Costco: Do bulk items for less equal more, more, more?
Short answer: Probably. For me saving money usually means something along the lines of learning the ins and outs of egg certification to liberate myself from the daunting task of selecting a carton and not getting ripped off. I have never been an out-of-my-way (as in fight to the death) bargain shopper. At Costco, you don’t need to.
Everything about Costco is large: the aisles, shopping carts, people, and packages. The products are so large the store doesn’t even bother with grocery bags. As I snooped around snapping shots out of sights of both video cameras and shoppers, I was surprised to encounter some Organic products.
Their success is simple. For $50 a year you can shop for staples that are 30% off. The company does not cut costs to offer lower prices. They offer a diverse range of products with high turnover from a limited number of national brands directly from a warehouse space. This allows them to operate with significantly lower gross margins than other companies. [For more, check out this iStock Analyst article.]
When entering a Costco, you immediately show your membership badge and are given a booklet of coupons. Then you go through the standard supermarket floor plan, i.e. all staple items are located as far away as possible. As a customer, this means you need to walk past most of the items with your “deals” package in hand before reaching the thing you came to buy. A $3 purchase turns into a $50 one by the time you reach the register. In New York it’s an even more extreme experience, considering how far away the store is from our comfort zone.
The theory is that at a place like Costco on average people spend more, and when they get home, they eat more. Is it true? While I couldn’t find any research material, it has certainly been proven in the restaurant business. Increasing portions and with it actual plate diameters has caused people to eat more.
So does Costco save money? If you’re strong willed, have a car, can shop with blinders on, and are smart to purchase things that will keep, then YES.
The view inside Costco
Sales of Spam have increased in our current economy. Cart it down to the bomb shelter, Marge!
Candy in bulk. Help me.
The carts at Costcos looked to be about 50% wider than the average.
Unfortunately, and obviously, all the meats and dairy come straight from the Industry. No Organic or cage-free here.
An Icon.
Surprisingly, the lines did not move as fast as I expected. Also surprisingly, there are NO BAGs. The shopping items get loaded out of an then back into the cart for direct entry into the back of the SUV. Hello… who wants to carry their gigantic jar of Helman’s home on the subway?
First, I’d like to say that I think you did a great job capturing Costco photographically. This is what it’s like. I dread going to Costco because of the need to maneuver an overly large cart through throngs of large people who are also pushing overly large carts (that they have no idea how to maneuver).
I believe that you are right, only those with strong, STRONG wills can shop at Costco and actually save money. I often find myself picking up something I don’t need, only to return it to the shelf after further consideration. Occasionally, I run in for just one thing (usually, a block of Tillamook – which I just noticed is now bigger if you buy it at Costco), but usually I have a list.
I recognize Costco as being a consumer tool – one that more often than not uses the consumer – but I’m still kind of partial to the place. On the other hand, if I don’t have to go back there for a year because I bought the lifetime supply size of Helman’s (yuck), that’s not so bad either.
Basically, I agree with you, but there are some things about Costco I like. One of the big ones is that they treat their employees well (nope, I’ve never worked there). Maybe I’m biased because of my past love with Seattle and Costco’s connection to that place.
Um, sorry for the long, rambling comment ;)
October 28th, 2008 at 10:41 pmMicha,
Thanks for the thoughtful comment! You’re totally right. When I looked up the business plan I was happy to find that the reason Costco is offering things at a lower price is simply because they have a good model and not because they are unfairly or unnecessarily cutting corners.
This was my first trip to Costco. I did sign up for a membership. I am taken just like anyone to the point of buying things I probably won’t run out of for another couple months.
So I would say I felt somewhat divided, too. But I do feel that human behavior-wise, people are prone to spend more and also consume more. That’s why Costco has had such success. There are much more deceitful marketing ploys out there.
October 29th, 2008 at 11:42 am[...] 29, 2008 · No Comments A Smart Mouth had an interesting pictorial yesterday of a trip to Costco, which noted that many of us buying in bulk have a little bulk [...]
October 29th, 2008 at 3:30 pmAt the Costco where I shop they actually do have organic meat available and for a better price than I can get it from my local natural grocer. I really only shop there for organics and not much else. I cringe when I see people with such full carts because I know I can save more elsewhere.
Great article!
November 3rd, 2008 at 12:38 amKristen: Where do you shop? Yea, I feel for people when they get scammed. Myself included :)
November 14th, 2008 at 5:35 pmKind of funny to see how people pick and choose what their snootiness. You derisively point out the sale of caged meat, then complain about the lack of plastic bags! LOL Bring your own!
I actually did a price comparrison between costco and my local grocery store… (when there wasn’t an exact quantity match, I calculated a per-ounce cost.) On 3 separate trips, prices were 5-7% lower at Costco. That isn’t much, is it? With a $50 membership, if you take the worst case scenaro of 5% savings, you will have to spend $1000 to BREAK EVEN with buying the exact same items at your local store. When you take into account the waste that often comes with bulk purchases (food rots or is simply never used), the hassle of dealing with the costco crowds, and the time/gas wasted going to costco AND your local grocery store… Is it really worth it?
For our family, the straight dollar savings was $75/year… Factoring in gas, time and waste… We probably broke even.
July 11th, 2009 at 7:31 amTallow: Point well taken on the lack of plastic bags. You’re right. But I wouldn’t consider the desire for higher quality foods snootiness, just that my health is a real priority. There are many ways to make quality food affordable.
And thank you for giving a practical cost breakdown. One of the hardest things is having to travel to multiple destinations to get the job done. And yes, with bulk you generally end up eating more or wasting more.
Have you found a better alternative?
July 13th, 2009 at 12:51 am