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Welcome
to the Warehouse Club!
Does
big box = big savings?
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The
quest for better prices seems to strike a note with bargain hunters
as the economy seems to be less than robust. And while many mainline
retailers such as Hudson’s Bay and The Gap have seen their
sales decline faster than attendance at a Brittany Spears movie,
big box warehouse stores have seen their sales increase as people
become more dollar conscious. But are the big box warehouse retailers
always a bargain? We’ll tell you tell you the advantages
and caveats of the warehouse scene and how to use them to your
financial advantage.
In
Canada the warehouse options are limited, with basically two main
choices: U.S. owned Costco and Real Canadian Wholesale Club (RCWC),
which is owned and operated by Loblaws Corporation. Costco operates
under the name Costco Wholesale clubs while Real Canadian Warehouse
Clubs operate their retail stores under the name Real Canadian
Superstore west of Thunder Bay, No Frills in Ontario and Atlantic
Superstore in the Maritime Provinces. Other U.S. based warehouse
gorillas such as Wal Mart’s Sam’s Club and BJ’s
Warehouse Club are not yet operating in Canada. You may in fact
find other smaller warehouse clubs or retailers operating under
the warehouse banner, however these may be limited in terms of
some of the operating efficiencies of their larger competitors.
Membership
In
Canada the Costco option will charge you an annual fee of $50
Cdn ($45 if you can show proof of having some sort of small business
- even if it is a summer business), while RCWC will let you shop
till you drop without any membership fee at all. If you combine
with a friend or roommate you can split the Costco fee in half.
In the U.S. warehouse club Sam’s’ charges $35 US while
being welcomed to BJ’s Club will set you back $ 40 US.
Membership
will let you shop at other clubs cross country or across the border,
which for Canadians with Costco memberships may be of value, depending
of course on how paltry our dollars’ value is compared to
the U.S. currency.
Warehouse
clubs are characteristically bare bones retailers. They tend to
concentrate on selling goods quickly, and in high volumes, so
that they are not paying for stock that is sitting collecting
dust on the shelf. Goods are thus sold at lower margins, (8% to
12% versus discount chains and supermarkets, which usually operate
on 20% to 30% margins), usually meaning lower prices for you.
At the same time you give up the wide selection of more traditional
stores (perhaps one model, one colour), and forgo the knowledgeable
sales staff. (That person you flag down for assistance may be
more apt to associate a “hard drive” with a round of
golf, than the new computer you’re looking to buy). Display
and ambiance are also de-emphasized as the “Early Americana”
store furnishings usually give way to “Pre-reconstruction”
pallets - more closely resembling the makeshift book shelves of
a campus abode.
Perhaps
the biggest drawbacks to the warehouse club concept for the average
student are packaged quantities and location. We found, for example,
that a large majority of these warehouse stores are located in
suburban areas - which may make accessing them difficult for a
student living and attending an urban campus. Of course if you
are living at home and tag along with you family on their membership,
this may not be such an issue.
Sizes
and quantities may also be a drawback if you are buying only for
yourself. Splitting with friends, roommates, or family may alleviate
much of this problem.
We
found that on some items the savings could be significant. In
particular books, stationary supplies, computer equipment, and
CD’s offered good value. In the food area however, savings
on items, particularly basic staples, were in many cases minimal,
particularly considering the quantity that was sometimes required.
At the same time most grocery stores and pharmacies had weekly
specials or loss leaders some of which were cheaper than the warehouse
price. The drawback of course is that a little effort and flexibility
is required when planning your food purchases based on the weekly
specials. However many items tend to go on sale in predictable
cycles (i.e. butter every five weeks, eggs once a month, etc.),
meaning you can often time your purchases to take advantage of
the sale price.
Another
drawback that we found, particularly on food items, is that some
brand items that you may get in the habit of buying may suddenly
be discontinued by the store or replaced by another similar brand.
While this can happen at any store, the strategy with the warehouse
clubs generally dictates that when items don’t sell fast
enough, they may get yanked when the store plans it’s re-order.
