Is Joining a Warehouse Club Worth It?

MSNBC asks if it pays to be a warehouse club member. They start with reasons why it may not be a good deal. This includes the fact that people may need to feel they have to spend more at club stores to justify the membership fee:

Customers may believe they’re paying for a chance to save money, but some experts think membership fees actually cause consumers to spend more.

“Right after you join a warehouse club, the first thing you think is, ‘How am I going to earn back that entry fee I just paid?’” said Brian Wansink, a professor of consumer behavior at Cornell University. “It creates a spending, but also a justification mentality.”

As a result, Wansink says, you’re going to spend more so that you feel like you’re saving more.

They also note that many consumers assume that prices are cheaper because they are buying in bulk. As we've discussed here, that's not always the case. You need to calculate the per unit cost of a club store item versus that of an alternative store to see which really is the better deal. For more on this subject, see these posts:

• Health and Beauty Aids: Walmart versus Costco, Kirkland Brand versus Equate Brand -- Which is the Best Deal?


• Costco versus Walmart, Round 2


• 10 Things You Should Always Buy in Bulk


• 10 Things to Buy in Bulk


• 15 Things Not to Buy in Bulk

They also note that club stores have less selection which means you'll probably have to supplement shopping there with shopping at another store -- which further adds costs.

But in the end, MSNBC seems to say that club stores offer a good savings:

Warehouse customers who believe that bulk shopping is smart shopping may have a point. According to a Consumers' Checkbook survey published by the not-for-profit Center for the Study of Services, BJ’s prices were on average 29 percent lower, Costco’s 30 percent lower, and Sam’s 33 percent lower than the largest supermarket chains.

The survey found that a family that spends $150 a week at a conventional supermarket could save $2,270 a year when shopping at BJ’s, $2,344 a year when shopping at Costco, and $2,571 when shopping at Sam’s Club.

In addition to shopping for groceries and general merchandise at club stores, there are several other ways you can save including gas, vacations (we saved $50 on our cruise versus the best price we could find elsewhere), and free food (don't laugh, one lady claims she saves $2k per year eating samples.)

I have been a warehouse club shopper for many years (my company provides a Costco annual membership for employees) and it comes down to this: you have to know your prices. If you do, you can spot what's a good deal at a club store and what's not. It's that simple.

Comments

[Money Wise Pastor]

I totally agree that you have to know your prices. We've been a member of Sam's (company membership) and Costco (personal membership) for years. We get a ton of value from the memberships. First, for us there is the entertainment value of getting free samples, which our five kids really enjoy, and low cost food at their cafe. Second, we save a lot of money on the things that we do buy at the warehouse clubs. We buy a lot of organic foods and Costco beats other local stores on the prices for many of those items.

[Matt]

Definetly need to know prices. With that being said there are things that we typically buy that are considerably less than if you bought at the local store.

Is there some waste. Yes. No way of getting around that but the savings beat the waste.

[jim]

“It creates a spending, but also a justification mentality.” Thats an interesting thought. Makes sense. Once you're in for that $40 membership fee you'll want to 'get your money's worth' from it. FOr some people that may subtlely or subconsciously push them to buy more than they would.

My problem with Costco used to be simply the enticement to buy junk I didn't need. I'd go in for 1-2 needed items then wander past the candy display... past the book display... etc and end up with 3 items I didn't need but kinda wanted and justified buying because they where great bargains. I identified and fixed that tendency myself by sticking to my shopping list.

[MC]

I let my Sam's club membership lapse this year. For 2 years I calculated out my savings there vs. buying those same items at my regular grocery store and it barely paid back the $40 annual fee. The only things I bought all year that were slightly cheaper at Sam's were peanut butter, coffee filters, coffee, seasonal items like christmas candy of gift plants, potting soil, sometimes bottled water, and sometimes toilet paper/paper towels/kleenex (but sometimes my regular grocery store was cheaper for these).

I don't usually purchase prepared or frozen dinners for my family. The fresh meat, produce, bread, cold cereal etc were indeed cheaper at Sam's but these are all packaged in too-large sizes for my small family to eat up before they spoiled--so, not a bargain. We drink a lot of milk but milk from Sam's is typically sold too close to the sell-by date--I can only go shopping once a week because I work full time, so I only buy milk that will last a week in my fridge. Sam's clothing is not worth buying IMO--Target has a larger variety of clothing in more current styles, they have more sizes, and their clothes cost less money.

