Do warehouse clubs save you money?

The allure of shopping at big warehouse stores like Costco or Sam’s Club is undeniably strong. It’s not only loved by money-conscious consumers who are trying to stretch their budget, but also shoppers who are simply obsessed with perusing the two-football field-sized warehouses. In fact, over one-third of Americans holds a membership with a warehouse club. It seems a little crazy, and a little counter-intuitive, for someone to spend money on a club membership for the privilege of saving money—or even just to walk in the door—but millions of people do it. Let’s take a look at exactly how it works and if it really does save you money.

The warehouse club business model

In spite of the strategically designed, no-frills environment, warehouse clubs are retail stores. They offer a wide variety of items, from Waterford crystal to cell phones, and from flat screen TVs to paper plates, at discounted pricing.

Unlike traditional retail stores, however, warehouse clubs don’t make the majority of their profits from the markups they charge. Instead, they require each customer to pay a membership fee. They have tremendous buying power and focus on passing those savings on to their customers. Rock-bottom pricing is not the only benefit you gain through membership, though. Members also have access to other deals and discounted services like travel, car buying, insurance, and financial services, to name a few.

Paying a reasonable annual membership fee that can, at the very least, be recouped in savings over the year doesn’t sound like a bad deal. But, there are some pitfalls that need to be considered, and they’re not quite as evident as the savings you see on your receipt.

Big boxes, large quantities

The reason warehouse clubs can offer lower prices is that they buy in bulk, and then they pass the bulk onto their customers. While you may eventually use the 45 rolls of toilet paper, the twin pack of ketchup will likely be expired before you’re halfway through the first bottle. The fresh produce has the same fate. Who can eat 24 apples before one decides to spoil the bunch? We all love the party-size bags of chips, candy, and cookies, but sadly, they don’t stand a chance of expiring, which leads us to a whole other problem.

Impulse buys

Take five steps into any warehouse club, and you’ll likely see a giant flat screen TV on sale. Need the new iPhone Xs or maybe an Apple watch? They’ll be there, too. If you make it through the entrance, you’ll also want to steer clear of the center isles. That’s where all the impulse buys are waiting for just the slightest glance. I bet you didn’t know you needed a Vitamix blender or a new set of mixing bowls. Oh look, a 120-pack of Kirkland K-cups!

Limited quantity items

You’re pondering the purchase of a particular item, and then see that it’s marked “Limited Quantity.” Two words that set off the alarms in your head and kick your hoarding tendency into full gear. You’re not even really sure if you need it, but the pressure of missing out, or the fact that this may be your last chance to bring it home has you tossing 3 or 4 of them into your cart.

Free samples

The free samples at warehouse stores are the perfect snack while you’re wandering the aisles. Hit enough of them, and you can call it lunch. The samples are not necessarily there, however, to keep your belly full. We all know that tasting the product could encourage shoppers to purchase the item on the spot. But, interestingly enough, free samples also work on a customer’s psyche. Ever feel a little guilty just walking away? Yep, a lot of other people do, too. So, out of a sense of obligation or the fear of looking like a freeloader, they head to the checkout with a monster size box of Annie’s Cheddar Bunnies in their cart.

Be a smart shopper

These danger zones don’t necessarily have to spoil your next trip to the warehouse club. Free samples can be good. It’s nice to know that you need to stock up on an item if it won’t be restocked. And, sometimes you do need a new blender.

Because every family shops differently, there’s no definitive answer as to whether a warehouse club membership is worth the money. If its benefit justifies the cost, then go ahead. But, continue to compare prices, don’t buy what you don’t need, and don’t spend the entire afternoon in the center aisle. You’ll definitely find some deals that will save you money, and balanced with your traditional grocery store shopping, your budget should stretch a little further each month.