I’ve always been fond of Costco. I suspect most of my fondness stems from nostalgia over the monthly trips my family use to take to Costco. However, I’ve also heard good things about how they treat their workers. In fact, sometimes Costco is criticized for treating its workers well at the expense of its shareholders.
When Jaeger and I first got married, it didn’t make sense to buy at Costco since we wouldn’t have had any place to store the items we bought. Later, I wasn’t sure if I could justify the membership cost. Today, I decided to wander over to Costco and evaluate if buying a Costco membership makes economic sense.
I’ve been keeping a grocery price book now for a little over a year. This spreadsheet includes various columns such as the item, how many times I’ve bought it, the average price I’ve paid and more. I copied a summary of this data into another spreadsheet and added an empty column for Costco prices. Then I printed the new spreadsheet out and headed to Costco for price comparison.
I had called Costco earlier in the day to see if I could get a temporary one-day pass without having to pay any money. The lady that answered the phone told me that I couldn’t because memberships are fully refundable if the customer is dissatisfied with it. However, they would give me a pass to wander around and look at the store. If I decided to buy anything, I could buy a membership at the checkout station. I think in the long run, this method turned out better for me. If I had a free, no-strings-attached temporary membership card, I probably would have walked out of the door with $100 worth of stuff before I had time to calculated the actual savings (or lack thereof). However, with the constraint of having to buy a membership if I wanted to buy any products, I dutifully went aisle by aisle comparing the items I had in my price book with comparable items I could find on the shelves.
When I got home, I compiled my data and came up with this spreadsheet. Since Costco often sells items in larger quantities than normal supermarkets, I compared costs based on the unit price of an item. To determine whether or not I would save on an item if I bought it at Costco, I took the Costco unit price minus the supermarket unit price. Then, if the result was positive, I multiplied it by the number of units I would have bought at the supermarket for this item and the total number of times I bought the item. I considered the result to be the amount of money I would have saved over a year if I had bought the item at Costco instead of the supermarket.
There are a number of flaws with the method described above. First, I don’t have an exact count of how much I bought of each item. Instead, I have a count of how many times I bought the item. For instance, when I went to the store today, I bought two cartons of yogurt. However, my spreadsheet will only count it as 1 visit. Thus, multiplying by the number of times I bought each item may underestimate the savings. However, while the unit cost for a Costco item may be cheaper than its supermarket equivalent, I may not have bought as much if I had bought it at the supermarket. Thus, I may spend less money overall if I had bought the item at the supermarket. There are several other flaws similar to these. However, I believe that the method referenced gives a decent estimate of whether or not I’d save money shopping at Costco. In fact, I suspect that my totals are a little conservative since I didn’t include the cost of some things that don’t have direct equivalents. For instance, I eat oatmeal every weekday and usually put some sort of frozen fruit in it such as blueberries, blackberries, etc. I buy these at the grocery store in individual 1 lb bags. At Costco, there is a frozen organic berry mix that ends up being cheaper than buying the berries seperately. It’s not an exact equivalent so I didn’t include it in my spreadsheet. However, if I shopped at Costco, I would probably gravitate toward buying the cheaper, organic frozen mix at Costco rather than the non-organic individual frozen fruit at a supermarket. Unfortunately, this spreadsheet doesn’t reflect the extra time/gas required to add another store to the grocery shopping circuit.
Before analyzing the results, I suspected that we could easily break even buying a Costco membership if we had a family. However, I was dubious that there would be any benefit when just buying for Jaeger and I. However, even buying the quantities that Jaeger and I typically use, it appears that we likely would break even if we bought a Costco membership. Only comparing prices against direct equivalents, we would save around $40 beyond the $50 membership cost. If we further limit results to items that can be stored for long periods (such as canned tomatoes), we would still save a little over $20 for the year.
As you can see, the savings aren’t substantial. However, I believe this provides enough data to show we will not lose money by buying a Costco membership. As I’ve mentioned, I’ve wanted a Costco card for a while so I’ll probably go ahead and get a membership and shop there quarterly, buying enough of the cheaper non-perishable items to last until my next Costco trip. However, when I shop there, I’ll need to take my price book along* to make sure I’m not buying items that appear to be a good deal but really aren’t. Of course, I’ll also have to battle against the typical Costco temptation to buy really fun stuff that one doesn’t need 
* My normal price book is kept on my PDA so I’ll be able to modify it to determine unit prices as I’m considering buying the item.
