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Why We Think Costco is Worth the Membership Fee

Posted By Jim On 04/03/2013 @ 7:15 am In Personal Finance | 19 Comments

My friend Mike at Wealthy Turtle wrote a post debating the merits of Costco and whether the membership fee is a bargain or not [3]. 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 [4], compared to Sam’s Club average wage of $9.86 an hour. Glassdoor has self-reported salaries of 701 employees [5] 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 [6].

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 [7])


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URLs in this post:

[1] Tweet: http://twitter.com/share

[2] Email: mailto:?subject=http://www.bargaineering.com/articles/costco-worth-membership-fee.html

[3] whether the membership fee is a bargain or not: http://wealthyturtle.com/is-the-costco-membership-fee-a-bargain-or-a-scam/

[4] $17 an hour back in 2005: http://hbr.org/2006/12/the-high-cost-of-low-wages/ar/1

[5] self-reported salaries of 701 employees: http://www.glassdoor.com/Salary/Costco-Wholesale-Salaries-E2590.htm

[6] best return policy ever: http://www.bargaineering.com/articles/costcos-incredible-return-policy.html

[7] greenwenvy: http://www.flickr.com/photos/greenwenvy/2286679033/sizes/m/

Thank you for reading!