Is Joining a Wholesale Club Like Costco Right for You?

I get asked about wholesale clubs all the time, mainly because saving on the cost of food and household supplies is such a big part of your everyday budget and of course you hear that joining a wholesale club will save you money. But is it always true?

Joining a wholesale club might be able to save you money, or it just might cost you. Here's how to tell if a wholesale club is right for you.

Back In the late 1970s, wholesale clubs (also known as warehouse clubs) started popping up and became popular all over the U.S. Then eventually they expanded internationally.

The idea of people getting an “exclusive” club membership that was offering groceries and consumers goods at significant discounts had great appeal to the then-primetime baby boomers raising families during that challenging economic era. It was a perfect storm back then. But is it still that way today? Is joining a wholesale club really for you in 2021?

What Is a Wholesale Club Anyway?

What you may think of as a really big grocery store is way different than that. Today, wholesale clubs have become a “Disneyland” of shopping, a mecca that includes everything from food to electronics, from furniture to clothing, and from automotive supplies to eye care and pharmacies.

Some even have travel services as well as banking services. And if you operate a small business, they may be the place to use for many of the supplies you need to operate. It has morphed into something very different than what it used to be or what you might even imagine.

What Are the Clubs, Where Are They Located, and What Are the Differences?

The major big three wholesale clubs are Costco, Sam’s Club, and BJ’s.

Costco with over 800 shops is worldwide with locations in Canada, Mexico, the United Kingdom, and Japan, among others. Meanwhile, Sam’s Club has over 600 locations that can be found coast-to-coast in the United States. BJ’s has the smallest operation with only about 200 locations on the East Coast and in Ohio.

There are several differences in these clubs even though on the surface they may appear to be all the same. They are not and that makes the decision as to which one is best and whether any of them is right for you all the more difficult.

Some differences you can measure

Costco has the most locations of wholesale clubs, but surprisingly also has the highest yearly membership cost. The most basic annual membership cost is $60 (business wholesale customers pay $120), in comparison to $45 for Sam’s Cub ($100 for plus membership), and $55 for BJ’s ($110 for business memberships). That may not seem like any big difference, but when you are joining a club to save money it may be a consideration. It may also make you believe that one place has better pricing and savings in store simply because they are charging more upfront. There is a method to this madness. You also need to check “what’s included” in the price of your membership as well because they vary from club to club.

If you are buying an annual membership, be sure to stay on the lookout for special deals. They might be offered in mailers, local flyers, or even on Groupon.

All of the clubs have perks and rewards associated with shopping. They have their own credit cards as well as accepting Visa, debit cards, cash, or checks. Sam’s Club and BJ’s also accept MasterCard, Discover, and American Express.

Can you shop without a membership? I wouldn’t advise it. You’ll pay a 10% service fee at most Sam’s Club locations and a 20% fee at most BJ’s locations if you do. At Costco, non-members pay only a modest 5% service fee, but it does defeat the purpose of shopping there when you pay any extra amount. In some cases, not everything is available to buy for non-members.

The pricing game

There are hundreds of price comparison reports for Costco, Sam’s Club, and BJ’s. According to ones I have seen recently, BJ’s has a slight edge on Costco for the best pricing, followed by Sam’s Club. But the problem is that in some of these comparisons, ones that may differ in the shopping content mix, Costco products were cheaper. Even more confusing is that there are some reports that insist that BJ’s has the best prices followed by Sam’s Club, and then Costco. See what this all means?

The answer is that there is no real answer here.

Cost is all relative to the types of products you purchase and prefer and what the survey includes on their shopping list.

Is It Worth the Money to Become a Member?

The decision is not simple. It really depends on your circumstances. In fact it may be worth a try at sampling the experience before you decide to join or not. How?

The easiest way to do it is to find a friend or relative who is a member and simply shop with them. Of course, they may be a big fan if you go with them and try to influence your decision, but try to experience it as independently as possible and see if you are a good fit. Typically, larger families who can buy in bulk will do well while individuals are more likely to overspend if they shop there. If you don’t know anyone who’s a member, you might be able to get a one-day pass to try it out.

Even if you don’t actually make any purchases during your visit, I recommend noting what you would be interested in buying, how often you’d use it, and what you might be saving on it. Calculate it out and decide if you’d actually save the money over your membership fee in a year of shopping.

