• Steve

Is Costco Worth It?

"Is Costco worth it?" It's a question I've gotten numerous times and is as old as, well,1973 when the first Costco, then "Price Club," opened. With almost 800 warehouses worldwide, 93 million members, and retail revenues second only to Walmart, the size of Costco is undisputed. What is disputed is whether the store actually saves you any money. Let's take a deeper look. First, we'll quickly get out of the way the fact that unlike most stores Costco requires an annual membership fee, usually $60/yr, but can be as much as $120/yr for the "Executive" level membership. So we'll note you aren't really saving any money until you've at least saved $60/$120. Next, I'll make the point that anything you buy at Costco that you wouldn't otherwise normally purchase is like an added membership cost. Many, many, many people struggle with this. Think about that jar of nuts up near the front you bought for $9 as you headed to the cash register; this is like an added $9 membership cost if you never would have bought the nuts in the first place, here or anywhere else. Same thing with every other item in your cart that you didn't plan on purchasing when you walked through the door; Costco is really great at encouraging these "impulse" purchases. Since we're buying in bulk, we also need to add in any cost for wasted food. For instance, if you buy a large package of fruit (because it only came in a large package) and some of it spoils before you eat it, this is effectively an added membership cost. I'll also note that most people drive to a Costco IN ADDITION to their neighborhood grocery/office supply/furniture/electronics store. So we've got to add in the cost of gas, which could be ~$5 each trip plus some intangible dollar value for the added time you're taking to shop at an additional store. Now, you might argue you can buy gas at Costco ~10 cents cheaper per gallon, but this may only save you $1.20-2.00 on a fill-up. All-in-all, there are a lot of costs to the Costco experience, some obvious, some not. But what about the benefits? Of course, there's (potentially) hundreds or even thousands of dollars saved by buying in bulk. And while I've added this to the "Benefit" list realize that after holding a Costco membership for a year, my wife and I determined that only about 1/2 of the products we regularly buy as a family were any cheaper at Costco than our neighborhood grocery store. Furthermore, we determined that of the 1/2 that are cheaper at Costco, if we waited for a sale at the grocery store, we could get them for the same price that Costco sold them every day, we just had to have patience and vigilance. Of course, Costco membership also has some nice perks such as preferred agreements with HVAC vendors, car dealerships, travel arrangers and so on. And here might really be the rub - if you plan to purchase something big (i.e. a new car, a new HVAC system, etc.) these arrangements may not only save you money (especially if you upgrade to the "Executive" level membership for just that year) and hassle, but you also get the bargaining power of Costco if you have any complaints/disputes. After all, what vendor is going to want to lose the Costco contract? So what's the answer when it comes to your family's Costco membership decision? In short, it depends. Unfortunately, there is no easy answer and you'll have to honestly think through the specifics of your unique case. It will require making a list of the items you, personally, buy and then doing item-by-item price comparisons with the stores you regularly shop at to procure them. Recognize that while some items at Costco are cheaper, others are not. It depends on how much you buy that you wouldn't otherwise buy. It may largely depend on if you purchase a "big ticket" item that is cheaper. For instance, purchasing a new car that at a $1000 discount quickly makes up for your membership price. I know, I know - you were hoping for an easy "yes" or "no" answer but as this article comes to an end, you're not going to get one :) One final word of advice if you do shop at Costco, absolutely bring a well-researched list of what you're shopping for and stick to it!