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After 7 Years of Wedded Bliss We Are Dumping Costco

Costco wholesale warehouse entranceSeven years ago, I was introduced to and fell in love with Costco. For those who may not be familiar with its format, Costco is a membership only wholesale warehouse club that sells a wide selection of merchandise in bulk sizes. It’s a giant of a company coming in only behind Walmart on the 2014 list of largest U.S. based retail stores for total worldwide sales.

The allure of Costco is palpable the moment you walk in the doors. Big open spaces, big shopping carts, big packaging, big slices of pizza at the food court…it’s all big. Add to that the big savings of buying in bulk and you have a shoppers dream.

Indeed, I was intoxicated all those years ago at its format and the prospect of saving money. “Look how much we are saving on diapers!” I remember exclaiming the first time we shopped there. It only took one trip for me to become hooked.

Two years ago the unthinkable happened. I began to fall out of love with Costco. The reason was simple…the company began to rethink its target audience.

Costco Business Centers

In mid 2012, we received a letter from our local Costco stating that the company would be converting to a new concept store known as a business center. At that time, our location was the ninth such center in the country and the only one on the east coast. The letter informed us that we would be seeing changes to the merchandise as the store transitioned to its new products. I was intrigued but also worried to see the new offerings.

The reason for my worry was because the letter stated that business centers are more oriented to small business owners. To this end over 70% of the merchandise in these stores is not carried at a normal Costco. Items such as TVs and other electronics, apparel, sporting goods, jewelry, toys, house wares, tires, books and CDs, and many other items are not sold. The deli and bakeries are removed. While they still carry food products, many of the items we had come to enjoy were eliminated.

Needless to say, once the conversion happened, our shopping cart was never as full as it used to be. That had a direct result on our savings and caused us to rethink whether our membership was worth it.

The Cost of Membership

Costco’s membership plans come in two tiers: Gold Star and Executive. The Gold Star level membership costs $55 annually with no additional benefits. Those who purchase the Executive level membership for $110 annually enjoy the perk of 2% annual reward (up to $750) on most Costco purchases.

So the Executive level membership works as long as one spends enough to recoup in reward dollars the $110 membership fee. If you can’t get back that amount it’s best to purchase the standard Gold Star membership.

After the change occurred, we continued with our Executive membership. Because of the change in products at the new business center, our spending at Costco began to decrease. They simply weren’t carrying as many items we were interested in purchasing. When it came time to renew, the reward check we received did not come close to recouping the cost of the Executive level membership.

Naturally, this was discouraging and we downgraded to the Standard Gold membership level.

Saving Without Costco?

Once the downgrade in membership occurred, I decided to get serious about whether or not Costco should even be a viable shopping option for us. I mean, why even spend the $55 for a basic membership if the savings aren’t there? As members, we had been regulars there about every six weeks, shopping for mainly groceries and household paper products. I wanted to see if the savings still justified the membership and the cost of gas and time to drive there.

So for this first half of 2014 I decided to only shop at our local grocery store (Publix), purchasing all the comparable items I would have otherwise bought at Costco. I’ve been closely tracking expenses in our budget and comparing that to what we purchased at Costco and Publix during the same time frame in 2013. All those years of being a member, I had been working under the assumption that the combination of shopping at both locations, buying some things at Publix and other items at Costco, was saving us money.

Turns out that wasn’t an accurate assumption.

For the first five months of 2014, I’ve spent $700 less on groceries while not doing any shopping at Costco.

Because of this reduction in spending, we no longer see the relevance of continuing to be members. The products at our local business center no longer match our needs and, as demonstrated by my five-month experiment, we are actually spending less overall.

This experience has reinforced some valuable lessons, mainly that:

1. I should continue to evaluate my spending patterns,

2. The lure of saving at warehouse clubs can actually lead to overspending, and

3. I should do a better job of cost comparisons when dividing purchases between multiple stores.

In no way am I suggesting Costco is making a mistake by targeting businesses in some areas of the country. They obviously feel that is the model that will move their profits forward. It seems to be working well for our local store.

All I know is that it’s not working anymore for our family. Bye, bye Costco…it has been great knowing you.

Do you shop at a warehouse club? What’s the big draw of these stores? Have you analyzed whether it saves you money in the long run? What’s your favorite item to purchase at Costco or any of the other warehouse stores?

Image at Wikimedia Commons

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  1. There’s definately a lot to learn about this subject.
    I like all of the points you have made.

