Evaluating the cost of buying items in bulk

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Costco Wholesale in Orem. With 462 areas of operation in the U.S. and Puerto Rico, Costco provides bulk goods for an annual membership fee. (Rebecca Klemetson)

Costco and Sam’s Club are wholesale stores promising savings in return for an upfront membership fee.

For larger families, the savings are clear. On the other hand, a membership for a couple or a small family may not be a smart investment.

According to the Bureau of Labor Statistics, the average couple spends about $250–$300 on food every month. This total doesn’t account for spendings outside the grocery store or on convenience items.

Based on the average, a couple will spend about $3,406 every year on food. A comparison of Sam’s Club and Costco reveals the benefits of each.

Costco vs. Sam’s Club

The history of the two brands is very similar. Their first warehouse locations were established in 1983, Sam’s Club in Oklahoma and Costco in Seattle, Washington.

Sam’s Club is a subsidiary of Wal-Mart and has approximately 621 clubs in the United States and Puerto Rico. Costco has 462 areas of operation in the U.S. and Puerto Rico and has extended its reach to Japan, the United Kingdom, Australia and several other countries.

A Sam’s Club membership costs $40 annually, while Costco fees are a bit more expensive at $55.

Both stores typically provide cheaper gas for members.

According to the Consumer Reports National Research Center, a survey analyzed 10 major chain stores satisfaction rates. Costco was a clear favorite, while Sam’s Club was recognized for its low prices but not at the same level as Costco.

The satisfaction results also reflect on the chains’ annual revenues. Costco makes $105.2 billion, while Sam’s Club brings in $56 billion. Sam’s Club has 47 million members compared to the 71.2 million cardholders at Costco.

According to the Sam’s Club website, members save an average of 33 percent over traditional customers. Based on several blogs and personal investigation, the savings between the two wholesale options are about the same.

Wholesale vs. traditional retailers

In order to save money on a wholesale membership, customers should analyze the costs of a traditional retailer.

The first part of this process would be to consider food expenditures and eating.

Spencer Mason, the front end assistant at the Costco in Orem, explained, “It’s worth it if you spend more than $250 a month.”

An individual might not dish out that much dough on a single grocery trip, but couples might want to consider the benefits of buying in bulk.

It’s important to understand that everything at a wholesale store is not cheaper.

Buying non-perishables is the key to saving money. The 25-pound bag of sugar won’t go bad as fast as will a crate of apples. Buying items used for several months instead of a few weeks will help balance the checkbook.

Devon Zimmerman, a Costco and Sam’s Club member, explained her policy on buying in bulk.

“Honestly, sometimes shopping in bulk is a little painful,” Zimmerman said. “I know the food is going to last a while, but it hurts my bank account (depending on how much I buy in one trip).”

One reason wholesale is cheaper than an average grocery store is because there is “not as big a selection,” Mason said. You only have one or two options for types of milk or butter, while a traditional retailer will have several options.

Wholesale stores purchase products in bulk from manufacturers, bringing the prices down for customers. The company tries to make its food as cheap as possible.

“Other stores might take a product that is $4 and try to get away with raising the price to $4.25,” Mason said. “Costco does the opposite. They take the $4 item and try to make it $3.75.”

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Sam’s Club, a subsidiary of Walmart. Sam’s Club offers bulk goods for a membership fee slightly cheaper than Costco at $40 annually. (Rebecca Klemetson)

Before considering the membership, calculate the extra costs.

Travel time should be considered as well when calculating the value of a membership.

However, owning a membership also means cheaper gas. Savings on gas alone equal about $3 at every fill-up.

The gas at Costco and Sam’s Club is cheaper than anywhere else,” Zimmerman said. “This price cancels out the extra cost of travel during the year. Fifty dollars of savings annually at Costco breaks even with the cost of a membership.”

Price comparisons

In order to decide which wholesale store is cheapest, or if the neighborhood supermarket is a better choice, customers can do a price comparison.

Ruth Soukup, blog author of Living Well Spending Less, explained how to take on this task.

I think you should do some price comparisons of items that you always buy. Keep track of those items for about a month or so. This should help you decide if it is worth the membership fee.”

Find a friend with a membership to get through the members-only door. It also might be worth looking at Groupons and other savings resources available to save on the membership costs.

Costco might not be cheaper for everyone, but if the price comparison saves money, it might be worth it.

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