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.
This post comes from Aaron Crowe at partner site DealNews.
Unless 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.
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
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.
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!
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.
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
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.
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.
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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