  2. I live in an area where there are multiple Costco’s to choose from and all are “on the way” to something. We have one business store that is awesome for certain things (like #10 cans of unsweetened applesauce.) But we mostly shop at one of the regular Costco’s. I do comparison shop and find that Target often has a similar product in a similar size that costs about the same as Costco. So if I need “just one” thing, I’ll go to Target. But Costco is still the best place for cheap produce and a good back up to my fish monger. Now once the kids are gone, I’m not so sure we’ll find it as interesting. If I ONLY had a business store available, we probably wouldn’t be members anymore either.

    • The conversion to a business store was a real downer for us. Oddly enough, we really haven’t missed it though in the last 6 months. We have become regular’s at Target…but try never to step foot in Walmart. 🙂

      • I agree on Walmart. I’ve been in Walmart a couple of times and generally, the quality has negated the savings. I’d rather pay more for a higher quality product that will lasts. It’s a better value in the long run.

  3. Wade @ DestinationFinancialWisdom.com says

    Interesting development. I hope our Costco stays “normal”. We mostly buy food and household supplies. We have a “default” list of items that are pretty significant savings from our local grocery chains. If they did change our Costco to a business style one, I would likely dump the membership as well.

    • I don’t know what their plans are for further changeover. My guess is if these business centers prove more profitable, then more stores will be converted.

  4. You know I feel the same. I stopped shopping so much at BJs and Sams Club and I’ve seen a big difference in my grocery bill. I still go for certain items but I stick to only buying those items and nothing else. I can get better deals at my local Supermarket. I share the membership with my sister so that helps me keep it.

  5. Holly Johnson says

    We have never belonged to a warehouse club because we’ve never really lived close enough to one. I think it could be a good value for someone who needs to buy in bulk, but we really don’t buy in bulk at all. We’re even getting out of the diaper stage.

    • One thing I know we bought there that we really didn’t need were drinks. I haven’t purchased any cases of Coke Zeros or Green Teas at the grocery store since we left.

  6. It will be interesting to see if Costco re-evaluates this business plan for the converted stores. We shop at Costco, but only for specific items. There are some of our staples that I know are less expensive at the grocery store. It’s just too easy to go over budget in a warehouse store!

    • As long as those stores do well I doubt they will revert back. It took several months for them to complete the turnover. I don’t know how many they plan to convert overall in the company.

  7. We don’t have Costco or Sam’s very close by, so I can’t really say if it would be a savings or not. I think it’s interesting that you spent less by not going. It’s kid of like us spending less by ordering most of our stuff from Amazon than going to Walmart. When you are in the store and see something that looks like a good deal, I think it’s just tempting to buy it. I still believe the best way to cut spending is to stay out of stores as much as possible. I guess Costco is no exception.

    • “When you are in the store and see something that looks like a good deal, I think it’s just tempting to buy it.” Very true…and I think the whole “warehouse clubs are cheaper” mantra has been very well marketed and sold to consumers. It’s easy to buy into that and think you are getting a deal, when in reality you are just buying more than you need.

  8. I’ve been wondering if Costco is contributing to our high grocery budget which includes paper and pet products. We don’t buy all of our groceries there, but still there is a tendency to overbuy. My husband get’s his prescriptions there for $5 each. Something I will have to review to see if there is still benefit for us.

    • It’s something worth checking out and at least doing a little bit of experimenting with. I probably wouldn’t have given it a second thought if our store hadn’t changed to a business center. In a way I’m glad they did because it made me evaluate how much we were overspending.

  9. I just did a post last week about what I love to buy at Costco. Big one being diapers and fruit. Ive priced it out a ton and they’re usually much cheaper for fruit (FYI food is crazy expensive here). We get stuff from Costco probably 2-3x per month for now it’s worth it and trust me I’ve done my homework!

    • That’s great it’s working for you Catherine. Baby items and fruit are two of the things we purchased a lot of. The store changing to a business center really affected what we purchased. With 70% of the items being different than a normal Costco there just wasn’t much there we needed anymore.

  10. We have a Sam’s Club membership because it is free with my hubby’s job, if it wasn’t, I would probably not pay for it. We went through a full analysis last summer comparing unit costs of everything at Sam’s Club vs. our regular grocery store and there were really only 3 or 4 items that were better at Sam’s Club. They try to convince you that you are getting a deal, but when you really compare numbers, it’s not worth it. And Publix is the biggest thing I miss about living in the South. They even made our wedding cake!

    • I think it works for some and not for others, depending on what the focus of purchasing is. When we were into baby items I know it saved us immensely. Our reward checks during those years paid for our membership and then some. If you can get a free one though, I’d definitely stick with it. No harm in being members in that scenario.

  11. I never used Costco very much. It always seemed like too much effort to find too few things that I really needed. Sure, toilet paper and paper towels were great to save on. But an extra trip just for those couple of items? It seems like Costco has moved on from you so you are well to part ways with them.

