Is Costco Really A Deal?
Filed in archive Buying Stuff on September 13, 2006
In today's edition of the New York Times, David Leonhardt's article "Distractions and Bargains Bought in Bulk" questions whether consumers get fooled into thinking they're getting a deal when in reality they can buy things cheaper elsewhere. He starts off at Costco, where, in an experience many warehouse shoppers can appreciate, he knows some things are good deals, but has no clue about the merits of other prices--after all, your local supermarket may not carry a two-gallon tub of mayonnaise that allows for top-of-the-head comparisons.
The point is that once convinced a certain location is a good place for deals, we'll buy there even when a little price comparing would show us the error of our ways. For example, people will bid items up on eBay to prices beyond what they could simply buy an item for if they went to the store or, in a true apples-to-apples comparison, if they bought the item at a different Web site.
It's an interesting discussion. For me as a Costco shopper, though, I was interested in Leonhardt's conclusions about that particular retailer. In general, he seemed to think that Costco delivers pretty well on its promise, but...
1) The $50 annual membership fee negates much of your savings unless you are a power shopper, and
2) When you buy things in massive bulk sizes, you're more likely to use those things liberally, whether it's gorging on pretzel rods because you bought 500 at once or taking an extra swipe with the toilet paper because you have so many rolls (btw, that last gross example is mine, not his; once it popped into my head, I couldn't resist).
I've got one other potential downside to Costco--they put a lot of stuff in front of your face that you absolutely do not need but it seems like such a great deal, it's hard to resist buying it. The clothes often get us--good brands at good prices, but do I really need another pair of jeans? It might be good value, but that doesn't mean it's good sense.
Are you a warehouse club shopper? How do you think these clubs stack up overall? Do you buy too much, use too much, or buy stuff you don't need because of the prices, or are you all about the savings on things you'd absolutely buy anyway?

Permalink: Is Costco Really A Deal?
Tags: shopping costco finance deal really really+deal costco+really personal+finance
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Rating: 9.50 out of 4 vote(s) cast.
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Response from:
jon
(09/14/06 4:18am)
In costco's specific case, their liberial return policy can make that $50 a year go a long way.
Response from:
makingourway
(09/14/06 12:32pm)
I have to agree with Jon, the return policy is excellent and has saved me many thousands of dollars on products that otherwise could not have been returned.
Furthermore, there ancillary services, such as check printing and car purchasing are outstanding money savers.
You and Leonhardt's both have a good point about unnecessary purchases, however, alternatives such as super markets are often selling below market teasers to pull you into their store to buy more expensive products - I would argue that teasers are the common denominator. At least with Costco, the majority of products are well priced, but more importantly, very few of the alternate vendors would have as acceptable a return policy.
regards,
makingourway
Furthermore, there ancillary services, such as check printing and car purchasing are outstanding money savers.
You and Leonhardt's both have a good point about unnecessary purchases, however, alternatives such as super markets are often selling below market teasers to pull you into their store to buy more expensive products - I would argue that teasers are the common denominator. At least with Costco, the majority of products are well priced, but more importantly, very few of the alternate vendors would have as acceptable a return policy.
regards,
makingourway
Response from:
Ed Kohler
(09/14/06 1:40pm)
Interesting post. I think people also walk into a Costco or similar warehouse store with the intention of buying a ton of stuff. It's not the kind of store you visit to pick up just one thing. Basically, an average order size mentality that works in Costco's favor.
Response from:
Super Saver
(09/14/06 10:56pm)
I like Costco because generally the prices are pretty good for what I want to buy. However, I know I often walk out of there with something I didn't intend to buy, when I entered the store. Overall, I don't mind because I enjoy the experience and the "unintended" producs I buy. And, as others pointed out, I can always return it if I get a case of buyer's remorse.
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