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Ironically the only store I go to is Costco, or the even huger Costco Business Center. EDIT: I'm not alone. Revenue is up more than 50%, and profit more than 6
by FredPret 3y ago
Ironically the only store I go to is Costco, or the even huger Costco Business Center.
EDIT: I'm not alone. Revenue is up more than 50%, and profit more than 60% in 5 years at $COST. [https://valustox.com/COST https://valustox.com/COST]
- Boogie_Man 3y agoCan you speak briefly on the economics of you purchasing at a bulk store?
- 4death4 3y agoI’m not even sure the economics make sense. Like if I buy toilet paper, I just want to buy as much as possible and not have to worry about it. Same with other staples. Costco delivers bulk goods with excellent quality at a good price. I’m not even sure I’m saving money honestly.
- talldatethrow 3y agoAs a Costco/Price Club member since 89.. it's never been the cheapest really. But it's always been the best value.
- pottertheotter 3y agoI still regularly call it Price Club.
- FredPret 3y agoTry and stop me. I LOVE Costco. Basically, when I buy something at a regular store, I'm shocked at the recent inflation. But at Costco, most things have barely budged at all in the past few years. And that's starting at a lower base as well - at the moment it's simply nuts how much cheaper things are there. In fact, if you look at their financial statements, their entire profit equals their membership fee income - this means you're buying things at cost price on average. And Costco is known to be brutal to their suppliers, using their market position to force lower prices and larger pack sizes onto the manufacturers. They don't sell everything though - there are some items you have to buy on Amazon or a regular grocery store. But almost (not entirely) every time that Costco sells something, it's the best deal you can get. Another downside is you have to buy a LOT of what you're buying. So it only makes sense if you're planning ahead somewhat, and if you have room in your fridge/freezer/garage. EDIT: actually the main drawback is the hugeness and remoteness of the store, and the immense number of other shoppers. But again, this plays into going every couple of weeks and buying ahead. These things are inherent in their model and I accept it. I actually spend less total time shopping now because I do all of it in 60-80 minutes every two weeks. Another edit: none of this means that the quality is any lower. Somehow, they're delivering excellent meat, produce, and more at a fraction of the cost. Maybe I should buy shares in this company. They barely have a profit margin though.
- S_A_P 3y agoI have a relatively large family and the quantities required still don’t make sense for most items in my case. However the gas prices keep me a member.
- IAmGraydon 3y agoI shop there for only my wife and I and it’s perfect. I’m curious - what products come in quantities that don’t make sense?
- mcphage 3y agoI get that they sell a lot of things, but buying your wife there? That strains the bounds of credulity.
- tomcam 3y agoObvious trolling, so I’ll spell it out for you. IAmGraydon and I live in the same neighborhood. Obviously, Costco only sells wives in packages of 8 (Kirkland brand). We went in with 6 other friends on this one.
- Boogie_Man 3y agoI tried to rob a Costco, but my plan failed because I didn't bring eight guns.
- mcphage 3y agoThat does sound great for you, but I'm not in a polycule, and I don't think I've got room in my pantry for the spare wives. I guess it's just not for me.
- taftster 3y agoI mean, they have hosted weddings at Costco before. Next step, bride or groom ordering service? Wonder how they handle returns in this scenario. Probably 90 days like electronics.
- Scubabear68 3y agoNot everything at Costco is a win price-wise, but if you do even a small amount of research you can find a number of items that are huge wins. A pint of pure vanilla extract for $9.99. Dog treats at about half the price of pet smart or online stores. Kirkland brand Flonase is about 75% less than you can get at a pharmacy. Kirkland brand Claritin is ridiculously cheap, 365 tablets for under $20. You very rapidly get back your yearly fee.
- radicaldreamer 3y agoCostco has barely any markup on the items they sell (sometimes absolutely 0 markup). They make up for it in membership fees.
- rahimnathwani 3y agoCostco's median gross profit margin is about 12%. (Walmart's is about double that.) Annual inventory turns: about 12x. (1.5x as fast as Walmart.)
- lotsofpulp 3y agoWhy is gross profit margin relevant here? Are the other expenses at Costco not related to their business? Their profit margin is 2.5% or less for 15+ years. Seems more accurate to use that number, which is also nearly equal their membership cost * number of memberships.
- rahimnathwani 3y ago"Why is gross profit margin relevant here?" I replied to a comment that said Costco has "barely any markup". Markup and gross profit measure exactly the same thing. If you know one, you can calculate the other. A gross profit margin of 12% means Costco's markup is over 10%. (Or 8% to 9% if you don't count membership fees.) This is low, but it's not nothing.
