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What’s the Big Deal?

How many of us enthusiastically belong to Sam’s Club, Costco or any of the big warehouse stores?

It is a tidy environment of bulk items that we use everyday – toilet paper, tissues and paper towels.  Things that we can certainly stock up on given you have the room to do so.  Even perishable items like milk are cheaper than at the regular grocery stores as well as prescription drugs.  (Not to mention, the rotisserie chickens and gas, that can be 10 to 15 cents cheaper than the gas stations.)  My favorite is the cheese that is much cheaper at Costco than at any other store in Indianapolis.  Lastly, there are those big-ticket items that tend to be less expensive than the local electronic stores.  So, why do people like me and you line up to shop at these stores?  One big reason, as we described above, is what everyone has already discovered: cheaper stuff.

You may have noticed as a shopper that there are not as many product names at Costco and Sam’s Club compared to what is at Kroger, Marsh or Meier.  One reason is that by focusing in on fewer product lines and larger volumes, warehouse stores can negotiate substantial discounts from manufacturers.  The membership fees you pay help to reduce the cost of the products by the stores relying less on the profit margins.  The annual membership fees start at $40 for Sam’s Club and $50 for Costco.  The fee can climb to $100 for programs that reward members with rebates and steeper discounts.    The result is much cheaper products and savings to you in the long run.

The down side is trying to carve out the space at home for the giant containers of Ketchup and other bulky items.  So, in some cases, you have to decide if this type of retail makes sense to you.  If space is an issue, then perhaps paying a little more for smaller size products at the other retailers is the best for you.  You can imagine how long it will take you to use a 5 pound jar of peanut butter.  The other issue is that some products have a short life at warehouse retailers, which can irk you if you get attached to certain products.  The other side effect is that going in to Costco for a few items results in those few items growing to more than you intended.  I have heard this referred to as the “Costco effect”.  However, I have yet to drive away from Costco with that crystal clear large screen TV that I stare at each time I walk in.

A Harvard marketing expert gives these tips to undisciplined shoppers and it can apply to shoppers at warehouse retail stores:

Take only what you can use.  If a 61.9 ounce box of cereal is too big to finish before it goes stale, perhaps you can pool together, like in the case of several medical student roommates, and buy cereal that everyone likes.   This goes with the next recommendation.

Divide to Conquer.  Shop with friends and split apart the large packages to share.  Pooling together resources and purchasing in bulk could be cost-effective.

Buy before it flies.  Since it is typical to see product lines change frequently at warehouse stores, it would be prudent to stock up if you see an item that you really need.

Don’t swear off your local supermarkets.  Weekly store promotions at traditional stores can offer bargains on staples, such as cereal and laundry detergent.  It may rival those prices at the warehouse stores.

Check out the checkout policies.  Costco only accepts American Express credit cards.  If you don’t have one, the alternative is a debit card, checkbook or cash.  Costco and Sam’s Club do not accept manufacturer’s coupons.  Return policies are generous at warehouse stores, but vary.  For example, Costco and Sam’s Club accept returned electronic items within 90 days of purchase.

In the end, you can save more by shopping at a warehouse store, but you have to be a disciplined shopper and don’t stray away from your list.  Also, keep in mind that having a diversified shopping strategy is also good.  The traditional stores do have some great deals that compete with warehouse stores.

The views expressed in this content represent the perspective and opinions of the author and may or may not represent the position of Indiana University School of Medicine.
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Jose Espada

Jose Rivera Espada is the director of financial aid at IU School of Medicine, a nine-campus allopathic medical school in Indiana. Jose’s experience includes working as an assistant director of financial aid at Butler University and a financial aid coun...