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Why We Think Costco is Worth the Membership Fee

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Costco SignMy friend Mike at Wealthy Turtle wrote a post debating the merits of Costco and whether the membership fee is a bargain or not. We’ve long been a fan of Costco and we’ve been members since 2003, when I graduated college, and big fans of the company. We started with the regular Gold Star Membership at $55 a year and sometime in the last three or four years we upgraded to the $110 Executive membership and its 2% cash back reward (we spend more than $2750 a year at Costco).

Mike goes into the pros and cons of Costco but I’ll tell you why we continue to pay for a membership and why we think it’s worth it.

Prices

The reality is that unless the store offers good prices, everything else doesn’t matter. A good shopping experience is great but the reality is that most shoppers want the best price and unless you are close, everything else is just noise.

With Costco, and other bulk buying stores, the joke was always that you had to buy 20 lbs. of bananas to save ten cents. What’s funny is that it’s probably closer to 5 lbs. (I really don’t know) and while you don’t save all that much, cheaper is still cheaper and a family of four can go through 5 lbs. of bananas in no time. Families benefit the most from Costco and the large volume packaging. A single person is going to have trouble.

Try Before You Buy

One of the difficulties of selling products by the ton is that people won’t want to buy it unless they like it. The fact that you can try a lot of the products in the store is a good thing. We’ve tried a variety of products we never would’ve purchased and found that we loved them. Jim Cramer once joked that he would go into Costco on the weekends and get full eating the free samples. A true frugalist would just go there for lunch on Sunday every week and make back the membership fee. :)

The only downside to this is that most of the samples are for prepackaged foods. We don’t get that stuff all too often but we’ve found a few gems this way (there are these Madras lentils are awesome over rice).

Costco Treats Its Employees Well

It’s common knowledge that Costco treats its employees well and that the average salary at Costco is much higher than its competitors, such as Sam’s Club. Can you guess the average wage at Costco? You probably didn’t guess it was $17 an hour back in 2005, compared to Sam’s Club average wage of $9.86 an hour. Glassdoor has self-reported salaries of 701 employees and while the hourly stocker isn’t getting $17 an hour, more like $12.61, it’s still higher than minimum wage.

Every time I go to Costco, I get great customer service that’s fast. All stores benefit from throughput, from getting cashiers to process as many items a minute as possible, but Costco does it and every one is smiling and chatting the entire time. That makes for an overall more pleasant experience.

Return Policy

They have the best return policy ever.

Complaints

I’ve heard some of the same complaints that Mike listed and with the exception of pricing, I think the others are not worth mentioning. I get why he listed them, he wanted balance in his article, but they’re minor compared to the pluses.

Do you shop at Costco? Why or why not?

(Photo: greenwenvy)

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19 Responses to “Why We Think Costco is Worth the Membership Fee”

  1. Noel says:

    I got Costco membership last year and during first ‘feel good’ visits, I applied for their AMEX card and got one.

    Now after a year and half of shopping at Costco, I see more downsides than upsides. Your article is a blanket article on all Costco stores. The 2 costco stores within 10 miles on either side of my home are pathetic, grocery is super crap. The price point is not very competitive. The items on sale at these stores are significantly less in number than many others mentioned around the web. This I experienced first hand when I was visiting a friend in CA. It does not cater organic foods. If you only use processed food items then this is a heaven but otherwise not so great.

    Everyone mentions great prices but I see that my local ShopRite offers better prices and for small package (then why on the earth I would buy a package that is 5 times bigger). Simple example, Q-tips, 900 Q-tips were on ‘sale’ for $9.99 whereas Shoprite was selling 330 Q-tips for $1.99. 10 Brita filters for $39.99 where as 3 Brita filters for $9.99, list can go long but you got what I mean.

    Overall, I think blanket statements will not work. Costco may be treating its employees well but they do not treat customers well. The treatment is pretty similar to Walmart. ShopRite employees treat me way better.

