Wednesday, July 30, 2014

9 ways to beat Costco at its own game

Recently, in my peregrinations about the Web, I came across an article called "9 Items that Will Single-Handedly Pay for Your Costco Membership." I read it with interest, since this is an issue on which I've personally gone back and forth repeatedly. Back in 2006, I used a free day pass to check out BJ's Wholesale Club and concluded that the prices there weren't good enough to offset the membership fee. However, in 2012, I visited Costco with my in-laws and discovered that this club offered much better deals than those found at BJ's, including great prices on Fair Trade coffee and organic sugar, which could make the cost of membership worthwhile. But then, when I finally tasted the Costco coffee, I found that I didn't like it at all, so I flipped back to my original position: for us, a Costco membership wouldn't pay for itself. Now here was this financial blogger, Joel Larsgaard, claiming to have identified nine different items that could each pay for the cost of a membership all by themselves. Could he be right? Might this article be the key to justifying the membership fee after all?

Sadly, the answer was no. I read through the list and found that most of the items on it were things we either don't buy at all or don't buy nearly often enough to justify paying $55 a year for a better deal. Moreover, for most of them, I could immediately think of alternatives that would cost just as little as Costco's price, if not less, and without the membership fee. So here's my line-by-line list of 9 Items You Can Get for Even Less than They Cost at Costco:

1. Tires. Larsgaard starts off his list with the question, "Where’s the last place you got new tires? If it wasn’t a warehouse club you probably paid too much." Well, as it happens, I just bought three new tires last month, and I got them for 27 percent less than the price quoted by my trusted local mechanic. The tire they recommended, the General Altimax (one of very few tires that's available in the correct size for our Fit), wasn't familiar to me, so I went to check out some customer reviews of it at TireBuyer.com—and I discovered that the price there was over $30 less per tire. When I asked Schwartz and Nagle about the price difference, they admitted quite candidly that they couldn't compete with the prices of a "tire wholesaler" like TireBuyer, and they thought it would be perfectly reasonable to order from there and have the tires shipped to them for installation. (The fact that they didn't try to talk us out of it is one of the reasons I love these mechanics so much.) So, even with the cost of shipping, I saved $95 on just three tires, which is better than the "$70-80 off certain brand of tires at different times of year" Larsgaard says you can get at Costco. (Even he admits that buying tires online is a "legitimate" alternative to getting them from Costco, though he recommends TireRack.com instead.) Moreover, when I went to the tire finder at Costco.com to see what their price would be on the same tires, I found that they don't offer them—or any other tire sized for a Honda Fit. So if you drive a Fit, you can't save a penny by buying tires at Costco. Next?

2. Lunch. Larsgaard says Costco makes "a fantastic place for a date": just stroll around munching on free samples, then top it off with a big 1/4-pound hot dog and a frozen yogurt from the lunch counter for just a couple of bucks. The problem with this for us is that I don't eat meat unless it's free-range, which I assume a $1 hot dog is not. For those who do, I'll admit, the Costco cafeteria looks like probably the cheapest place you'll ever find to go out for lunch—but as several folks point out in the comments below the article, you don't actually have to be a member to eat there. (Note, however, that according to this post on LifeHacker, nonmembers can use the lunch counter only if it's located outside the main store, so you don't need to show your member card to get in.) Alternatively, you could just put together a picnic lunch of some home-baked bread (47 cents), Aldi string cheese (93 cents), and a bar of IKEA chocolate (99 cents) for the same "just over $2" you'd spend at Costco, and take it down to the park to eat, say, on a blanket beside a lake. That seems like a much more "incredibly romantic" date to me than chomping on a hot dog at a noisy lunch counter.

3. Movie tickets. According to Larsgaard, these are a little-known deal at Costco: $17 or less for a pair of tickets, as opposed to the $11-$13 per ticket you'd pay at the theater. That's a significant savings, to be sure, but there are plenty of ways to see a movie for even less. For instance, you can go to a discount theater, if there's one in your area, and pay as little as a dollar per ticket; you can go to a preview screening for free; or, my favorite, you can take home a DVD from your local library, snuggle up on the couch, and skip all the annoying previews, screaming kids, sticky floors, and overpriced snacks. You can even pause the film when you want a bathroom break, rather than climbing over the laps of several disapproving strangers.

4. Baby formula. Larsgaard calls this "probably the sickest value proposition Costco offers," costing less than half what you'd pay at the grocery store. Obviously, this is a savings only for those who have a baby to feed. But if you do, you'll save significantly more by breast-feeding. Trent Hamm of The Simple Dollar calculates the cost of a year's worth of formula at over $1,700; by contrast, a good breast pump, which makes breast-feeding feasible for a working mom, only costs about $225. You'd have to cut the cost of formula by over 80 percent to beat that. (Of course, there are all sorts of other considerations to factor in when choosing between breast-feeding and bottle-feeding, and every mother has to make the choice based on her own individual situation. However, if you're looking at the question strictly in terms of cold, hard cash, the breast definitely wins. (How often do you see that phrase in print?))

