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Is shopping at Costco worth the membership fee?

Shopping at Costco saves money, even after paying the $55 membership fee, but comes at the price of buying in bulk and limited selection.

By Cheapism.com Aug 1, 2014 5:09PM
This post comes from Emily Lugg at partner site Cheapism.com.

Cheapism.com on MSN MoneyNowadays there are an endless number of ways to shop at a discount -- coupons, e-commerce, clearance racks, bargain stores, and membership clubs, just to name a few.

Costco Wholesale Store in Clarkton Wash. © Francis Dean/Rex FeaturesCostco is one of the most popular warehouse clubs nationwide, but how does it stack up against the conventional retail competition? With our $55 membership and a shopping list in hand, Cheapism decided to find out.

After comparing our shopping cart at Costco to comparable products found at Kohl's, Best Buy, Kroger, Staples, and Bed, Bath & Beyond, we calculated nearly $400 in savings on 19 items owing to our Costco club card. Shopping at Costco shaved 25 percent off the total bill elsewhere.

Selection
These savings come at a price, however, in addition to the membership fee. The selection at Costco is sparse compared with its retail counterparts. By way of example, we found more than 50 TVs on display at Best Buy while Costco carried just 16. To enjoy the savings as a Costco shopper, then, you must be willing to purchase a different model, brand, quantity, or style of the item on your list. If not, then sticking with the retail standby is the best bet.

Quantity also limits the number of choices at Costco. If you want just one cantaloupe, forget it -- the only melons available are packaged in units of three. Are you looking for a four-pack of toilet paper to take on vacation? Don't bother; the smallest pack we found contained 12 rolls. As long as the item isn't perishable and you have the storage space, buying in bulk can save you serious cash. Otherwise, Costco generally isn't an option.

Interviews with Costco members revealed that many shop at the warehouse store strictly for specific items, such as dairy products, paper products, and children's clothing, and need to refill their larders infrequently. We also observed that families with four or fewer people are the most particular about the products they buy in large quantities. Larger families are more likely to consume perishables before they expire and can really cash in on the bulk deals. Other members get the most out of Costco by taking advantage of membership perks, such as discounted restaurant gift cards and movie tickets, and basic foodstuffs such as eggs, milk, butter, and olive oil.

Prices
Costco's business model keeps prices in check. Financial analysts report that Costco merchandise is marked up by about 15 percent compared with the retail industry's more standard 25 percent. The relatively thin selection also holds down the vendor's costs, as does the proliferation of its in-house brand, Kirkland Signature, on product shelves. During our store visit we also noticed that some items seemed to be slightly older models, especially in the electronics aisle.

We saved money across all the departments we shopped in, including household, grocery, and electronics. A Shark Pro Steam & Spray mop cost $24 less at Costco than at Best Buy, for example, and the price tag on a 32-inch Phillips HDTV was $100 lower. The total bill came to $1,165 at Costco compared with $1,557.28 at the other stores.

Unlike other retailers, Costco doesn't accept manufacturers' coupons or mount big sales, so on occasion you'll find a better deal elsewhere. The catch-22 is that you can't guarantee what the price will be at retail on any given day. We shopped at the start of tomato season and caught a deal at Kroger on Roma tomatoes -- 99 cents a pound compared with $4.99 for 2 pounds at Costco. If we had returned the following week in search of the same deal, chances are we would have been out of luck.

Shopping experience
The convenience of one-stop shopping is a big reason for Costco's wide appeal. You can pick up contact lenses, tires, produce, dairy products, children's clothing, and home and auto insurance all under one roof. Product demonstrations and food samples liven up the scene and keep shoppers' children entertained.

That said, the physical environment is not the most aesthetically pleasing. The stores are very large and outfitted with stark metal shelving, bright lighting, and cement floors. By comparison, retail stores feel warmer and more inviting. Their smaller size makes them seem more manageable.

Given Costco's size and warehouse setting, finding an employee wasn't always easy. While we noted quite a few during our visit, they were all busy with specific tasks that didn't invite requests for shopping assistance. At Kohl's, on the other hand, we were approached several times by eager salespeople who were ready and willing to help.

And finally, it's important to note that Costco accepts only cash, check, debit card, or the affiliated credit card from American Express. The other stores we visited accept nearly every type of payment option. This factor doesn't deter regular shoppers who know the ropes, but it's something to bear in mind if you're considering a Costco membership.

More from Cheapism.com
367Comments
Aug 1, 2014 6:59PM
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I hate shopping.  But I LOVE Costco.  Why?  Because they treat people with respect.  Their employees are well paid.  Their employees are very courteous in stark contrast to the usual.  It is an absolute pleasure to shop there.  I save a lot of money, but even if I didn't, I would still shop at Costco.
Aug 1, 2014 7:34PM
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I got a rebate check from Costco in the amount of $264.00. My cash back from my American Express card, that I got through Costco, was $424.00. And I pay my bill every month so there was no interest. Yeah I think my $110 yearly membership is worth it.
Aug 1, 2014 6:57PM
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That buck-and-a-half hot dog and drink are a calling card for Costco and you don't even need a membership card.
Aug 2, 2014 1:58AM
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Hey, you forgot to mention that Costco only pay's their CEO $300 k annually, they pay their workers a living wage. Much better citizen than other's like Wally World, who don't care about their workers.
Aug 1, 2014 5:59PM
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Being approached by salespeople is not a plus to the shopping experience.  I own the stock, and I wish every store had the same shopping experience.  Food samples and all.
Aug 1, 2014 5:38PM
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Hard to beat Costco's prices for prescriptions. But one does not necessarily have to be a member to be able to fill prescriptions there so it wasn't mentioned in the article.
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This article ignores the real value of Costco membership because it doesn't include the savings gained by the cheaper gas there.


