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7 ways warehouse clubs get you to spend more

DealNews has uncovered tricks that retailers use to make those alluring wholesale prices much less consumer-friendly.

By DealNews.com Apr 10, 2014 4:22PM

This post comes from Aaron Crowe at partner site DealNews.

DealNews on MSN MoneyUnless I leave my wallet at home, I can never make a trip to Costco without spending $100. It's simply not possible. I may go there with a shopping list and be determined to stick to it, but every time I leave with more goods than I expected to buy.

Shoppers stand in line to pay for their merchandise inside a Sam's Club store © Susana Gonzalez/Bloomberg via Getty Images

What pull does Costco have over my wallet, and how do wholesale warehouse clubs get shoppers to spend more than they've planned to?


The folks at DealNews have uncovered a few factors that make up the allure of wholesale pricing. Make yourself aware of them, and maybe you'll avoid buying more than you need.

Membership fees and low prices add up
People shop in bulk to save money, but low prices aren't the only way wholesale or warehouse stores entice shoppers to spend. Costco makes most of its money from annual membership fees, which help it maintain its low prices. Those low prices in turn make customers feel like they're getting a good deal upon just walking in the door; but lots of low prices add up and customers end up buying just a little bit more than they immediately need, says psychotherapist Judy Belmont. "It's unbelievable how low some of those prices are," Belmont says. "So people do end up spending a lot more."

Shop at your own pace
It probably hasn't occurred to many shoppers that there's no music playing in the background at many wholesale clubs. "They want you in that store forever," behavioral and marketing psychologist Elliott Jaffa says. "There's no fast music to make you shop faster or slow music to encourage you to meander through the store." It's as if time becomes suspended in the endless aisles.

Large quantities and sizes can disguise unit prices
If bigger is better, then buying more of something bigger comes at that much more of a savings, right? Unfortunately, this isn't always the case. The sizes and quantities of bulk products are not what people are used to, Jaffa says, so three pounds of cream cheese looks like a deal worth buying. Never mind that you may never use all of that cream cheese before it goes bad. You have to look at the unit prices — sometimes marked, sometimes not — and compare it to other stores' unit prices to figure out if you are truly getting a good deal.


"I've got to believe [Costco] has some of the best psychologists in the country working for them," he says, "because it has the best suppliers and know how to price everything."

Product placement is everything
Whether it's a warehouse club or a grocery store, product placement is key to getting shoppers to buy, says Rob Jager, a business and management consultant who has worked for numerous big-box retailers. Cameras, computers, and other electronics don't provide a large profit margin for stores. To compensate, they position these items at the front of the store so that they at least see a lot of turnover.

The ends of aisles, or "end caps" as they're known, are prominent spaces that suppliers often pay for. Signage may make you think end cap products are great deals, but check twice before loading them into your cart. "I think shoppers have been trained to believe [end caps are] where the deals are," he says. But it might just be that that's where the ad dollars are going.

Shopping at Costco is like being on a treasure hunt
Since stores like Sam's Club, Costco, and BJ's Wholesale Club change out their merchandise often, you never know if what you see on sale today will be there tomorrow. Finding new things in a warehouse club is an on-going treasure hunt and gives shoppers a sense of intrigue when they walk in.

Marketing expert Harry Beckwith, who has Costco as a client, says that his best friend can't go to Costco without recounting the incredible deals he got there. This friend is wealthy but shops at Costco because it makes him feel clever and smart. It turns shopping — something he normally dislikes — into a game he loves.


Buying a lot to avoid return trips
Face it, walking through a huge store can be a hassle. The parking lot is usually packed, the store is full of people pushing huge carts that are difficult to maneuver, and checkout lines are sometimes endless. It's not an easy trip, so once there, many customers find it smart to make the best of it and buy as much as they need in order to avoid making another trip any time soon.

Cashing in on customized deals
Sam's Club, for one, gets members to buy more by tracking their prior purchasing patterns and offering customized deals, says Bruce D. Sanders, a consumer psychologist and retailing consultant. The Sam's Club program, which requires an extra annual fee, uses predictive analytics to determine what items are attractive to individual customers, and then offers discounts on those items. Consumers also receive discounts on items they've never bought before, but that which are logical future purchases based on a consumer's history. This "endowment effect" encourages shoppers to buy more because they've paid for the privilege to get rewards and are motivated to cash in on such programs, Sanders said.

If you're aware of the ways in which wholesale clubs tempt the everyday shopper, you may be able to save even more money. By sticking to a list, allotting yourself a set amount of time, and only carrying cash, you can avoid the temptations that these stores present.