    • Sam says:

      Your sample is what is too small. Look at gross margin for shop rite and for Costco. Costco has the lowest margins period.

  2. Marilyn says:

    I love Costco (yep, those madras lentils are delicious).

    I am typically skeptical but when I compare the prices I pay for Costco versus Safeway, I’m 90% won over. When I compare the quality of produce at Safeway versus Costco, I’m 100% won over.

    My complaints: whenever I buy bread at Costco, it starts to mold in about 2 days. I take this to mean they do not use any preservatives, which is good if you eat the bread in two days. My family eats about a loaf a week (or less).

    I’d actually like to go through Costco’s customer service training as a way to add to my life skills. They deal with a heavy work load and not always pleasant product. It’s true that if you need help finding a product, it can be difficult to find an employee. I have seen employees clearly ducking the public (maybe they are going to break) and exactly one time, an employee told me to “ask those guys over there” and scurried away.

    I tend to buy things at Costco that will store well in bulk–oatmeal, almond milk, etc. Produce is very fresh so it holds up well too still I look at items like berries that the family devours and hard produce like apples that can sit or that ripen slowly.

    I also don’t like when Costco switches a product. For example, my Costco switched from Bob’s Redmill slow cook steel cut oats to quick cook and from USA Golden Flax to Bob’s Redmill…as much as I love Bob, USA’s flax is a superior product.

    What I wonder is whether I’m actually saving when I consider that other stores and Amazon offer more brands. I might be getting the best price on Bob’s Redmill flax but is USA Golden flax cheaper? Maybe it’s a great deal on Crest but can I get Aquafresh cheaper elsewhere? If Costco offers a name brand supplement, is there a cheaper generic at CVS?

  3. We don’t have a Costco here, but we do have a Sams. I find it’s worth it but my family is large and we use what we buy.

  4. Sadie says:

    Cannot justify driving another 30 miles to reach a COSTCO; instead to SAM’S CLUB I go every 3 weeks. Name brand dog & cat food is much less expensive especially the Milk Bone Soft & Chewy dog treats. At local groceries, a “5 oz” pack costs approx $3.50 but at Sam’s cost for a “37 oz” container is approx $9.00.

    Plus I enjoy occasionally coming across some unique items not found elsewhere; like the packaged easter eggs shaped like basketballs, footballs, etc. with candy inside which were used for prizes at our church. Kids loved them!

  5. freeby50 says:

    Its worth it for my wife and I.

    Gas at costco is always cheapest. Plus with our Amex Costco card I get 3% cash back. I can save ~10-15¢ a gallon versus the next cheapest gas. That right there just about pays for my Costco membership. Otherwise theres a few specific things we buy at Costco that are cheaper. For example I get 2x Cheerios boxes for about $6.5 and thats about 40% cheaper than typical price at regular stores. I can probably do as well or beat Costco prices if I use coupons and shop sales but Costco is easier. But with regular prices versus regular prices Costco can be very cheap on certain random products that we want and those are key things we buy there.
    Costco is pretty close to us too so its convenient for us as well.

    But I am careful with shopping there. Their prices are certainly not always better.

    Their customer service is fine but nothing that I’d rave about. I get just as good service at other grocery stores. Also I have an example of awful service from Costco with an incident my sister experienced.

    Back several years ago when I was single, Costo wasn’t worth it. I didn’t buy enough to warrant their larger packages plus I had a tendency to buy DVDs, books, or games there on impulse taht I didn’t need. I’d go in for 1 thing and walk out with 3 things. So I quit them for a while back then.

  6. huskervball says:

    Costco is actually a little closer to my house than Sam’s. I dropped Costco and re-upped with Sam’s. We are a retired couple, the savings on large sizes were not worth the incredible hassle of shopping at Costco. Parking is terrible at Costco and they open at 10:00a.m. vs Sam’s 7:30a.m. opening. Produce at Sam’s is better and there is more variety.