5. Luggage. Larsgaard says Costco gave him a great deal on his last purchase of luggage: just $100 for "two fantastic pieces" with a lifetime guarantee. I'll admit that, if you have a genuine need for two new pieces of luggage, this deal is pretty hard to beat. But how often do you actually need to replace your luggage? I've been using the same carry-on bag for over ten years now, and while I'm not exactly a frequent flier anymore, it certainly got plenty of use when I was flying across the country to visit Brian several times a year. And when it finally gives up the ghost, I'll probably replace it with a simple duffel bag like this $45 one from L.L. Bean, which is lightweight, fits in most luggage bins, and is also backed by an unconditional lifetime warranty. I guess if you're a real frequent traveler, you might need something more elaborate, but even so, if the luggage Larsgaard bought is really built to last a lifetime as he claims, then it's only a one-time savings. At best, this purchase could offset the cost of his membership for one year–not every year. So perhaps if you happen to need a new set of luggage, it's worth getting a membership for one year just for this purchase (and then get as much use out of it as you possibly can before it expires).

6. Guarantees. Luggage isn't the only purchase that Costco backs with a money-back guarantee; according to Larsgaard, they actually pledge to refund the full cost of your membership at any time if you're dissatisfied. I think that's a commendable policy, but I don't see how it can actually "pay for the cost of your membership." If you keep your membership, then you don't save anything; if you rescind your membership, you're back to where you started. The only way to actually come out ahead would be to sign up for a membership, buy lots of stuff at a discount, and then ask for your money back, which seems unsportsmanlike to say the least.

7. Wine. Larsgaard admits that he doesn't buy wine at Costco himself, not being a wine fancier, but he claims that those who know their wines say Costco offers some surprisingly good vintages at bargain prices. There's even a blog devoted entirely to reviews of Costco wines; I checked out their "best of 2013" list and found a dozen recommendations ranging from $12 to $40 a bottle. Now, I'm not a wine drinker either, but I've always assumed that if I were, my go-to store would be Trader Joe's. It doesn't have an entire site all to itself, but this article from the Wellesley Wine Press recommends eight TJ's wines, all priced under $11. In other words, all eight of them beat the prices of the top Costco wines. (Trader Joe's famous "Three-Buck Chuck," from Charles Shaw, did not make the list.) I don't know if anyone's ever held a head-to-head taste-off between Trader Joe's wine and Costco's, so I couldn't actually tell you which ones taste better, but if all you want is a decent, drinkable wine at a bargain price, it looks to me like Trader Joe's is the place to go. And they won't hit you up for $55 before letting you in the door.

8. Rotisserie chickens & pizza. Apparently, at Costco you can buy a whole rotisserie chicken for only $5. This, like the hot dogs, is only a good deal if you eat meat (or meat that isn't free-range, which I'm assuming a $5 chicken is not). However, if you don't care about how the chicken you eat was raised, you can get one at the supermarket for about $1.50 a pound—so around $4.50 for a 3-pound bird—and roast it yourself. Get it on sale, and you might pay as little as $1 a pound. As for the pizza, I don't know what Costco charges for it (Larsgaard doens't say, and it's not listed on their website), but I absolutely guarantee you that a homemade pizza will cost less. Plus you can make it exactly the way you like—whole-wheat crust, gluten-free crust, extra cheese, fancy toppings, whatever—without paying an arm and a leg for it.

9. Gas. Larsgaard says he doesn't use this one much himself, as the line at the Costco is usually too long, but he claims that if you catch it when it's short, you can save up to 30 cents a gallon. I checked the price on a site called NewJerseyGasPrices.com, and it says our nearest Costco currently charges $3.17 a gallon, while our local Sunoco charges $3.19. So by driving to the Costco to get our gas, we could save as much as 15 cents on each fill-up—but the extra 6.6 miles of driving would burn up 52 cents' worth of gas, leaving us 37 cents to the bad. Of course, presumably if you're a Costco member you simply take the opportunity to fill up when you're there—but if the lines are as bad as Larsgaard says they are, the gas you burn just waiting to fill up might be enough to use up your 2-cent-per-gallon savings.

So it looks like my current position on Costco remains unchanged: while it would probably be lots of fun to have a membership, it wouldn't actually save us money. At this time, the only item I'm aware of that we could save a significant amount on by shopping there is organic sugar—but even at a savings of 75 cents a pound, we'd need to get through over 70 pounds a year to pay for the membership. And I think consuming that much sugar would probably end up costing us more than $55 a year in health care bills.
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