The truth about Costco: My membership saves $500+ per year

Is it worthwhile to pay the price to join a membership warehouse, such as Costco, Sam’s Club or BJ’s? Or is carrying that little plastic card tantamount to proclaiming that you’re a sucker?

All of these warehouse membership clubs promise to pass the savings of bulk purchasing on to members — but they come with hefty annual membership fees ($35 to $100 per year).

As with most frugal endeavors, joining a membership warehouse has good and bad points. A quick rundown of the pros and cons of warehouse club membership might include these:

Pro:

  1. Many per-unit prices are lower at warehouse clubs.
  2. Some per-unit prices (cat litter, eggs, diapers) are much lower at warehouse clubs.
  3. Savvy shoppers can save packaging and trips by buying in bulk.
  4. Limited choices can save the “brain damage” of endless comparison shopping and paralysis of choice.
  5. Some warehouse clubs offer rebates that make shopping even sweeter — for instance, Costco offers Executive Members a 2% reward check annually on all purchases throughout the year. If the rebate check is less than $50 — the difference between regular and “executive” membership — the warehouse will refund you the difference in cash.

Con:

  1. Buyers need storage to store bulk purchases, or a system to divide purchases with others.
  2. Purchasing can cost more up front to get a better per-unit price.
  3. Those vulnerable to temptation might find it hard to resist a good deal on an unneeded item (flat-screen TV, anyone?).
  4. Choices are limited.
  5. Warehouses aren’t available everywhere and can be in inconvenient locations.
  6. Prices tend to always be good; but they are not always lower than regular stores.

Putting the pedal to the metal: My experience

We started shopping at a Sam’s Club (when there was no Costco in our area) to buy cat litter and diapers. (We used cloth diapers, but used disposables at night to minimize nighttime changes — and waking). At that time, we calculated that those two items paid for our membership fee.

When Costco opened, we switched to Costco because of the greater availability of organic items and preferable company philosophy. Today, we no longer have a cat or a child in diapers, but we are still active Costco members. Some of our regular “deal” items have included:

  1. Software – I typically save about $20 per year off retail price on tax preparation software.
  2. Clothing – Mr. Cheap has several pairs of Calvin Klein and Ralph Lauren jeans in his wardrobe, purchased at Costco for $22 each, as well as nice socks and undershirts, and Mlle. Cheap snoozes in organic-cotton PJs bought for less than $10 a pair.
  3. Gasoline – Gas is regularly a few cents a gallon cheaper. I don’t go out of my way to buy it, but when we’re there, we fill up.
  4. Eyeglasses – We just purchased two pairs of eyeglasses (frames and lenses), including one pair of non-reflective, strong-prescription lenses made extra thin, with rounded edges to look better, for around $250 total.

But what about the everyday purchases that bring us back again and again? I put our buying to the test by comparing the Costco prices to grocery prices for 19 items we buy again and again.

The individual savings percentages might not impress you. But if you purchased the whole list at once, it would cost $171.67 at Costco … and $538.71 to buy the same quantity at the grocery store (and Amazon, in one case). That’s a savings of 68 percent or $367! We buy all of these items annually — many of them more than once — so the savings on our purchases conservatively equal at least $500 per year. That more than pays for the $50 annual membership fee (and even the $100 executive membership).

Here’s the complete rundown (click the image to see it full-size in a separate window):

Which warehouse is best?

If you have Sam’s Club and Costco in your area and are wondering which is a better deal, Wide Open Wallet compared the two on certain purchases.  Sam’s Club came out $7 cheaper on $400 in purchases (not quite 2% savings). She notes that she will stick with Costco because it is not part of the Wal-Mart empire.

Saving even more

For those who are interested in examining specifically whether the items they purchase are a better value at a warehouse store, The Simple Dollar posted recently about how to calculate cost per unit, and how to determine the value for you.

The uber-frugal can calculate an advantage in shopping at Costco during a busy time (like Saturday noon) when the sample tables are bustling. At least one couple argues that they save $250 a year lunching on Costco samples every week.

Try club membership for free

If you’re new to a warehouse, here’s how to try one for free:

  • Costco members can bring a guest to shop with them at the warehouse. You must make purchases together on one receipt.
  • Sam’s Club periodically offers trial memberships. Through May 25, you can try a free one-day membership. Sam’s also is promoting a summer membership for $15 for 100 days — “just 15 cents a day.” But note that a full year-long membership starts at $35, or 9 cents a day.
  • Visit this blog for a free trial pass to BJ’s clubs (activate the trial membership by July 6, 2009).

Do you have other tips for saving big bucks at warehouse clubs (or not)? Or have you found little-known products available in warehouses or online that help you save even more?

{ 12 comments… read them below or add one }

Karen Peissinger-Venahus May 21, 2009 at 6:28 pm

Please read the NYT article for the truth about Costco:

http://www.nytimes.com/2009/05/13/nyregion/13about.html?_r=1

My husbands comments on the article:

“There’s a lot I don’t like [in the Costco article].