I estimate that my savings on  gas bought at Costco pays for the entire years fee, so all other savings are a bonus: for example, pharmaceuticals, which have been proved to be cheaper at Costco then anywhere else.

Also, not everything is large quantities: my wife and I, a couple with no other family members, shop there all the time because their food is so good!   And, we have a freezer.  And liquor prices are better, etc., etc.


And, the refund we get every year virtually pays the fee by itself. . . . year after year.


Aug 1, 2014 8:00PM
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I love Costco.  I get my membership back plus enough to go shopping one day for free.  the products are always high quality and the customer service is awesome.

Don't like it?  Go somewhere else.  It has been too crowded in there lately anyway.
Aug 1, 2014 8:41PM
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I shop at Costco because they have hands down the highest quality meat and produce and they're 35%-65% less than the upper scale markets that carry this grade, they have saved me a fortune on everything else as well.
Aug 1, 2014 6:00PM
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Through Costco I got an American Express Card.  Early each year I get a check from American Express through my purchases that more than make up for the amount I pay for membership.  Actually I don't even pay for membership.  My son put me on his account, but together my son and I get way more money back than we pay for membership with checks from Am. Express plus I think my son gets another check from Costco if I recall right.
Aug 1, 2014 8:29PM
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go once a month, shop with some self-discipline and buy what you need for the next 1-3 months.


You will save enough to more than pay for the fee.


Especially good on eye glasses and on prescription and non-prescription items. 

Aug 1, 2014 7:34PM
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Best and ONLY reason to Buy there that most people don't know about Costco....Lifetime return policy on MOST Item's except Electronic goods, TV's etc.....

Buy a mattress, 10 year's later it sag's...bring it back!, I have bought and returned several Item's due to failure and have never had  them turned down

Aug 2, 2014 2:11AM
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Is shopping at Costco worth the membership fee?

Yup, if you use it, if not then no. I shop at Costco for a few things, not everything, I don't need a five gallon bucket of soy sauce or a gallon of mayo, but 12 cans of tomato soup or a family pack of steaks or ribs are a great deal at Costco and worth the cost of admission IF YOU USE IT! And now that Costco has liquor at much better prices than the liquor stores here in Washington state it's another good reason to go there (again, IF you use it) and they have good gas prices at the ones with gas stations etc etc etc. Most importantly, everything they sell is top notch, yes some stuff is average quality at best, but compared to Walmart, whose quality is generally a joke, I would say yes, the cost of a Costco membership is worth it, even if you only go there a few times a year.

Aug 1, 2014 8:40PM
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That store that had only 16 TV sets on display is a myth. I have yet to see a store with that few in number displayed. It's the same with BJs and Sam's club. They have on average 40 to 45 TVs on display
Aug 1, 2014 6:19PM
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Definitely yes. Even as single the Platinum AMEX pays for more than membership with rewards.
Aug 1, 2014 7:39PM
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Hard to beat Costco's produce, I have bought some from big chain stores and is the cheapest quality, I am a single shopper so the Executive membership is not for me, but for families it makes sense.
Really enjoy shopping there, good quality products.
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Not necessarily the cheapest.  We find things cheaper by watching for sales at our local grocery stores. Great for planning large parties buying in bulk.
Aug 4, 2014 4:44AM
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I kept my Costco membership and dropped my Sams membership.  I would rather spend a bit more at a company that takes care of their workers.
Aug 4, 2014 10:53AM
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Chickens pay for our Executive Membership. Huh? You read that right! Any size family can consume a cooked chicken in a week (and of course you have to before it goes bad). Chickens at Costco cost between $4.99 and $5.99. Worst case scenario at $5.99 we save $2 for each one of those little mother cluckers compared to shopping at Jewel which costs $7.99 usually (and those cluckers are smaller). 52 times 2 = $104 - $6 shy of the $110 Exec. Membership. But wait! there's more! You still get your Costco cashback and Amex cashback which for us comes to 5% total between the 2. There's the balance of your membership accounted for. 

But don't touch that dial! You then save an average of 10 cents per gallon on gas and about a buck per gallon of milk. (Full disclosure here, I drink a lot of milk). Not to mention toilet paper. As far as electronics go, models are really not that much older and you get 2 years warranty and a dedicated line in case of problems. No-one, but NO-ONE offers that kind of service on electronics. Compare to Worst Buy's policy on extended warranty and service.
Aug 2, 2014 1:18AM
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Not enough selection in the store? shop costco online.
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