Be Wary of Warehouse Clubs

Many money savers are big fans of warehouse club stores and/or buying in bulk. While the author of Miserly Moms: Living Well on Less in a Tough Economy does like the latter, she's a bit cooler on warehouse clubs. She says that people can not assume that warehouse clubs "always" have better prices and that we need to compare unit prices from several stores to actually determine the best deal for any particular item. She's done this and here are a few of her general conclusions (paraphrased by me):

• Take along your price book (collected prices of various grocery items) so you can see for yourself if an item is a better deal at a warehouse club.
• While name-brand items at a warehouse club my be better priced than name-brand items at a grocery store, store-brand items at a grocery store are better priced than them both.
• Warehouse clubs are featuring more of their own store-brand items, and these can be good deals. But you must compare unit prices to make sure.
• Shopping at warehouse clubs tempts people to over-buy food they don't really need, and this can be a big budget buster.
• She said that in general joining a warehouse club is worth the membership cost. She is careful about what she buys there and as such saves more than her annual fee each year.

And to wrap up, here's a direct quote from the book:

After comparing prices of many like items at our local warehouse clubs with local grocery store prices, I have shortened the list of what I buy at warehouse clubs to only ten or fifteen items. This list changes as they change their prices.

Here's my take on this issue:

• It's "saving money common sense" to compare prices and never assume. Of course, many people still do neither of these.
• I found that health and beauty store brands at warehouse clubs are cheaper than store brands at Walmart (and here's round 2)
• Consumer Reports says that you'll save more money being a grocery store store brand shopper than a club store shopper. Then again, if you shop at both, you can save even more.
• What you buy matters. I've covered the fact that some publications have listed things to buy in bulk and things not to buy in bulk. 
• Buying in bulk is not always a deal. You MUST calculate the per unit/use cost.
• It's not just groceries. Sometimes you can save on big ticket items at warehouse clubs.

What are your thoughts/suggestions on shopping at warehouse clubs?

Comments

[Belmont Thornton]

Well thanks for the information on warehouse clubs. I had never thought about it that way. However, even i agree with the fact that bulk buying saves lot of cash if you have the right storage facilities.

[Rich Avery]

Don't forget the potential savings from Sam's and Costco's "cash back" program. You pay a little more to enroll in that program, but then you're guaranteed to get your money back, plus some more (depending on how much you spend).

We didn't think we'd spend enough to make it worth our while, so we didn't enroll at first. But a few months ago, the cashier at Costco told us that if we had enrolled, we'd already be getting money back...so we upgraded our membership to the "cash back" program.

Also, we've found that Sam's and Costco have had some pretty good deals on name brand clothing.

We go to these stores not just to shop, but also for entertainment. Our kids love to stand and watch a movie on the big screen TV's. We usually go over the lunch hour on a Saturday and we buy a pizza. It's the cheapest place to feed a family of 7 (besides eating at home). And there are always lots of free samples to enjoy - many times of foods that we'd never buy, but the kids get to enjoy it for free at the store.

[Rob]

I agree with the author's main idea that you have to compare prices. However, I do not think I will ever be taking it quite as far as she, having a "price book" and whatnot. We've found that there are specific items we buy at Sam's because we know they are a better price. For the rest of our shopping we'll go to the grocery store.

[Paula1849]

I have always found that Costco has great deals on good tires. Add the awesome customer service and we don't go anywhere else.

We have also been very pleased with the quality of Costco's store product the Kirkland brand. The beer sampler has gotten good reviews, including from my husband. http://consumerist.com/2010/06/blind-taste-test-costco-generic-beer-about-as-good-as-brand-name-beer.html

[MelMoitzen]

A lot depends on whether you tend to pay "everyday" pricing or are an active bargain hunter. If you have the patience and time to shop only sale items and visit multiple grocery stores and clip coupons, you'll probably wind up doing better at the grocery than at a warehouse club. I have the patience and time and know the prices at the warehouse club of the items I typically buy, so I know when it's time to stock up at the grocery store.

But if you need a specific item and don't want to chase after sales to get it, nine times out of ten the name brand item at the warehouse club will be cheaper (unit price) than both the name brand AND everyday-priced store brand item at the grocery.

Maybe it's the market where I live, but the store brands aren't all that much lower than the name brands (perhaps 20% less) when they're not on sale. Costco tends to be 30-40% less than the grocery store in my experience on the name brand items.

There seems to be a mentality that people focus on one or two commonly-purchased items that are often prominently on sale as a loss-leader at a grocery store for less than at Costco (e.g. twelve-packs of soda for $2) and from that they conclude Costco isn't the cheapest overall. Or they only shop sale items at the grocery (often loss leaders). Costco and the other warehouse clubs simply don't do loss leaders. If you build your shopping cart based solely on what you need in your pantry without being influenced by what's on sale at the grocery store, the unit prices on the items from Costco will be cheaper 9 times out of 10.

And nothing beats the prices at a warehouse club for food packaged as gifts, specialty and gourmet-type items that are rarely discounted at a grocery store--if you can find them there.

[Liz]

My ex-boyfriend was the most frugal, budget-conscious person I have ever known. He comparison shopped everything and was incredibly smart about his spending. After much time spent doing this, he concluded that anything he could buy at Costco was the cheapest option 99% if not 100% of the time. That's good enough for me. I'd rather not have to clip coupons, shop only the sales at the grocery store or do most of that other stuff. I shop Costco, use my Costco/Amex card that I pay only $50/year for and typically get back around $200/year in Costco credit. And I'm only shopping for one person. I also ALWAYS get the cheapest gas around there. That's the best deal going if you ask me.

[Matt]

Time is money and if you do not have the time to comparison shop than warehouse stores like costco sometimes have the best deals. If I can not buy chicken on sale than costco has the lowest. Cheerieos are so much cheaper than on sale at a grocery. Time, price and convience equals balancing act.

Would you spend an hour comparison shopping or spending it with your family.