Costco: Good Value for the Money, but Not Frugal

For reasons that I just cannot explain I just love shopping at Costco! I don’t know if it’s the aisles and aisles of well stocked borderline gourmet stuff, or if it is the free samples they let me graze on while I shop. Or maybe it's the fancy electronics that always seem oh, so within reach. But, overall, I really enjoy the experience. And no matter how good my intentions are before I start my shopping trip, when I walk out of the store I almost always have stuff costing at least $100 in my cart! So, I reckon if I limit my Costco sojourns to once every four to six weeks, I should do fine. Well, after last weekend’s trip, I decided to do a list to see if Costo was really saving me any money. Surprisingly (and a little disappointingly), I don’t think shopping at Costco is really saving me any money at all. I may get more stuff for my money compared to regular grocery stores (where I hate shopping, for the record), but when I consider the actual amount of money I spend, I probably spend more rather than less, when I shop at Costco. Here is my analysis –

If you are a small family, you are limited in what you can really buy at Costco.
Costco is a wholesale store. We are a family of two. For small families like us, practically speaking, it makes no sense to buy any perishable goods. What will I do with a 2lb bag of garlic or 10lb bag of apples? On the other hand, it’s a great place to buy non-perishable stuff in bulk. For example, my Costco shopping list usually consists of some of these items – soaps, body wash, body lotion, detergents, kitchen towels, toilet paper, frozen food, cereal, milk, multivitamins etc. I know I save a lot of money on these items. But the question is, does the quantity that I buy save me enough money to justify the membership fees?

Impulse buys at Costco cost way more than impulse buys at a regular grocery store.
Since it is a wholesale store, if you make an impulse buy, it’s usually in much bigger quantity than at a regular grocery store. That means that it costs more too. For instance, on my last shopping trip, I picked up a bag of pecans. On my way to the checkout line, no less. In a regular grocery store, this discretion would have probably cost me $5. But at Costco, it costs me $10. And when I brought it home, I realized that the quality is not all that great :( So now, I am stuck with a big bag of pecans, I didn’t particularly like :(

Wrong product/brand/choice cost is much higher too.
Which brings us to the next point, at Costco, mistakes are expensive. Not just on impulse buys, but for items on your regular shopping list as well. And making mistakes, especially with the choice of a brand is relatively easy at Costco, since they stock only a limited type of brands. For instance, during one of my earlier trips to Costco, we wanted to pick up some cereal. I don’t remember if they were out of the particular cereal we were looking for or if we just felt very experimental, but we picked up the strawberry-yogurt cereal instead. I mean its strawberry and yogurt, so what’s not to like about it. Turns out, it’s a nice cereal, but I just don't like eating it the first thing in the morning. Again, I am stuck with huge double box of cereal, and a nasty choice, eat it or waste it?

Some deals are not as good as they seem to be.
Finally, some deals at Costco are just not as good as they seem to be. Take for example, the gas price. Gas price at Costco is consistently 5 cents less per gallon, than the local gas stations in my area. If my gas tank is completely empty, it can take about 12 gallons, which works out to savings of 60 cents per tank. More often than not, I fill up much before my gas tank is completely empty. So my average gas purchase is around 10 gallons. That makes my savings 50 cents, per fill up. But, the closest Costco from my home is about 25 miles round trip. That’s a gallon of gas right there. With the current gas prices, it’s easy to see that I spend much more on gas to get to Costco and back, than I save on gas. Of course, I don’t go to Costco to just buy gas, but you get the idea, right? Usually, the number of Costco stores is a lot fewer than regular grocery stores. So, more often than not, a Costco trip involves at least a short commute. Add the gas price to the membership fees, and you’ve got to wonder, are you saving enough to justify shopping at Costco?

So, overall, here’s my conclusion. Unless you are extremely disciplined, you will likely end up buying at least a few items that you were not planning on buying anyway, and they cost you more at Costco than regular grocery stores. So, while you might get more stuff for the same amount of money by shopping at Costco, some of that stuff may not be what you actually need and so, Costco isn’t a very frugal place to shop at! For small families, the cost of membership could possibly well exceed the amount saved. So, if anything, for small families, Costco can be definitively anti-frugal!

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Jenn said...

I found that I don't save enough to justify the membership fee! I do however go about 2X a year with a girlfriend who has a membership just to stock up on a few things that I do like. Costco (or SAMS) are a place where you really do need to know your unit prices.

Overall I have found that personally I save the most money by not being brand loyal on most things and shopping at either Aldi's or Save a Lot. Do you have either of those in your area? Aldi's is owned by the same folks who own Trader Joe's, but they are just regular food, not the all natural/organic stuff.

Also, you don't need a membership to browse at Costco or Sams, so if you gave up the membership and know someone who has one, you could spend one Saturday looking around, price comparison shopping and eating samples (with no temptaion to buy because you can't), then go back with a buddy who has a membership on a differnt day to actually purchase the items (or if you are extra lucky they might just pick them up for you and you pay them back later)

Just a though!

ispf said...

Hi Jenn, We dont have Aldi's or Save a Lot here :( No Trader Joe's either :( But my regular grocery store usually has combo offers such as "buy pasta sauce and get pasta free" and so on. I try to stock up during such offers.

I like your idea of sharing membership to Costco/Sams. I recently found out that a collegue of mine has a Sams Club membership. She doesnt have kids either, so I hope she will want to share the membership. When my current year's membership expires, I will check with her if she wants to share my costco membership, or add me as a secondary card holder to her sams membership. Thanks!