My family consists of me and my 2 teenage kids--pretty close to the typical american family of 4. Perhaps if you had a much larger family Sam's would be worth it for groceries?

[EM]

"...some experts think membership fees actually cause consumers to spend more."

Fees don't cause consumers to spend more. People choose this behavior. It's like something I read recently about diet soda "causing" obesity because people consume more food calories when they have zero beverage calories. And the longstanding argument that credit cards cause people to spend more. I disagree.

It may seem like an issue of semantics but it's really about people taking personal responsibility for their actions. If, in their thinking, they shift the blame to an external source, then they can claim they don't have control over their overspending.

That said, I do believe there are people who are addicts. In the same way that some people shouldn't have alcohol because they are addicted and will abuse it, some people are spending addicts and therefore shouldn't have credit cards or whatever their spending drug of choice is.

Even in those cases, though, I think people should recognize their addiction and do the work to overcome it if they want to get better.

[paul]

Diapers alone make it worth it

[Matt]

Two medium frozen pizza $2.50 each
Pepperoni,bacon, mushrooms and onion toppings for us $2
Pepperoni for them $1

Fresh pizza cooked the way we like it $8

Order out and pick up from local pizza chain $12 or more

Once a week meal $208 yearly savings.

Enough said.

[Lance @ Money Life and More]

You really have to decide if this is worth it to you or not. For me, I don't get as much value because I only live in a two person household and the warehouse club is inconvient to where I live. For others who drive by it every day and have a family of six I can definitely see where it would be worth it. Do what works for you :)

[lincmercguy]

Diapers, that's all I need to know. The Members Mark brand saves our membership fee every other month. They are kind of cheaply made, so we use a little better brand for nightime.

Some of the other odd things I buy at Sam's include motor oil for my diesel pickup and farm equipment, Rotella is actually fairly cheap there.

[Walden]

We go to Costco every 6 weeks or so, and have definitely saved enough to to "earn" back the membership fee - but we only buy specific products, and we plan ahead so we can make the best use of them. For example, we buy the large packages of chicken breast, and then "re-portion" them when we get home and throw them in the freezer. Same with seafood. We'll buy the large packages of fresh organic vegetables and then I'll use them to make big batches of freezer-friendly meals. Otherwise they go bad before my husband and I can get through them all. But with a little prep work (clearing out the freezer and making sure I have a free afternoon) we really save a lot.

We also buy paper products, bottled water, shredded cheese (it freezes great!), butter, and some personal items (body wash, razor cartridges) there.

Also, spices there are a great deal if you cook a lot from scratch like we do. A small container of a spice at the grocery store is usually at least $3, at Costco I get a huge bottle (5 or 6 times the size) for $7. They don't always have everything I want/need, but they have the basics.

[Melissa@LittleHouseInTheValley]

I agree. We have to buy rice and soy milk because we can't have regular milk, and those can be very expensive at regular grocery stores. However, Costco offers a significant discount. They also offer some frugal organic food such as one pound of organic spinace for $3.99. I just stick to my list and do fine.

[Catherine]

We did the math. The savings are not there for our lifestyle. It does seem to pay if you need diapers or consume alot of processed, packaged and frozen food or soda. However we don't.

I went thru a layoff four years ago and spent 13 months out of work. Buying in bulk (for something to consume weeks or months from now) when your monthly income on Unemployment Insurance is insufficient to cover the mortgage & health insurance is the very definition of insanity. It literally would require dipping into my cash savings to build up a supply of something that isn't cash. Crazier still is paying a fee for the privelige and so we let our membership lapse. We used up all the food in our cupboards. We only bought what we could carry on mass transit. We ate more fresh produce and very little processed items. We baked all our own bread. And, we limited our selves to using one tankfull of fuel in each car per month. Even after a return to work with a six figure income, the extreme frugal habits weren't worth dropping. A retrospecitve analysis of our shopping before and after showed that we didn't really save money in Sam's or Costco. The biggest savings, however, was time. I can well afford the money now, but it will zap a few precious weekend hours to drive to and from the nearest warehouse club. The time is even more precious to me than the money.

[Arimack]

One interesting thing from that same show on MSNBC (it was a profile story on Costco), Costco profits are mostly from the membership fee. The margin they make on everything else in the store largely just covers their overhead for operating.