I’ve only been blogging for about a month, but it looks like I’ll have to retract something I posted recently. In my post on 25 Ways I Save Money, one of the ways I mentioned was using Costco. It looks like I’ll have to retract, or at least amend, that statement. The problem is that when shopping for stuff like eggs and milk (which are usually a great deal cheaper at Costco than our regular grocery store), I end up being tempted by the big screen flat panel TVs, the books, the tools, and all the other stuff that I didn’t go there intending to buy.
The problem isn’t that these things aren’t a good deal at Costco. They usually are. I think Costco almost always offers a great value and I love their selection. The problem is that I didn’t really need these things to begin with. I’m not saying that I’ve bought a flat panel TV from there on impulse, just that everytime I go in there, I think “Hmm, that’s a great deal on that TV, maybe we should get a new one since the price is so good.” Or, I end up picking up a cool flashlight or a book or a software package, just because it’s a good deal.
It happened yesterday when I went there to get some groceries and ended up buying a two pack of those windup flashlights with built-in radios. I wiped out any savings from the eggs, milk, and groceries that we bought by buying those flashlights. I reasoned that Costco always has good prices and that I could leave these flashlights in the cars without having to worry about the batteries running out. Still, if I hadn’t of seen them there, I wouldn’t have gone out of my way to buy them and I would have been $23 richer.
Do you ever encounter the same “problem” at Costco?
10 users commented in " Retraction: Costco Doesn’t Save Me Money "
Follow-up comment rss or Leave a TrackbackI totally agree!!!! I myself do the same thing. I really hate to take my wife because she looks through all the clothes and always end up buying something.
I always leave there with something that I could have done without.
Oh yes! My wife and I have to put on blinders when we go to Costco or Sams. It’s so tempting to think - “Look at how much I’m saving by buying item X”. Of course the problem is that I never even knew I needed item X until I saw it at Costco!
In our case, I’m the guilty party rather than my wife. It’s the only time I look forward to “grocery” shopping since I get to browse the electronics and books section while she buys the stuff we really need.
You pretty much described Costco’s and many other retailers business plans. Get you into the store with some low-cost deal and sell you something that you didn’t even realize you wanted. I try to go there only when I’m looking for something specific. They have a good deal on ground beef compared to my local grocery store, so I buy it and then I’m good for quite some time. I don’t need to go back for a month.
I ended up buying my flat panel TV there as well, which was a really, really good thing. It wasn’t impulse, I did the research and budgeted for it for some time. It was less than a year when it broke and Costco, which doesn’t sell extended warranty (it’s built into your membership), gave me cash for the TV when I returned it. I was really surprised and expected some depreciation or something, but their systems couldn’t do it. So I ended up taking the money adding a couple hundred more and upgraded to a much better one as prices had dropped significantly. I feel a little bit like a crook because I made out with the TV breaking, but I their system kind of forced me into it.
Hence, I really like Costco. That one experience there saved me lot of money.
Okay, except for that blender I bought one time, and about 82 unused pounds of dried fruit, I find that just plain shopping at Costco turns out pretty well in the end. Some of the stuff I originally bought on impulse has turned out to be my go-to brand/product in a particular category. For one thing, their women’s underwear is the best anywhere, and they have these frozen, pre-seasoned salmon filets that are AMAZING. I find that if you mostly stick to certain familiar categories you can’t go too far astray, and then just use your shopping smarts when it comes to more occasional stuff.
Someone told me that Costco did not have to sell any products to make money. Apparently, the income from memberships is quite significant. Even if they sold everything at cost, they would still make money. What they get from selling products is gravy. And, they are good at that, too. Can anyone confirm or deny this?
In its latest quarterly results announced last Thursday, Costco had net income of $355.6 million and membership fees of $380 million, so basically all of its profit (and then some) came from membership fees. It wouldn’t mean that it sells everything at cost, though. The gross margin would need to cover all the expenses such as operating costs and financing.
Thanks, gte.
That mostly confirms what I was told. I am sure they do not sell much stuff at cost. But, loss-leaders are real and they do work (get the folks in the door) as this post shows.
[...] Costco Doesn’t Save Me Money at Getting To Enough How is it that a favorite store of frugal shoppers doesn’t save shoppers money in the end? I knew Charlie Munger was too smart to be involved in a money loosing business. Also, check out the percentage of profit at Costco made up of the annual fees reported in the company’s annual report. [...]
[...] A few months ago, I had mentioned in my post about “25 Ways I Save Money” that I saved by buying in bulk at Costco. A couple of weeks later, I wrote a “retraction” saying that I end up not saving money when I go to Costco because I end up buying stuff I didn’t originally intend to buy. I thought it was interesting that in this Sunday’s New York Times, Julie Bick wrote about this, dubbing it the Costco effect. [...]
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