Whether you want to stop living paycheck to paycheck, build up reserves in your emergency fund, or max out your 401k contributions, you need to save money to focus on your financial goals.
With the average price of food rising about 2% over the last year and understanding that grocery and household purchases are a growing part of your budget, you’re wondering whether joining a warehouse club is worth the money.
Joining a warehouse club can indeed be worth the membership expense if you shop there regularly.
But you'll need to control your impulse buying, or the value will quickly decline.
Why Warehouse Clubs?
In the late 1970s and early 1980s, warehouse clubs became popular all over America.
The notion people could join an “exclusive” club offering groceries and consumers goods at significant discounts held great appeal to baby boomers raising families during a challenging economic time.
Fast forward to 2021, and some of the same warehouse chains still offer a wide range of goods.
They now provide a variety of services too. The major warehouse clubs in the US are Costco, Sam’s Club, and BJ’s.
A Look Inside a Warehouse Club
Imagine walking into a large department store or your favorite major grocery store. Now, strip away the well-designed floor plans, strolling customer service reps, and seasonal décor.
Add in a membership services desk, wide aisles and sky-reaching industrial shelves loaded with consumer goods and mega-size groceries. That’s the look of a warehouse club.
Today's warehouse club facility has transformed into a mega-shopping experience without all the frills.
Customers can shop for:
- automotive supplies
They can also take advantage of available:
- banking services
- eye care – Costco Optical Center review
- hearing care
- health screenings
- legal services
- travel planning services
Some clubs even offer water delivery for homes and businesses.
How Membership Works
The process of joining a warehouse club is simple. Unlike social clubs, membership is guaranteed to anyone willing to pay the annual membership fee.
In most cases, the yearly membership is between $45 – $55, depending on the chain.
Some warehouse clubs offer reduced-priced memberships at different times of the year. You can also check sites like Groupon to see if there are any cheaper deals on memberships to local warehouse clubs. Military discounts or lower-cost memberships for college students are perks at some clubs also.
The first step is completing the registration form and paying the initial membership fee. New members then receive their exclusive membership card.
Some clubs also offer a free membership card to another person in your household. Membership cards must be presented for entry into the warehouse. Most chains do allow people to come in as guests if escorted by a member.
Is Joining A Warehouse Club Worth the Money?
It should come as no surprise that warehouse club memberships have both advantages and drawbacks. Some people couldn’t imagine giving up their warehouse club membership. But others would never shop at one or decide early on they won’t be renewing their membership.
Since most people have experience shopping at a Walmart, we'll use it here as a standard of comparison. After reviewing the pros and cons, it should become clear whether or not joining such a club is worth the money based on your circumstances.
- Low Prices. It's hard to reach a consensus on some goods and services, but it's generally believed groceries and household goods are 15%-30% cheaper at warehouse clubs than at Walmart. With lower overhead, clubs like Costco can offer lower retail prices to their customers. The club's goal is to compensate for lower profit margins with membership fees and sheer volume of goods sold.
- Access to Discounted Services. Walmart and other department stores offer access to some of the services mentioned above. But warehouse clubs tend to provide services at lower prices. Again, due to lower overhead, the clubs pay in the form of rent. This allows warehouse clubs to charge lower fees to customers, clients, or patients. It’s still a good idea to comparison shop for specific services you might use before buying a membership to a warehouse club.
- Better Store Brands. Most major grocery chains have an affiliate store brand. Store brands are typically offered at lower prices than national name-brand goods. The problem is Walmart or Target's store brands are generally considered to be of a slightly lower quality than comparable national brands. That's not necessarily true of warehouse club brands. In fact, many experts claim warehouse store brands are on par with national brands but sit on shelves at much lower prices.
- Customer-Friendly Return Policies. Many department and grocery stores maintain strict guidelines for the return of groceries and consumer goods. But warehouse clubs generally have liberal return policies for many items, up to and including a “no questions asked” policy. Just keep in mind abusing the generous return policies could get your membership revoked.
- Free Samples. To promote new foods and snacks, warehouse clubs often offer free tasting samples to customers strolling through the aisles. It's a great way for customers to try new products without having to buy the item. This is a bonus because of the bulk size portions at warehouse stores. Some people enjoy a free “bonus” meal with all the samples they try at a warehouse club on the weekend. In addition to free samples, some warehouse clubs have snack bars offering inexpensive meals and treats if you don’t want to wait in line for samples or if you prefer sitting down to enjoy a bite to eat.
- Memberships Fees. While membership fees may offer the benefit of lower store traffic, it's still money you have to pay out of pocket. The only way to offset the cost of membership is to purchase enough goods and services to make joining a worthy investment. Remember, a customer who averages a 10% discount on consumer goods they purchase would have to buy $500 of products to compensate for the cost of a $50 membership fee. For people who anticipate becoming frequent shoppers, there are memberships plans offering more services and larger discounts. But these memberships also have bigger annual fees. Taking time to research exactly what is available to you at different membership tiers will help you make a smart decision about what membership (if any) you should purchase.
- Dealing With Bulk Quantities. Warehouse clubs are famous for offering good discounts on bulk purchases. You want to consider the logistics of buying more of a product than you might otherwise want to buy if it's only offered in bulk. Do you have adequate storage space? Take a look in your cupboards, pantry, freezer, closets, or basement shelves. Is there room for large bulk items? Another question to ask is whether you'll need to split items into smaller packages so food doesn't spoil or reach its expiration date before you can use it. Some people feel the time, and energy-related to these extra steps takes away some of the benefits of lower warehouse club prices.
- Impulse Buying – The quickest way to negate the advantage of a discount is by buying more of a product than you can use. Also, buying bulk-size products not originally on your shopping list can really add up. If you struggle to avoid the temptation of putting extras in your cart, you might think twice about a warehouse club membership.
Can I Shop At a Warehouse Club Without Joining?
If you aren’t sure whether you want to join a warehouse club, there are ways to shop at them without joining. Just be sure to understand the limitations on what you can purchase and any fees or surcharges added to non-member orders.
Some clubs allow you to enter the store as a member’s guest. Ask a friend if you can tag along on their next warehouse club trip to check out prices on things you usually buy.
If you decide to make purchases, you can either join the club, pay your friend back, or pay a slightly higher cost – if the store allows non-member purchases.
If you don't have a friend with a warehouse club membership, you might be able to shop (with an added surcharge) using a day-pass.
Ordering online using services like Instacart or using gift cards purchased by a warehouse club member are other ways to shop at them without joining. Contact the specific club where you’d like to shop and ask about their terms and conditions.
Should You Join a Warehouse Club?
Joining a warehouse club as a way to save money is obviously a personal decision based on your specific situation.
What works great for one person or family may not make sense to others. Don't join a warehouse club just because your friends or family members tell you about the great deals they get.
If you're a savvy shopper and use coupons to stack grocery store discounts, you might decide to skip a warehouse club membership. Many clubs don't accept manufacturer’s coupons.
Having plenty of storage, sticking to a shopping list, and being located close to a club are good reasons to consider a membership.
Visit one (if you haven't); then you can decide if a warehouse membership would benefit you financially.
When all is said and done, the value of joining a warehouse club comes down to your shopping there regularly. You’ll definitely get value from your purchases – but you have to control your impulse buying, or all bets are off.
Vicki and Amy are authors of Estate Planning 101 – a Crash Course in Planning for the Unexpected -coming soon from Adams Media.