Costco is a Rip-Off
My husband and I used to believe in Costco. We bought Costco cards and went into the big-box retailers’s store regularly; and when we came out, having spent hundreds more than we would have in a trip to a regular store, I mentally justified it by telling myself we’d saved money by buying items in larger quantities. Then, early in our marriage we ran into a tough spot financially and I started keeping a diary of food costs at various grocery stores. To my surprise, Costco wasn’t cheaper at all. We could get similar items in bulk sizes at Smart & Final at the same price, and sometimes even for less; and loss-leader sales at our local grocery stores always beat the Costco price, and were sold in more convenient sizes for our 2-person family.
I already hated the insult of shopping at Costco. Just going in meant having to bypass some crazy Nazi who insisted on seeing the Costco card, even though it would be impossible to buy anything without it; the checkout lines were always dreadfully long and headed by surly clerks; and God forbid the day when one spouse had brought his card and the other spouse had brought her checkbook, because if check name and card name didn’t match, even if both spouses have the same surname, only cash would do. Furthermore, we’d have to wait in another long line just to get out, so another door Nazi could carefully check our purchases against our receipt, as if it’s possible to smuggle out a big screen TV. We ended our relationship with Costco, and only went back briefly when Neil was a baby for their bulk pricing on diapers and formula; but we didn’t bother to do so for Kelly.
Yet most of the people I know still swear by the belief that Costco is saving them money, and think the $50 card fee and the hassle is worth the savings. I know people who go into the store every day, and the parking lot of the Almaden Costco near us is always packed. On a certain level, honest Costco mavens will admit that they’re paying more for their food than I am pouncing on supermarket promotions and driving to Wal-Mart, but there’s another element of it that Peter calls “adventure shopping.”
Costco adventure shopping is the particular thrill of snagging one or several of the consumer items Costco buys at a bulk discount and makes available to its shoppers. Peter talks of a Kitchenaid mixer he found at a price well below other places one year; I still have a suede skirt that can’t have cost me more than $30. But today, in the age of Froogle and Gasbuddy, I’ve become more cynical about those bargains. One year, several mothers from Neil’s second grade classroom were teamed up to buy a Christmas gift for the artistic son in a certain impoverished family. One of the daily Costco shoppers came to our team, thrilled that she’d seen an easel at Costco for only $30. When I took the information to Peter, he mentioned that IKEA had easels for $12–so we ended up buying one of those and a slew of art supplies to boot.
For their typical customer, a trip to Costco almost always involves unneccessary spending. Do you really need a $600 air hockey table, or did the sight of it inspire in you a desire for air hockey? And if you do have an unquenchable air hockey table desire, did you know that Wal-Mart has a less-flashy air hockey table for only $250? When you were buying that massive $40 gift basket for your uncle, did you even stop to think if he might have been just as happy with a $20 bottle of wine, or some good books instead? Many people cite Costco’s “bargain” gasoline a great reason to buy a Costco card, but a quick check on Gasbuddy this morning revealed the price of Costco gasoline to be exactly the same as at the Arco station 3 blocks from my house, and gasoline actually costs even less a few miles east of it.
While researching this piece, I also discovered a hot topic among discount shopping fans is that Costco pays its employees better than Wal-Mart does. But I certainly haven’t seen that difference shown in service. The employees at the Super Wal-Mart in Gilroy are plentiful and cheery. The Costco near us, last time I was there, made us feel like citizens of a police state, and the painfully long wait in line was obvious evidence of far too few cashiers. True, the Wal-Mart in south San Jose has less-than-spectacular employees, but I don’t have to lick their boots going in and out of the place, nor pay $50 a year for the priviledge of doing so.
My title for this piece is an exaggeration, largely to get attention. Costco, after all, isn’t an out-and-out rip-off. If you are dilligent enough to keep a price diary, or compare prices with other stores, you can pick out their bargains. But the membership card does not get you items below cost; Costco has a mark-up on everything it sells, just like any other store. But if you believe you’re saving money by buying everything at Costco, you’re wrong.
March 28th, 2007 at 6:38 pm
Actually, Costco’s business model is that they don’t really charge a markup on their merchandise. Their ‘profit’ comes from the membership fee they charge; the actual merchandise is sold at pretty much their wholesale cost + a flat percentage of overhead for transport, etc.
Part of the value of Costco is that in many ways they’re very forgiving with returns and customer service. I disagree about the surly associates; for the most part I’ve found the employees at Costco are as good or better than the ones I’ve seen in Walmart or Target, and Costco will let me return things that are broken months later without a huge hassle.