- xethos 3y agoI still don't see the relevance - couldn't the higher gross profit margin be accounted for by having a markup of only slightly above zero, but supplemented by membership fees?
- IAmGraydon 3y agoNot sure why this is getting downvoted. It’s 100% true. Their profits primarily come from membership fees. I believe their markup is capped at a maximum of 15%.
- armchairhacker 3y agoThings are cheaper when you buy in bulk. I’m lucky to have a fridge and freezer. Ironically the bulk store brands also tend to be higher quality. The downside is there’s less variety.
- dylan604 3y agoWould it be less of a downside if you knew that a lot of the variety and options available at other stores are the same product just reskinned?
- yumraj 3y agoOne of the primary reason I love Costco is fewer SKUs. I don’t have to decide between 20 items of same kind, say white bread. There’s usually 1 or 2 of a kind, generally of great quality. You buy it and move on. We rely on Costco buyers to do the quality due diligence for us. Also, even if their price is not the best for an item, I trust it’s good enough. Couple that with their return policy, most purchases become a simpler exercise.
- ryandrake 3y agoYea this is great. It sucks going into a supermarket and having to choose between nine different brands of tortilla chips. I mean, come on, store. Just sell the best (least expensive balanced by quality) one and don’t stock the rest! I know. First World Problem.
- cpburns2009 3y agoThe bulk goods tend to be cheaper at Costco than my local stores whenever I've price shopped them. Bounty Paper Towels are about 5-15% cheaper. Kirkland butter is 10-20% cheaper than my local white-label. Kirkland unsalted nuts is 30% cheaper than white-label. I'm sure not everything has that much of an effective discount. Fresh fruit is roughly the same price. It can make sense to purchase bulk nonperishable products and food items you know you'll use before they go bad.
- FredPret 3y agoThere’s very little margin in fruit, so you would expect similar deals most places. Take Fresh Del Monte - I know they do more than just fruit, but their margins are tiny. [https://valustox.com/FDP https://valustox.com/FDP]
- enjoylife 3y agoFor most non-perishables it’s the most time efficient in minimizing the number of trips. Also given how often I go, ~once a month, each time I get the same sort of novelty as a Trader Joe's for they will have swapped out many items.
- lotsofpulp 3y agoIn this context, change in nominal profit is not a relevant number, but the change in profit margin could be. Which is up from 1.5% to 2.5% since 2010. Which is not earth shattering, but the slow and steady increase does indicate they are on the right track for operational efficiencies and offering a competitive product relative to its price.
- dadadad100 3y agoWe’ve got a costco and an Aldi in the same parking lot. Between the two we rarely have to go elsewhere. To the point of the OP, I think Aldi by itself is bringing down the average size of stores. Great European quality stuff at ridiculously low prices
- rahimnathwani 3y ago"We’ve got a costco and an Aldi in the same parking lot." South San Francisco has a Trader Joe's right behind a Costco parking lot: https://goo.gl/maps/ZakBe7FENqr1ybRm9 https://goo.gl/maps/ZakBe7FENqr1ybRm9 Not quite as good as an Aldi, but close.
- wenc 3y agoWhat if you need more cultural foods? Costco and Aldi only have very generic foods. Costco has the odd frozen food and snacks from other cultures, but otherwise it's just a lot of run-off-the-mill type food.
- dadadad100 3y agoGood point. My comment was mostly about “essentials”. If your “essentials” includes Asian or south-Asian essentials then we have those too and love going there almost as an excursion. And those stores are also small, to the OP.
- jadbox 3y agoCostco, Trader Joe, and the farmer's market has been our core of late.
- rickydroll 3y agohere in boston, market basket is my goto store.
- rahimnathwani 3y agoBread flour is 60% cheaper at Costco Business Center than at Safeway. (~$0.40 per lb vs ~$1 per lb.)
- alternative_a 3y agoI don’t shop there myself but a couple of visits tagging along with a shopper I was impressed with their bread section - head and shoulders above the typical supermarket bread. But looks like you bake your own bread (which is awesome).
- rahimnathwani 3y agoA couple of things from their bakery that I like, and cannot easily make at home: - croissants ($5.99 for 12) - artisan burger buns
- alternative_a 3y agoInteresting you mention croissants. That bread is my litmus test of a bakery. Costco’s croissants are quite good for a supermarket outlet (and that price is amazing). Their baguette is also not bad.