How much does Mary Ellen Ham love warehouse clubs? Let her list the many ways.
There are the bulk items — the toilet paper, tissues, and paper towels she habitually stocks up on. The milk and half-and-half, "so much cheaper than at the grocery store," she says. Ditto her prescriptions. And rotisserie chickens. And gas. "It can be 5 to 10 cents a gallon cheaper than at nearby service stations."
See also: A cheapskate's guide to shopping clubs.
Ham is such an avid warehouse-club shopper that at one time, she sheepishly admits, she belonged to all three major warehouse chains: BJ's Wholesale Club, Costco, and Sam's Club. Now she's down to "just two" (Sam's and Costco, because they are closest). She shops in at least one of them every other week.
The 77-year-old Orlando resident isn't your stereotypical warehouse-club fan. These no-frills megastores are famed for drawing big families with deals on bulk items — think 36 rolls of toilet paper and gallon jugs of soy sauce. Ham lives with only her husband. But she loves saving money, so she cheerfully makes room for the jumbo packaging. "If you have a place to store things — and I do — you never run out," says Ham.
The three warehouse chains sold more than 128 million memberships last year, up from 122 million in 2008, and sales have increased an average 5.5 percent a year for the past five years. Food buyers are increasingly shopping at warehouses, eating into the market share of supermarkets. And here's the surprise: About a quarter of club shoppers are 50-plus empty nesters like Mary Ellen Ham. Why do they line up with the minivan brigade? For the same reason everyone else does: cheaper stuff.
Because clubs stock only 4,000 to 7,000 different products (compared with the 15,000 to 60,000 in a supermarket) and deal in huge volumes, they can negotiate substantial discounts from manufacturers. At least half of each company's net income comes from annual membership fees that start at $40 for Sam's Club and $50 at Costco and BJ's. (The fee climbs to $100 for programs that reward members with rebates or steeper discounts.) The result: prices typically 30 percent lower than those of traditional retailers, says Michael G. Clayman, editor of Warehouse Club Focus. Last year the magazine compared 68 items at three warehouse clubs in Miami and found prices at a nearby supermarket were 61 percent higher; at a Walmart Supercenter they were 31 percent higher. A shopper who spent $150 a month would save $500 to $1,000 annually, the study concluded.
But before you clear space in the pantry for giant jugs of mayonnaise, think about whether this kind of retail makes sense for you. Product turnover is so fast that selection varies from week to week, which can be irksome if you are devoted to certain brands. You must be prepared to deal with the industrial-size packaging. Tawra Kellam, editor of the website Living on a Dime (livingonadime.com), warns that " if it's just you and your husband — or even a family of four — it's going to take a long time to use up a 25-pound bag of rice and a 5-pound jar of peanut butter."
Then there's the so-called Costco effect, familiar to every warehouse clubber who pulls up for a few essentials and drives home with a new flat-screen TV and enough prime rib for a football team. In a 2007 paper, Harvard marketing professor Michael Norton argued that the mere presence of membership fees encourages more spending.
If you're an undisciplined shopper, don't stray from your list, and follow these rules for saving when you join the club.
1. Take only what you can use: A 61.9-ounce box of cereal might sell for less than half the supermarket equivalent, but good luck finishing it before it goes stale. A small household might take a year to use a large container of detergent. Also, make sure you have space to store items.
2. Divide to conquer: Shop with friends or family members, splitting apart the big packages to share.
3. Buy before it flies: Product lines change frequently, so stock up if you see an item you really need.
4. Don't swear off your local supermarket: Weekly store promotions at traditional grocers can offer bargains on staples, such as cereal and laundry detergent, that rival those at the clubs, a 2007 Consumer Reports study found.
5. Look beyond the tag: Don't compare appliances or electronics by price alone. These products can be tailored to specific retailers, which offer "unique" models with different features like extra computer memory.
6. Check out the checkout policies: Costco accepts only American Express credit cards; if you don't have one, bring a debit card, a checkbook, or cash. Sam's Club and Costco do not accept manufacturers' coupons; BJ's does. Return policies are generous, but they vary: BJ's requires most items to be returned within 30 days. Sam's Club and Costco have a 90-day return policy for most electronics.
7. Sum it all up: Calculate how much you spend at a warehouse store. If it's more than $2,500 a year, consider springing for a more expensive membership level — you'll get the money back in perks such as the 2 percent rewards program offered at Costco and BJ's.