The government:
*We’re going to take your tax dollars and use them to help this big box retailer come in, but you won’t be able to shop there
*But we’ll let you handle the congestion
*And the diesel fumes
*And the noise pollution
*And the damaged roads
*But don’t worry, we’ll make them give you new windows
*And stick you with higher electric bills from your new air conditioning
*Sucks to be you, maybe you should vote next time
*Just remember when you do, I may have destroyed the neighborhood, but I brought jobs

Costco:
*Bottom line be damned, we don’t want poor Hispanics and blacks shopping here
*And we’re not going to memorialize any excuse, because we know we’re wrong”

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kimchi May 21, 2009 at 7:47 pm

I am glad you posted this – I am a Costco fan regardless of the above article. Costco targets a different population than the Sam’s/Walmart empire and even though I don’t agree about the food stamps thing at least they treat their employees well with good benefits and such. Well – off the soapbox and onto the post – I feel they have a good selection of things that you hit on – the cheaper gas, the clothing (I buy my kids pajamas there for almost 1/2 the price at Kohl’s, Carter’s, anywhere else), the food court (Buck fifty for a hot dog and a soda is a treat b/c we don’t eat out a lot). If you are smart about what you buy there you can save money – I totally agree. They have really nice organic products that I haven’t seen anywhere and I buy all my bulk nuts, maple syrup, butter, dried fruit, yeast, baking soda, and vinegar there. I like the cost analysis!

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Cheap Like Me May 21, 2009 at 9:12 pm

That is a great article. We should all drop a line to Costco and let them know they ought to accept food stamps.

I do know that nighttime deliveries are commonplace in NYC, and people of all ethnicities and a variety of incomes shop at my Costco. I suspect the decision is purely economic — which doesn’t make it right. I should edit my positive comments to say that I prefer Costco of the big-box stores … which have inherently negative impacts on the world.

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FFB May 22, 2009 at 8:42 am

I was surprised to discover that BJ’s has a full-service deli that is frequently a lot cheaper than supermarkets and that’s before their sales!

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Patricia May 22, 2009 at 9:37 am

The price comparison you posted is very helpful, thank you. I am not a member of Costco because there is not one near to me. We do have a Sam’s Club nearby however, and I shop there often but always feel a little guilty because they are part of Wal-Mart where I never shop. I also know the philosophy of Costco and would much prefer to support it than Sam’s. It might be worth travelling a little distance for the cost savings and my own peace of mind. Thanks for the great post!

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Valerie May 22, 2009 at 2:10 pm

Oh, the gas savings alone is in the hundreds of dollars for us – we have a service business with a couple of trucks and get 3-5% interest off with the AmEx card. That’s at any gas station.

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Valerie May 22, 2009 at 2:10 pm

Oh, the gas savings alone is in the hundreds of dollars for us – we have a service business with a couple of trucks and get 3-5% interest off with the AmEx card. That’s at any gas station.

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Jeff9 May 24, 2009 at 11:15 pm

Save money and the Earth and be clean at the same time! Get serious and add Bathroom Bidet Sprayers to all your bathrooms. I think Dr. Oz on Oprah said it best: “if you had pee or poop on your hand, you wouldn’t wipe it off with paper, would you? You’d wash it off” Available at http://www.bathroomsprayers.com with these you won’t even need toilet paper any more, just a towel to dry off! Don’t worry, you can still leave some out for guests and can even make it the soft stuff without felling guilty. It’s cheap and can be installed without a plumber; and runs off the same water line to your toilet. You’ll probably pay for it in a few months of toilet paper savings. And after using one of these you won’t know how you lasted all those years with wadded up handfuls of toilet paper. As for water use a drought is always a concern and must be dealt with prudently but please remember that in the big picture the industrial water users always far exceed the water use of household users and in the case of toilet paper manufacture it is huge. The pollution and significant power use from that manufacturing process also contributes to global warming so switching to a hand bidet sprayer and lowering your toilet paper use is very green in multiple ways. Blog; http://jeff9.livejournal.com/932.html

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Claire Walter May 24, 2009 at 11:17 pm

IMHO, one of the main cons is that retail warehouses that undercut small, locally owned retailers that can’t compete and ultimely close — to the detriment of the community and to fragile downtowns. Personally, I wouldn’t set foot in a WalMart or Sam’s Club. We belong to Costco because they are a more decent company to their employees, but we really do try to patronize local businesses whenever possible and don’t use our Costco membeship all that often.

Claire @ http://www.milehighonthecheap.com

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Claire Walter May 26, 2009 at 9:36 am

A link to this informative post is at http://www.milehighonthecheap.com/2009/05/blogger-compares-warehouse-clubs/. We’ve also added this blog to our links list called “Our Cheap Friends” on the righthand side of MUOTC’s home page.

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TSue May 27, 2009 at 10:33 am

Thanks for the article. Like your blog, just added to my RSS feed. Little confused by your spreadsheet, when I glance down the grocery store column, it only seems to add up to just over $100, not $500. What am I missing?

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Cheap Like Me May 27, 2009 at 12:29 pm

@TSue – Thanks for your comment, and I’m sorry if I wasn’t clear! The $538 is what it would cost to purchase *comparable amounts* at the grocery store. So, for instance, yeast comes in 30-ounce bags at Costco, and that bag cost $3.59, or 12 cents per ounce. At the grocery store, yeast cost $1.72 per ounce ($6.89 for 4 ounces). So if I purchased a comparable amount of yeast (30 ounces) at both places, it cost $3.59 at Costco, and would cost $51.60 at the grocery store. The $538 figure is the sum of those comparable amounts, calculated by a spreadsheet formula. I hope that helps.

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