Do you really need a two pack of 60 oz. mayo (that’s the equivalent of 4 regular jars)? How about a 48 pack of Hershey bars? Are these things you want, and could you split them with a family member or friend? Think it over and try to be realistic in your assessment.

Some Pros and Cons of the Wholesale Clubs

Pros

First and foremost amongst the pros are the lower per piece or per pound unit prices than you will find frequently in your local supermarket chain or even at Walmart. But the fact is that you still need to comparison shop and price check because supermarket sale prices often beat everyday wholesale club prices. Still, you can expect about a 10% to 15% savings on many items every day. In many cases, you can also use their coupons or codes or manufacturer coupons for additional savings. Just find out in advance as to what is acceptable at each specific wholesale store.

You will also find many items that are store affiliated brands that are less expensive and often made by major manufacturers for them that all save you money!

One fun thing is all of the free samples you can try on many food items when you shop. In fact, it can be a nice snack even if you aren’t buying, just to sample!

Cons

The cons? Number one is of course your membership fee. If you were to save 10% on your food bill over a two-month period, it would be wiped out by your membership fees. So consider that and how often you would actually use your membership before you commit to the annual deal.

Dealing with bulk, which I addressed earlier, is a big issue too. It can be difficult to use up perishable items before they go to waste, or even to store non-perishable items.

Next would be the tendency to impulse shop because of all of the bells, whistles, and quantities that will overwhelm some people.

And finally, selection can be an issue, particularly if you have someone in your family with special dietary needs. For example, my wife and I buy quite a few low-sodium products that simply aren’t available in the wholesale clubs.

Return Policies

Every club accepts returns if you have a problem or are simply dissatisfied with something you have purchased. That makes all of them just like any other good retailer. The differences between them though may not be to your liking.

Most returns involve non-food items of which all of these clubs have large selections. Costco and Sam’s Club do not have a specific hard deadline for a non-electronic return of an item. Sam’s Club does recommend having the receipt and original packaging however. At BJ’s, items purchased over a year ago aren’t returnable and neither is used merchandise without the original packaging and accessories. BJ’s also has a list of specific items that are not returnable which you can obtain when you join the club.

Customer Satisfaction

In general, all wholesale clubs have good satisfaction ratings and in fact have many hardcore fans.

Costco ranks higher in customer satisfaction than Sam’s Club and BJ’s, but just barely in the most recent surveys. Seventy nine percent of respondents rated the store “good” or “excellent”.

Final Thoughts

I don’t belong to a wholesale club, although I have in the past and also shopped with friends and relatives in them on occasion. Some items they sell are not easily available in my local market and so I find they do fill a need for me from time to time. But realistically, for a family of one, or in our case two, it’s really unnecessary. Joining a wholesale club as a way to save money is obviously a very personal choice and must be based on your specific situation.

I remember years ago friends telling me that were saving so much at a wholesale club after the birth of their first child. But when we compared, they actually wound up spending more than twice every month on food and other items.

What works great for one household may not make sense to other people. Don’t join a wholesale club just because your friends or family members tell you about the great deals they get.

Do you have a wholesale club membership? Are you a fan? Have you saved as much or more than you thought you would or do you spend more to save more? Will you renew your membership when it comes due?

Image courtesy of Sikander Iqbal on Wikimedia Commons via CC BY-SA 4.0

2 Comments

  1. Louise

    Thanks for bringing this topic up, Gary!
    I am not a member of any savings clubs, as none are near enough to me for regular use. The very few times I went with someone else, I was overwhelmed by the size of the store and the amount of merchandise. Do figure into your calculations that it will take a few trips to learn the store And see if the set-up lets you run in and get out quickly with just a few items. If not, you may end up using a regular store anyway.
    Occasionally, many years ago, the human resources office at my employer would have one day trial passes for Sam’s Club.
    It is not necessary to be a member to use the pharmacy, at least at Costco, and Costco has a good reputation in hearing aids.

    1. Thanks, Louise. You brought up some good points. I would agree that getting a free trial is a really good thing and I wasn’t aware that employers had offered that. The warehouse clubs aren’t for everyone, but I think trying it will let you know the real answer for sure. Thanks for your comments.

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