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Can you speak briefly on the economics of you purchasing at a bulk store?

4death4 3y ago
I’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 ago
  As a Costco/Price Club member since 89.. it's never been the cheapest really. But it's always been the best value.
  - pottertheotter 3y ago
    I still regularly call it Price Club.
FredPret 3y ago
Try 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 ago
  I 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 ago
    I 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 ago
      I get that they sell a lot of things, but buying your wife there? That strains the bounds of credulity.
      - tomcam 3y ago
        Obvious 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 ago
        I tried to rob a Costco, but my plan failed because I didn't bring eight guns.
        mcphage 3y ago
        That 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 ago
        I 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 ago
Not 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 ago
Costco has barely any markup on the items they sell (sometimes absolutely 0 markup). They make up for it in membership fees.
- rahimnathwani 3y ago
  Costco'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 ago
    Why 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 ago
    I 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 ago
  Not 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 ago
Things 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 ago
  Would 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 ago
One 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 ago
  Yea 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 ago
The 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 ago
  There’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 ago
For 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.

I’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 ago
As a Costco/Price Club member since 89.. it's never been the cheapest really. But it's always been the best value.
- pottertheotter 3y ago
  I still regularly call it Price Club.

FredPret 3y ago

Try 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 ago
I 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 ago
  I 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 ago
    I get that they sell a lot of things, but buying your wife there? That strains the bounds of credulity.
    - tomcam 3y ago
      Obvious 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 ago
        I tried to rob a Costco, but my plan failed because I didn't bring eight guns.
      - mcphage 3y ago
        That 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 ago
      I 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 ago

Not 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 ago

Costco has barely any markup on the items they sell (sometimes absolutely 0 markup). They make up for it in membership fees.

rahimnathwani 3y ago
Costco'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 ago
  Why 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 ago
  I 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 ago
Not 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 ago

Things 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 ago
Would 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 ago

One 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 ago
Yea 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 ago

The 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 ago
There’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 ago

For 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.