Max writes in with a great question that had an answer that was just a bit too long for the mailbag:
Recently moved to and bought a house in a new town where I hope to stay for several years. There is a Costco and a Sam’s Club here. Never lived close enough to either or had the storage space to make it worthwhile so I’m considering joining one or the other. Sam’s Club is closer and more convenient but Costco isn’t bad either. Trying to figure out if it’s worth it.
I assume Max is trying to decide if he’d save enough money over the course of a year to pay for a year’s membership at either club. So, let’s address that question.
In my experience, warehouse clubs really only save money on a few specific things. Outside of those specific things, the prices at warehouse clubs are comparable to other big box retailers like Target or Wal-Mart. The value of a warehouse club comes down to whether or not the savings on those things adds up to enough over the course of a year.
First, warehouse clubs usually save money on gas. Many warehouse clubs offer gas for members at a price that’s $0.05 per gallon cheaper than nearby competitors, give or take a few cents. In my area, the only convenient warehouse club is Sam’s Club, and the one nearest to me sells gas at a price that’s pretty much always $0.07 cheaper than the two gas stations closest to it – believe me, I’ve checked.
Let’s say I go there once a month and fill up the tank on our van, which is a 16 gallon tank. 16 gallons per visit times $0.07 per gallon times 12 visits per year gets me to $13.44 in savings over the course of a year with monthly fill-ups. If I do that more frequently – for example, if I do it once a week (though I don’t need to fill up that often) – it would pay for my membership right there.
So, the first thing to look at is whether or not any warehouse clubs near you offer gas sales and, if so, how much it saves. If you join, you should start filling up there as often as possible because that will pay for a significant slice of the membership.
Second, warehouse clubs usually price their store brands very well and the store brands are of at least reliable quality. At Sam’s Club, the store brand is Member’s Mark; at Costco, the store brand is Kirkland Signature. The store brand products at both places are of at least reasonably high quality; in particular, the Costco store brand is quite good for most products.
What really makes them stand out, though, is the price – while it’s not quite universal, the store brand at both Costco and Sam’s Club is almost always a very nice bargain over name brands and even store brands at other stores.
We rely on Member’s Mark for things like toilet paper, trash bags, dishwasher detergent, and many other household needs. It’s usually the least expensive option for those things available to us and it’s comparable in quality to almost every brand we’ve tried.
The catch is that to really nail the savings, you have to buy them in bulk. You’re going to be buying 200 trash bags at once or enough dishwasher soap for more than 100 dishwasher loads or enough toilet paper to last a family of five for several months.
I ran the math carefully over the course of a year just calculating our savings on bulk nonperishable household products, comparing them to prices on similar items at Fareway (our primary grocery store, which is a discount grocer), and I found that we saved enough over the course of a year on nonperishable bulk items to pay for our membership multiple times over. It’s worth noting here that we stuck almost exclusively to store brands in doing so.
This brings us to the third point: most warehouse club bargains come when you buy something in incredible bulk, which usually means perishable goods are off the table unless you’re going to consume a lot of it. We rely on warehouse clubs for a lot of nonperishable items, but we generally only buy them in bulk (and many of them are the store brand). That means that we have to have storage space for that stuff, which means if you look in our main floor closet, you’ll find lots of things like toilet paper and extra canned foods and toothpaste and so on. I’ve joked before that our main floor closet looks like the closet of a prepper.
It’s worth noting here that the value of doing this varies a lot depending on the nature of your household. A single person is going to get far less value out of this kind of bulk buying than a family of five would. I speak here as someone who shopped at warehouse clubs as a single person, as a married person without kids, and as a married person with kids: the larger your family, the bigger the benefit of bulk buying is, but I’m not sure the benefit is big enough if you’re single.
It’s also worth noting here that not every bulk item at a warehouse club is going to be strictly cheaper than elsewhere. You’re generally not going to be paying higher prices there, but on some goods, the prices at a warehouse club are comparable to what you’d find elsewhere for similar quantities.
This is one of the challenges of shopping at a warehouse club: there’s a carefully cultivated sense of “value” when you shop there that makes it easy to convince yourself to buy something that you might not otherwise buy because you perceive it as a bargain. Fairly often, it isn’t a bargain at all. That’s why, just like at other stores, it pays to shop at a warehouse club with a shopping list while not buying things that aren’t on your list.
There’s a final thing that I want to mention that provides a lot of value from warehouse clubs: electronics. The prices on many electronic items at warehouse clubs are, at the very least, extremely comparable to the prices found elsewhere on basically the exact same items. If you’re looking for something like a tablet computer or a laptop or a television or even a small kitchen appliance, you absolutely must include your local warehouse club in that comparison shopping if you’re a member because, at the very least, the prices will be highly competitive. Several electronic devices in our house right now were purchased from a warehouse club simply because their price on that type of item couldn’t be beat by other retailers, even online ones.
So, should Max join a warehouse club? Here are my thoughts.
If Max has at least three people in his home, he should join. He’ll get enough value from the bulk purchases to more than pay for his membership because, with three or more people at home, those items will get used up fast.
If Max has a significant daily commute by car where he drives right by a warehouse club that sells gas, he should join. At my old job, I drove right by a Sam’s Club that sold gas and I ended up paying for most of my membership just with gas savings.
If Max is intending to buy a significant electronic device soon, he should use the warehouse clubs as a pricing tool and join if he can save money on the purchase. I’ve consistently found the prices on electronics at local warehouse clubs to be very, very competitive and often the lowest around. Our last television replacement saved us enough on comparable models at other retailers that it more than paid for our annual membership in one purchase.
Otherwise, it’s probably not worth it. If one of those three factors doesn’t pull Max in, then he’s likely not getting enough value out of a warehouse club to make it worth the cost of the annual membership.
A final tip: if you do join, take advantage of it. Don’t let the membership languish. Use it with intention and seek out genuine bargains there (it’s a good idea to note the prices on some things from your ordinary grocer, like toothpaste and toilet paper and garbage bags, and make sure you’re saving money on them at the warehouse club).