    • I agree Brad…we never made special trips just for one or two items. I was always confused to see people walking out of there with a loaf of bread and a bag of apples. Most of been locals. I’d never travel 25 minutes just for that.

  12. I’ve never had a costco membership. Instead if there is anything there that will save me money, I ask one of my million friends who do have costco memberships if I can come with them on the next trip and use their membership. I don’t buy much in bulk anyway because my place is small, and I do think there is an allure to overspend there too.

    • “…I ask one of my million friends…” I think that’s a great way to go Tonya, especially if you will only need items that are more big ticket (TVs, furniture, sporting equipment, etc.) and only need them now and then.

  13. Done by Forty says

    I used to have a Costco membership and found we were spending a good deal more with them than we would elsewhere. For us, a lot of the items we use (meat & produce) are actually more expensive per pound or per ounce at Costco than we would see at a normal grocery store. The fact that we’d pay the higher unit price for a huge quantity only magnified the extra costs.

    For some things, like dry goods or dog food, there was a savings. But it was a net loser for us…at least with the way we’d shop for groceries (mostly produce & meat).

    • Costco’s dog food (the Kirkland brand) was $3 or $4 cheaper than at our local Petsmart. So a little but not a huge savings. We ended up purchasing most of ours at Petsmart because our dogs didn’t seem thrilled with the Kirkland brand. Gotta keep the pups happy! 🙂

  14. I do have a Costco membership but they are still a regular Costco. I’m not sure I would keep my membership if they converted to a similar store because, like you, I don’t think I would have the same benefits that I currently enjoy. It’s great that you took the time to do some comparison to make sure you were getting the best deal. We have a tendency to assume that those big warehouse stores and buying in bulk is always the best deal, which isn’t always true. Although will say when it came to diapers and such – they were a huge godsend. 🙂

    • If I was a business owner, especially in the restaurant business, I would love the new stores. They have some great cookware and of course you would save buying all that food in bulk.

  15. I wish Publix would hurry up and build some more stores here! My parents belong to Costco and I split some purchases like paper towels and toilet paper, but otherwise, it’s not worth it for the two of us. I always try to compare costs, and it seemed as though Costco won on most things. I think it’s great you went back to your spending history to see if you were really saving. $700 is a big deal!

    • It wasn’t worth it for the two of us years ago. That’s why it took us about eight years before we joined. Once the kids came along it made sense for awhile, but no longer.

  16. I’m getting better at recognizing the sales. We used to get cases of Capri Sun drinks at Costco for the kid’sschool lunches. When they go on sale at Publix they are as cheap as what I would find at Costco. I think that is probably true of a great many items.

  17. I don’t belong to a warehouse because it’s only my wife, me and a baby…I feel like there’s no need to buy in bulk. Also, there is no room to store that much stuff in a small apartment. With a baby, people tell me I need to join to save on diapers and baby stuff, but I get them at a decent price else where. The prices are pretty good at warehouse clubs, but if you use coupons, shop sales, buy generics…you can get similar savings. Plus, the only time I can go is on the weekends and I find the lines are incredibly long….I can’t deal with that.

  18. I think it’s so great that you notice the changes and re-evaluated your membership. It’s not worth it to stay if you’re not benefiting. I personally don’t belong to Costco because I live by myself, but I don’t think it would be worth it even if I was married.

    • We did not get a membership until our third kid came along. That seemed to be when the savings began to happen, especially on all the baby products. The savings there is what got us hooked in the first place.

  19. Very interesting that they made this change, I’ve actually never heard about them doing something like this. But, I think it’s great that you did the math and compared to see that it was saving you money not to stay with Costco. We have actually gone on the other end and have switched up nearly all of our shopping to be at Costco. It mainly goes back to our switch in dietary habits and easting much more in terms of fruits/veggies and organics. We’ve found that we’re still at the same level of grocery spending and still under budget. That said, it is incredibly important to make sure you don’t go in without a plan or a budget as it can be very easy to overspend at a warehouse store and when you’re talking “lower” cost items all being at least $10 it can add up very quickly.

    • I don’t know how many of these stores they plan to convert into business centers. Seems like that is where the money/growth might be for them in the future. Businesses have a lot more money to spend than consumers so perhaps they are looking at making it more attractive/friendly for them.

  20. I was thinking of getting a Costco membership- although to your point, I think it can lead to overspending. I need to find an alternative to Publix stat as my local store sucks and it is time for a divorce.

    • “…it can lead to overspending.” Very true…This may have been part of our issue. But the change to a new format caused us to evaluate that. Otherwise, I may never had and would probably still be a member.


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