    Long story short, I like Sam’s better altho Costco has a better selection of pre-cooked meals in deli.

    I did like the attitude of Costco employees but all in all a big box store is not meant for two folks who eat out often. I hear Cramer extolling them and am just puzzled by his devotion.

  7. Mike Collins says:

    Hey Jim, thanks for mentioning my article!

    I’m a big fan of Costco myself, but like anywhere else you have to watch the prices and make sure you’re getting a good deal.

    Noel makes a good point about quality varying from one store to the next. In my old neighborhood I couldn’t go near the Costco on a weekend because the lines were insane (I have no patience for long lines) but after moving last summer I’m at Costco all the time. Much less crowded and more organized than the old one.

  8. John says:

    I am single and I do well shopping there. When it comes to food I can get several items that store easily, and I get my toilet paper, paper towels, and tissues too. Their dress shirts are great…well made and hold up well. Their books are cheaper than stores that offer discounts. I enjoy shopping there.

  9. admiral58 says:

    I agree that its worth the price; especially if you have a family or significant other.

  10. Shirley says:

    Because we are two seniors (with occasional teens tossed in) I believe the Costco membership fee would be more than the savings for us. We also have a Food 4 Less, a Walmart, and a Target close by which adds to that decision.

  11. Scott says:

    We buy most all of our meats at Costco and then freeze them. It’s WAY cheaper than even Walmart and we’ve found the quality to be on par or better than anywhere that’s not high-end and a lot more expensive. The fact that they sell big portions of salmon already skinned won my wife over immediately (she hated skinning the salmon from our local grocer and we won’t go near the fish counter at Walmart).

    • Jim says:

      Personally I love the skin… Costco also sells one with skin but they don’t take the scales off which is a bummer. We actually prefer the one with the skin only because it’s easier to remove from the oven pan after baking.

  12. Jose says:

    I don’t have a Costco near enough to take advantage of, but I do have a Sams Club membership which gives us many of the price advantages you get from Costco. I would like to try Costco, hopefully they’ll build one near me soon!

  13. SLS says:

    Even though our family consists of only my partner and I, we find the Costco membership worth it. The stores in our area are all pretty great and we go maybe every 1-2 months and mostly buy several staple ingredients and perhaps a couple of splurges (like lox) on occasion. The prices on cheese, condiments (including pickles, olives, etc.), and some veggie “meat” products can’t be beat!

  14. skylog says:

    i would definitely find it worth it to join, but there is no Costco in my area. i had a trial membership with Sams Club, but it did not seem to be quite as “good” as Costco at least in terms of what i needed/wanted.

  15. SE says:

    For me, it’s probably not worth to join, where I have all within 5-12 miles apart: Costco, BJ’s, Sam’s Club; Target, Kmart, and Walmart; a Ahold USA grocery (e.g.Giant Food, Stop & Shop, Martin’s Food), The Great Atlantic & Pacific Tea Company grocery (eg. A&P, Food Basics, The Food Emporium, Waldbaums, Pathmark), Wegmans, Shoprite, Safeway, Shaws, and MarsFood? Plus, CVS, Rite-Aid, and Walgreens? Sometimes BJ’s and SamsClub will offer a daily pass, or free 60-day trial with no surcharges; that’s the only time worth it.

  16. I think a Costco membership will be worth the money for most families. I think we get our money’s worth on diapers alone.

  17. Sheila says:

    We have had a Costco membership for about 3 years and, like you, have enjoyed our shopping experiences there.

    From a travel standpoint, Costco offers some excellent deals sometimes. I keep an eye on their Hawaii travel deals. Not every deal is phenomenal, but I do find some that are definitely worth investigating further.

    When traveling to Hawaii, Costco is a great place to buy Hawaii-made candy, coffee and nuts. You get a bigger bag for usually less than what you’d pay elsewhere. Also, their gas prices in Hawaii are significantly better and usually located near the airport.


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