More articles from DealNews
57Comments
Apr 10, 2014 10:01PM
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If you only carry cash, you miss out on two good deals:  the 2% cash back you get from Costco for your annual spending (with executive membership), and the cashback on the AmEx card offered by Costco. 

And, since Costco's merchandise is ever-changing, if you pass up a really good deal, it probably won't be there next time you visit the store.

If you can't control yourself in a warehouse or big-box store, it's not the store's fault.

Apr 11, 2014 7:21AM
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Shopped at Sam's before the local Costco opened. It was like night and day. Sam's was dirty and had bad customer service. Costco is clean and very friendly staff. Costco also has quality products.
Apr 11, 2014 7:17AM
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This article is completely senseless. I work in marketing & I can tell you that ALL stores use the same techniques to sell you something!!!! They all use the "end cap trick" & most warehouse stores sell more electronics than your average variety store ( ex. Kmart, Target.....) So  they don't need to  compensate for electronics. Jewelry doesn't provide a large profit margin for stores. So why isn't the Jewelry counter positioned at the front of the store? Every store pretty much markets the same way. And have you ever known of a store that DOESN'T have customized deals? And as far as the music goes, well any bimbo knows that fast music makes you want to move faster thus if they play it in the store you will feel anxious at getting your shopping done sooner. If the music is slow, like in most stores, your more likely to stay awhile because this music relaxes you. Then your more likely to purchase more. AND since the warehouse clubs rarely play music... I mean come on people! Your shopping in a WAREHOUSE??? Unless they are giving out samples of something I've never tried before, I get bored very quickly. Thus, I pretty much stick to what I actually need. The only TRUE statement in this whole article is: " Costco makes most of its money from annual membership fees, which help it maintain its low prices. Those low prices in turn make customers feel like they're getting a good deal upon just walking in the door." Which in FACT they do since they sell their products barely over cost!
















 


Apr 11, 2014 8:21AM
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If people do not want to shop there they wont, but some folks need large quantities and for them its a deal, large family, small business, etc. CORAVETTE
Apr 11, 2014 7:09AM
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Sam's club is dirty, poorly  stocked and even worse for customer service. Costco on the other hand is well lit, clean and every time, without fail, a store employee will ask if they can help with anything. That beats having to find an employee at Sam's, interrupt their texting or talking to another worker and then still not getting a answer. I still have cards to both but haven't been to Sams's in almost a year. You can tell it's a walmart company.
Apr 11, 2014 11:49AM
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Kevin <> I very much resent your assessment.  Anywhere you shop near a city you will find what you describe as unkempt people.  Some of those people are kinder and more compassionate that those dressed more suitable in your tastes.  A set of classy clothes and a Ivy League education does not make for better people.  Check out your government SUITS.  I happen to have been a construction company owner with a college education that frequently shopped in my torn or dirty work clothes.  No one would have guessed I was pulling down six figures.  Looks can be deceiving.
Apr 11, 2014 9:05AM
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I go with a list, I know that I'm going to get things that aren't on my list, but I try to make smart choices. We buy only certain things at the bulk stores - like pet food, paper products, freezable foods, toothpaste, etc. Very rarely do I make a "splurge" purchase that I regret later.
Apr 11, 2014 2:43AM
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I sometimes can visit Costco and just purchase the items that I needed that brought me in, usually PT and TP. When I am there I like to cruise all the food aisles to see if there is something deliciously different to try.  About 85% of the time I buy some food items based on an impulse.
Apr 11, 2014 10:03AM
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Having done retail and food floor advertising, I can tell you that food stores can sway only seven (7%) percent of the buying public. Everyone else is pretty much going to go to the same store every time. Now when you translate that 7% into the large, full color double spread advertising pages and flyers produced weekly by every food store you can see just how much even that low percentage is worth. We have all read about the trick of putting certain items at specific levels for different customers and other such marketing point of sale tricks.

I love the little tricks like People, Readers Digest and Time magazines at the 10 item or less while the more lurid rags (plus the above) are at the longer line checkouts. When the lines are backed up, the magazines fly off the shelves. When lines move quickly people don't have time to read the cover and therefore don't buy. Stores close off tills just to slow down the check out by a little so the high profit quick movers have a little longer to snare you.

I use to marvel at stores constantly seeming to be out of one house item or another. The space allotted to these items always seemed small in comparison to the more expensive brand names. I thought it was just poor record keeping or product knowledge. Nuh-uh! The reason there is two rows of in-house ginger ale is because the store makes more on the brand name with eight rows plus they get a reduced per item wholesale price plus bonuses. No trick is ever missed in retail.

