely will buy it to try.

So I decided to try and experiment yesterday. We needed some toilet paper and the latest Costco coupons had $3.50 off the price of 30 rolls of Quilted Northern. Normally I purchase all of our paper products through Target because if I watch for a sale, sometimes with a free bonus gift card, and use both manufacturer and store coupons, the deal is usually unmatched. So I went into Costco and found the Quilted Northern toilet paper. Normal price…$18.79. Price with coupon…$15.29. I then went next door to Target to see 1) if they carried the same quantity?; and 2) how much was it?

Target did carry the same 30 roll package; their price without a sale…$16.99. Therefore, what I proved to myself was that with the Costco coupons, there is a substantial savings over their everyday price compared with the competitors. Even if I had a Target store coupon and manufacturer coupon, I probably wouldn’t have gotten the price down to Costco’s coupon cost.

I realize the business model that a single store can not have the best prices on everything, but I will continue to see if the savings of a Costco membership really pays off in the end. I have a feeling that buying items at Costco’s normal price will not produce any savings for the equivalent quantity or unit cost when you can go elsewhere, use store and manufacturer coupons, and stack with credit card rebates.

On the flip side to all the negatives discussed above, we have to admit we really enjoy the shopping experience at Costco. The products that they carry are of a higher end quality than what we have seen at other big box wholesalers. In addition, there are lots of items that Costco carries that appear to be unique, and thus present a value to the consumer. For example, there are several food items that are always new and worthy of a sample.

I will discuss the pros and cons of Costco Travel in a future post.