With
warehouse clubs prices are often as fixed as a French figure skating
judges’ scores. Prices are usually pre set, meaning there
is no room to barter and weekly sales and promo flyers may be
a scarcity particularly at fee charging clubs. And while manufacturer
mail in rebate coupons can still be used, warehouse clubs generally
don’t accept manufacturer coupons at the checkout. We found
for example that Costco’s did not accept these coupons while
RCWC did (In the U.S. BJ’s accepted them while Sam’s
did not).
| Feature
Comparison Chart |
|
Feature
|
Costco
|
Real
Canadian Wholesale Club (RCWC)
|
| Membership
|
Required |
Not
Required |
Membership
Price
|
$50/yr.
($45 for small business) |
N/A
|
| Payment
options
|
- cash
- debit card
- Costco credit card
- American Express card
- authorized cheque
|
- cash
- debit card
- MasterCard
- cheque with store
check-cashing card
|
| Student
discounts or advantages |
No |
No |
| Accept
manufacturer coupons |
No |
Yes |
| Meet
competitor prices |
No |
Yes |
| Option
of buying small or in bulk |
On
some products |
On
many products |
| Charge
for plastic bags or Bring Your Own Bag (BYOB) |
BYOB |
BYOB
or .04/bag |
|
Locations
List provinces
|
-
Alberta
- British Columbia
- Manitoba
- New Brunswick
- Newfoundland
- Nova Scotia
- Ontario
- Quebec
- Saskatchewan
|
-
Alberta
- British Columbia
- Manitoba
- New Brunswick
- Nova Scotia
- Ontario
- PEI
- Saskatchewan
|
| Demographic
locations |
mainly
suburban
|
mainly
suburban |
| Advertised
specials |
Occasional
store coupons |
Yes |
| Return
policy |
30
days |
14
days with receipt |
Extended
warranties
|
|
On
some electronics |
| Online
order option |
US
only, shipping charge |
No |
| Free
test shop |
No |
N/A |
How
they stack up
As with most stores some items are cheaper than others. To give
you an idea of how they stack up we’ve prepared a list of
24 items likely to be on a typical student diet of consumption
(thus items like that work horse snow blower or the 100 pack of
baby formula have been left out). To help us compare we’ve
used stores with traditionally low prices such as category killers:
Future Shop and Staples along with the Safeway grocery store and
Shoppers Drug Mart pharmacy to help us cover all the items on
our shop list. Keep in mind that this is based on a set shop period,
so those prices may fluctuate depending on sales and specials.
These prices may also vary based on region and seasonality, particularly
on items such as produce. We tried to use large national chains
where possible - particularly chains that have uniform prices
across Canada.
While
prices may very depending on specials, the chart is aimed at providing
a rough idea as to the average discount that one may expect based
on a typical basket of expenditures that an average student may
have during a year. Of course some of the items we’ve compared
may be regular purchases while others may be bought once every
few years.
Costco
vs. Traditional retailers
On
our sample shop of 24 items, we found the total savings between
a warehouse club (in this case Costco) and the traditional retailers,
to be just over $210.00. Overall we found the Costco warehouse
clubs to have the lowest prices in most cases versus traditional
retailers. Of the 24 items that we examined, 21 were cheaper at
Costco. In dollar terms savings ranged form as low as little as
.36 (butter) to as much as $40.00 (Palm Pilot PDA). Where the
more traditional retailer was cheaper, the difference ranged from
$1.00 or less.
Costco vs. Real Canadian Superstore
We also compared prices on 14 items that were carried at both
Costco and Real Canadian superstore. We found that on 5 of the
items RCWC was cheaper, while Costco was cheaper on 4 with 5 items
having identical prices. However in total dollar savings Costco
was slightly cheaper by $2.56. Both of these warehouse clubs were
far cheaper than their traditional competition.
With
such a small difference in pricing, your choice between using
one warehouse club versus the other will often come down to location
and whether the membership fee quickly pays for itself. In addition
we also found in general:
- Costco
tended to have the better selection in non-food items, particularly
home electronics, computer supplies, CD’s and books.