Apr 10, 2014 10:00PM
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I'm sure the article is all (mostly) true, but you couldn't keep me out of Costco with a stick.  I think I'm getting value for my money.  Even if I'm wrong, it feels good.  But I wish our would put the hot drink machine back, in.
Apr 11, 2014 11:54AM
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One thing to remember, Costco is NOT a retailer. Sorry to all those who think they are. They are a wholesaler and abide by rules of wholesalers. They have a limit on their mark up (11-13%, not sure of the exact number, so don't come down hard on my comment). They make their money on memberships and the volume of sales. Food prices are normally a bit lower, but most people dont' understand that supermarkets also work on some fairly low margins too. Costco has some great ideas, for one, doubling the manufacturer's warrenty. Use an AMEX card, and get another year added on.
Apr 11, 2014 12:05PM
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Sam's is great if you know how to assess the deal they're offering and don't fall for the gimmicks.  I buy over-the-counter medications such as aspirin, ibuprofen, vitamins, etc. at about 25% of the cost at Target or the local drug store.  Although their clothing selection is small, you can get great deals on things like Levi's or other brand name jeans for less than $20.  I buy frozen seafood there frequently at about half the cost of the local grocery chain.  They also have great quality bed and bathroom linens at really excellent prices.  I bought a 100% wool, imported Oriental rug there recently for less than $400.  The same rug was for sale in a local rug shop for over a grand and on-line for $795--plus shipping.
Apr 11, 2014 9:44AM
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I do most of my shopping at Costco. But i do not buy anything because I see it there. If go with the list or items in my mind that I want to buy, stick with with, and get out of there when I got my stuff. Occasionally I see something the reminds me that I should buy or forgot to put it in the list. Then I grab it.

Do not buy anything that you like there and want to buy, but buy things you need. But if you have millions to spare who cares?


Apr 11, 2014 2:34PM
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After recently joining Costco we'll never go to Sam's club again!
Apr 11, 2014 4:17PM
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Costco = ALWAYS Clean Stores w/ nicely dressed, helpful employees VS. Sams (aka Walmart) = usually clean stores w/ trailer trash looking employees and service to match

Apr 11, 2014 11:09AM
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The Mrs. & I go to Costco three to four times a year and for specialty items as a Printer.  We have a plan when we go.  It is a method of inventory that works like this.  I printed out a two page shopping list with four columns:  Items by category - # of items we have at home - How many we want to buy.

We keep this in a loose leaf notebook open in the carriage, and check it off as we load it in the cart.  There is space to write in extras we buy.  We have notes to look at added thought items to gauge the price vs. need at the store.  This store is 20 miles from home so we know we have to save at least the cost of three gallons of gas.  We buy a lot of Kirkland products that are equal to name brands (trial & error).  We are retired so time spent shopping during off hours is leisurely and price comparisons are easily done by the shelf markings of UNIT PRICING.  An order runs from $450 to $750 per visit on the AMEX card.  I pay the bill by dividing the total by 3 so it is paid off in time for the next visit, and the interest is minimal for the convenience of shopping 3-4 times a year.  Meat & fish pricing is 10 - 20% less than B J's or the local super markets.  That is where most of the money goes - into the freezer.  Store is clean & help, if needed, is easy to find.  The floor personnel do offer assistance when someone looks perplexed.  Dedham. MA,  Avon, MA or Waltham, MA are all 20 to 25 miles from my home.

Apr 11, 2014 4:05PM
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My wife and I belong to both, Sam's is only a mile away and Costco 7 , When our friends ask which we prefer we  tell them Sam's is full of Democrats, and Costco full of Republicans. One is very clean and polite and the other has a sense of entitlement. I 'll let you decide which is which.

Apr 11, 2014 11:41AM
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Just about all the reasons the article states for NOT shopping at Costco are the reasons we DO  shop at Costco.  I just needed to upgrade a computer program so I shopped Best Buy, Staples, Wal-Mart (none) & B J's.  The closest price was $19.50 more than Costco's price with the sales tax & shipping included.  I also saved $45 buy purchasing a printer there over the pricing at the same stores.   It was delivered in three days from ordering.  Well worth the $55 per year fee.  I am not an executive member as I would have to spend $5,000 per year to get back the $100 fee at 2% of purchases.
Apr 11, 2014 3:32PM
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Has anyone noticed that the 1/2 liter bottles of water are the least expensive per ounce?  Those bottles are even cheaper that the 5 gal jugs.

 

So much for bigger is cheaper

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