When it Doesn’t Pay to Shop at Costco
As a longtime Costco shopper – dating back to the days of its predecessor Price Club - I’ve found great bargains in just about every aisle of its stores. But there are some departments where Costco doesn’t provide much of a bang for your buck.
The key to Costco’s bargain prices are razor-thin margins. While most retailers mark up their prices anywhere from 30 to 60 percent, Costco’s average mark-up is around 13%, providing just enough profit to cover operating costs (Costco generates most of its net profit through membership fees). That means if Costco pays $10 for an item, it will sell it back to you for about $11.30.
But despite those low margins, you can find better deals on some products by browsing the Web sites of mass merchants or specialty stores. Here are a few categories where Costco doesn’t provide much of a bang for your buck.
Once upon a time, this was a bonanza for bargains but Wal-Mart’s expansion into electronics has driven prices down across-the-board and made Costco’s prices par-for-the-course. For example, a 55-inch Vizio 1080p LCD TV sells for $1,049 at Costco compared to $998 at Wal-Mart. The same holds for some computer products (not counting manufacturer rebates). A Dell Inspiron 560 Desktop computer that sells for $649 at Costco is only $598 at Wal-Mart.
This is an area where Costco’s “treasure hunt” offerings come in handy (Costco constantly rotates about 20% of its product mix to bring in new products for a limited time and many of those are in the hardware category). But, for standard everyday hardware items, you can find comparable prices at other retailers. Its Freeman 16 Gauge Straight Nail Finisher sells for $89.99, the same price it’s being sold for at Sears.
Costco tire centers are big on convenience - you can drop off your car, do your shopping and pick it up when you’re done - but their prices are middle-of-the-road. Its Bridgestone Insignia tires (size 195/65/R15) sell for $84.99, the exact same price Discount Tire sells them for. Costco does run frequent specials like one it launched in April - where you can get $70 off a fourth Bridgestone tire when you buy 3 – but you can find the same deals at places like Pep Boys.
You may think you’re getting a great bargain buying a giant package of bath tissue or paper towels, but buying in bulk doesn’t always produce savings. A good example is an 80-count box of Angel Soft bath tissue that Costco sells for $49.95 (about 62 cents per roll). That’s a pretty good deal but not when you compare it to a 36-count package of Angel Soft that Wal-Mart sells for $16.44 (about 45 cents per roll). And Costco’s 15-roll package of Bounty Paper Towels sells for $23.99 (about 1.50 per roll) compared to Wal-Mart’s 8-count package for $8.87 (about $1.10 per roll). So buying bigger isn’t always buying smarter when it comes to paper products.
When gas prices are falling, Costco is a great place to buy gas but when prices are on the rise - as they are now - you can find better deals elsewhere (Costco buys fuel on the “spot market,” which makes it more vulnerable to price fluctuations). On April 29, a Costco in Carlsbad, CA was selling regular unleaded for $4.17 a gallon compared to an Arco station a few miles away selling it for $4.10.
This is not one of Costco’s strong areas. Though its Kirkland brand private label products are good buys, Costco is hampered by a limited selection and an inventory that rotates with the seasons. You’ll find some pretty good deals (at $29.99, its Levi’s 559 men’s jeans are a few dollars cheaper than most retailers) but it’s hardly worth a special trip to bargain hunt.
This is just a sampling of a few items in key product categories but it should give you a pretty good idea of where you won’t find bargains. Check back in a few days for a rundown of product categories where you can find the best buys at Costco.