- Costco
tended to carry some of the better known electronic brands in
areas such as home electronics.
- RCWC
tended to have a better selection in food items.
- With
RCWC we found it easier to buy in smaller quantities. RCWC for
example, often had bulk food sections which allowed you to measure
out the exact quantity that you wanted on such items as flour,
nuts, pancake mix, chocolate chips, granola, etc.
Are
these warehouse clubs a money saver for students? Even though
membership-charging clubs offered no breaks specifically for students,
we found the savings to be significant enough to justify the membership
fee. The savings on some items were enough to cover the cost of
the membership and perhaps even your transportation costs in one
or two visits.
The
biggest drawback to some of the warehouse clubs was perhaps more
in the way it may affect someone’s shopping habits i.e. does
a typical shopper end up canceling out any savings in that they
just end up spending more - lured by the low prices? Even though
warehouse stores are not high in ambiance the free samples and
demonstrations of various items throughout the store, the interesting
variety of products combined with the large savings on some items,
may tempt the average person to spend more. Perhaps you’ve
stocked up on a half dozen jumbo bags of dog food - only to remember
you haven’t owned a pet since grade school!
It’s
estimated that roughly one quarter of all grocery purchases are
unplanned. Thus, the more tempting the environment, the greater
the chances that you’ll make these unplanned purchases. Little
wonder then that while many of these stores do not emphasize esthetics,
they do market to our sense of smell and taste. Free samples and
food cooking on-site can be hard to resist - to the point where
the fresh made donuts practically leap into your cart. Many of
these aggressively promoted items may also be the more profitable
products, which the store sells. When it comes to food items a
full stomach before you shop is your best weapon against over
shopping.
In
these stores in particular it is perhaps most important to make
a list ahead of time and to stick to paying by cold hard cash.
Warehouse bulk busters
- One-two
combo - Combine the use of a warehouse retailer, with a
low cost retailer such as a grocery or pharmacy that has weekly
loss leaders. (I.e. a once a month warehouse shop combined with
weekly grocery store shops.)
- BYOB
- Yes you’ll usually need to bring your own containers
to haul away your purchases. Most warehouse clubs charge you
a fee per bag (usually about .03 to .05 per bag), or you can
access recycled empty boxes, which they often have on hand for
free.
- Ask
for a free shop at fee charging clubs - Some will give you
a free shop before you have to purchase a membership. Costco
and Sam’s does not offer this, however BJ’s Warehouse
does.
- Carded
friends - Most fee charging clubs will let members bring
one or two guests when they shop, although they may only allow
one person to make the payment (i.e. all on one cheque or debit
card). Thus check to see if your friends or a roommate have
a membership card.
- Mark
down prices of prospective purchases - While it is unlikely
that you will write down everything that you buy, you may want
to note prices such as school and computer supplies, personal
care items and frequently used groceries for comparison.
- The
shelf life - Before wheeling your load to the checkout with
that cow’s carcass draped over your cart, decide how long
you reasonably have to use it. Wasted or spoiled food can quickly
eliminate any initial savings.
- Keep
a running list of supplies you need between visits
(i.e. computer, food, and personal). For example we found many
of the supplies such as personal care, would suffice for the
term or more, thus making it worth it at particular points in
time during the school year, rather than having to store or
haul it home for the summer.
- It's
in the Mail - Check to see if they have mail in coupons
for items on your list at the front of the store, which may
further enhance the savings.
- Coordinate
with friends and roommates
to see if there are any similar items that you can split between
you i.e. computer supplies, paper, laundry detergent, etc..
- Check
on warranties for electronics and appliances as the extra
cost may vary (LU up policies on extended warranties at Costco
and RCWC). If you plan on purchasing an extended
warranty then
you’ll want to factor this into the price (tell what they
do as well as Sam’s).
While
perpetually piled pallets of products may not mean cartloads of
cash , warehouse clubs may be a way to save you a big chunk of
money on many everyday expenses. For the average student they
may not be your one stop shop, but rather one strategy among many,
to keep your costs low.
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