Tim said...

1. if costco, you should always opt for the executive card instead of the regular membership since you gain a rebate on exec membership. if you do not earn rebate equalling the exec membership, then return the rebate check and costco reimburses to the reg. membership. so you will only always pay for reg. membership.

2. as jenn wrote, sharing membership is definitely a good idea. i've shared since i first joined several years ago.

3. your mileage at costco will vary. for us (wife and I), costco being nearby is definitely beneficial. add the fact that my friend is on the card, even more so. we eat lots of fruits and veggies, so the large fruits and veggies are definitely savers for us. we also eat mostly seafood or chicken, so that is also a plus. coffee beans are cheap there too and freshly roasted. if you have the space, buying bulk TP and other nonperishables is good. saves trips, thus gas and time.

4. if you didn't like the strawberry yogurt, you could have returned the unused portion for a refund. i've returned clasm that didn't open before and was refunded.

i agree, costco isn't necessarily a fit for everyone, but at least for us it definitely is.

ispf said...

Tim: Thanks for the stopping by and the detailed comment! I did not know that Costco reimburses you to regular membership if your excecutive rebate does not cover the exec membership fees! Also, I did not know that you could share the membership on the exec card (I thought it was only for regular card). I will be sure to check these out when I go to Costco next!

debtaholic said...

i dont think shopping at costco or walmart saves you money. if you go to a regular grocery or clothing store, you would spend $100 on grceries and $100 on clothing. when you go to costco/walmart you spend $90 on groceries, $90 on clothing and $30 on crap you dont need, like dvd's or plants. at least, that's my experience.

Jenn said...

By the way, I just want to say that I don't actually "Share" my friends membership as in pay for a portion of it. She gets the membership anyway-and a couple of times a year I just go with her and she she lets me throw things in the cart and I reimburse her for them. If I was going to do this frequently (for me it really is only about 2X a year) then I would offer to pay her for a portion of the membership.

WH said...

Agreed! Costco is not such a great deal for a small family. In fact, if you got down to the nitty gritty on some items, you're really buying them for the same price you'd pay anywhere else, since the difference is the the size of the packaging, and not the unit price. I'd rather save the $55 and shop frugally elsewhere!

Anonymous said...

I do not like Costco. My wife and I had put off buying a membership for 6 years and we finally got one about 3 months ago. They have some things that are a great deal but like many of you have eluded, who needs 5lbs of peacans? I can see the advantage if you have a large family, party, or business. For the average Joe it is wasteful. Another reason I don't like it is because the crowds. My daughter is in a wheelchair and people are constantly stepping in front of her and reaching over her. It is like they are saving so much money that they can afford to be rude! And finally I will never buy furniture or household "upgrades" from there because you go to your friends and they have the same furniture or flooring. :( My sound off has finished. lol.

Ways to save money the easy way said...

We are a family of 2 and we actually do really well at costco. We have to make a list and really stick to it like at the regular store. That really eliminates impulse buys. We also have to be ok with eating the same kinds of foods over and over. It really saves on things like contact solutions and shampoo. We get sodas, yogurt and chicken there. If you are creative and put things in the freezer it can really pay off. I pack lunches every day and use the perishable stuff like apples and blueberries that way and they last. Costco is close to us and while is is not always worth it on gas b/c we get 5% back on our Discover and we cannot use that at Costco, sometimes we really save a lot. It just depends on what your family needs. :)

Charlene said...

I agree, you need to be disciplined while shopping at Costco. But, the other services they offer can save you a lot of money. Perscriptions and Car and Renter's Insurance top my list. If you go on-line and get an insurance quote, I think you'd be surprised at how inexpensive their insurance is. Just be a savvy shopper.

Michael said...

Another good way to save at Costco is to get their American Express Card. You earn 3% on gas and eating out, 2% on Travel, and 1% on everything else. Plus, if you are an Executive Member you get your 2% on all you Costco purchases. This means when you get gas you are saving that initial 5 cents off every gallon, plus an additional 5%. This comes to over 20 cents per gallon at today's gas prices. If you drive a lot, it is easy to pay for your membership in gas savings alone if you have a Costco on your daily routes or near your home. Make sure to look through the coupon books they send you also. The coupons are generally only good for a few weeks but you tend to get them early enough to plan ahead.

Anonymous said...

Continually questioning the need for Costco membership. For the past year, the cost of gas at Costco has been more than that at a local Exxon gas station. When I discussed this with the membership staff, the response was that the gas price was adjusted with the prices toward the north side of Costco. I told the service rep that the gas station was less than five miles from Costco and my only reason for obtaining the membership in the first place was because of the gas savings. Lately, I found inferior tasting products and poor quality meats. Filet mignon was very fatty on the bottom portion that could not be seen without opening the package. Veal scallopini stunk when I opened the vacuum sealed package prior to the sell by date. Additionally, cookies tasted strange and packaged frozen food was poor quality. All of these items were packaged much larger than I would normally purchase. And today when I went there to purchase gas, the gas station was shut down at 1:00 p.m. The attendant at the door told me that so many people were buying gas for no reason at all. Hellooo....
I told him I was really getting fed up with Costco. Previously when gas prices were going up, Costco gas shut down... Seems strange that the local Exxon still had gas at 3.66 - while Costco had been selling gas for 3.75 until it shut down the pumps.