Is Shopping at Costco Worth the Membership Fee?

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Nowadays 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 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 determined 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.

Click here to see Cheapism's infographic.

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 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.