Is Costco Worth It?
Published on By Emily Lugg
A membership at Costco, the popular warehouse club, costs individuals and families $55 a year. That has many consumers asking: Is Costco worth it? Our research comparing Costco with conventional retail stores found that membership does pay off -- and not strictly for the savings, which can be substantial: almost $400 on our shopping list of 19 products. Members enjoy a raft of perks, including access to a variety of relatively cheap consumer services and the convenience of one-stop shopping for most family needs. But these benefits come at the price of limited product selection, bulk packaging, and a Spartan shopping environment.
The warehouse club requires membership to access its deep-discounted offerings, which generally come in large quantities. The stores are stocked with bulk grocery items and limited variety in other departments, such as housewares, clothing, and electronics. Bulk buying deters some shoppers who fear waste and/or storage challenges. Some flock to Costco for the membership perks and the one-stop convenience.
Conventional Retail Stores Review
Specialty retailers such as Best Buy, department stores such as Kohl's, and supermarkets such as Kroger offer a wide selection of products in specific market segments. Coupons and loyalty cards can make prices competitive with Costco's, especially when factoring in the yearly membership fee at the warehouse club. For some shoppers, the superior selection outweighs potentially higher prices.
Pros and Cons of Costco Membership
To see how Costco stacks up against other types of stores, we visited Best Buy, Kohl's, and Kroger outlets in Columbus, Ohio. We went in search of electronics (32-inch TV, Blu-ray player, streaming media player, men's shaver), household products (upright vacuum cleaner, spray mop), groceries (tomatoes, fresh salmon, pineapple, cantaloupe, apples, onions, canned soda, disposable diapers), and clothing (ladies' hoodie, children's playwear, girls' swimsuit). Additionally, we made pit stops at Staples for permanent markers and Bed, Bath & Beyond for cookware. At Costco we priced out brand-name items and a few bearing the store-brand Kirkland Signature label. At the other retailers, we checked out the closest brand-name equivalent to the stock at Costco and found exact matches for most items. The bottom-line total for 19 products came to $1,165 at Costco versus $1,557.28 at the other specialty retailers, for savings of $392.28 at the membership club.
When we spoke with customers, a majority said they shop at Costco for specific things, such as paper products, dairy products, and kids' clothes. They don't flock to the warehouse store daily or even monthly. We noted that families with four or fewer people home in on a handful of items that draw the most value from their memberships. For example, apartment dwellers, such as Chicago resident Katie Leemhuis and her husband, rarely if ever buy bulk items at Costco. They use their membership to score price breaks on movie tickets, restaurant gift cards, the basics (eggs, milk, butter, olive oil), fuel for the car, and the occasional super-deal on gadgets or electronics. Larger families and those with lots of storage space, on the other hand, are better positioned to take advantage of the cost savings that come with Costco's bulk packaging of products, be it dental floss, breakfast cereal, or detergent.
The annual cost of a Costco membership is $55 for an individual or family. A similarly priced business membership can add up to six other cardholders, who all receive a membership card for their own households. An executive membership costs $110 a year and returns 2 percent (up to $750 per year) on purchases. Regardless of family or home size, the consensus among the consumers we interviewed was that the membership fee to shop at Costco is worth every penny. The purchase of one big-ticket item alone can recoup the $55 fee when Costco prices are set against those posted by specialty retail chains.
Checkout price $392.28 less than retail, a 25 percent savings
Grocery items sold in large quantities; only a few models of each item; good-quality store brand
Large selection in specific product categories
Customers can buy as much as needed, reducing risk of waste; better chance of finding exact item
One-stop shop; demonstrations; samples
Samples; loyalty card discounts
Saves multiple trips to various retail stores
Efficient checkout; helpful employees
Mixed reviews about speed of checkout depending on retailer
Streamlined checkout process keeps lines moving fast; few complaints about customer service
Selection.Product selection is the realm in which Costco is weakest and specialty chains shine. The budget-wise business model that makes Costco so popular with frugal consumers at least partially explains why the warehouse club can't serve as the exclusive shopping destination for many fans: It may not carry the specific item, brand, or quantity you want. Specialty chains, by contrast, offer far more choice and enable more control over how much you spend at any given time.
During our shopping expedition we found markedly fewer options for the items on our list -- and in general -- at Costco compared with the inventory at the other stores. For example, we counted 16 TVs on display at Costco but more than 50 at Best Buy. Costco's online selection is better -- 59 models -- but doesn't come close to the 639 available on Best Buy's website. Costco carried fewer than 20 configurations of pots and pans, while Bed, Bath & Beyond stocked more than 200. We found an entire display of mix-and-match shirts and shorts for children at Kohl's but spotted just three shirt-and-short sets (which were not meant for mixing) at Costco.
Package sizing is another limitation at Costco. Forget about buying a 21-ounce box of Cheerios like you can at Kroger. Costco's only offering was two 55-ounce boxes packaged together, each the equivalent of almost three grocery-store-size boxes. Unless you have a lot of Cheerio eaters or a secret way to keep them fresh, consuming that amount of cold cereal before it goes stale could be a challenge. Ditto for fresh produce. Costco cantaloupes come three to a pack and apples are sold in 10-pound bags. At Kroger, by contrast, you can buy one cantaloupe or one apple.
Some products, such as toilet paper or paper towels, last forever. But a place to store them and a budget that supports the purchase of large quantities at one time are necessary conditions. Julia Betz, a homeowner in Columbus, Ohio, who has plenty of storage space, last bought toilet paper three months ago and considers her $11.89 investment both a money- and time-saver. Shelling out for 12 rolls of toilet paper is about 10 percent cheaper than buying four rolls at a time at Kroger; plus, there's less likelihood of having to make an emergency run to the market. Splitting a Costco haul, perishable or otherwise, and its cost among family, friends, or neighbors is one way to skirt the quantity issue, but doing so on a regular basis could be a logistical nightmare.