MINNEAPOLIS (WCCO) – Warehouse retailers Sam’s Club and Costco offer low prices with an upfront membership fee that can cost up to $110 a year. According to a retail expert, the membership can be worth the cost, but shoppers have to use it often.
Consumers are hooked on savings and buying in bulk.
“I come to Sam’s maybe two to three times per week,” said shopper Neil Saltzman, who was buying three pounds of bacon. “We freeze it.”
A Sam’s Club business membership starts at $35 a year. The retailer claims its customers save 34 percent a year on groceries.
Costco memberships range in price from $55 to $110 a year. The most expensive option includes 2 percent cash back on all purchases.
“I’ve been a member for over 10 years, and it’s unbelievable,” said Tricia Dobis, a mother from Eagan.
Costco and Sam’s Club guarantee store memberships. Selling these memberships for an upfront cost is the main reason why prices at warehouse retailers are so low.
“Those membership fees, they offset the operating costs so we can bring value to the merchandise,” said Melissa Keller, manager of the St. Louis Park Sam’s Club.
According to retail and merchandising expert Hye-Young Kim, memberships are at the core of the warehouse retailer business model.
“Membership fees provide a means of covering their operating costs, overhead, ultimately reducing the prices of the products,” said Kim, who received her Ph.D. in retail and consumer science from the University of Tennessee.
Costco and Sam’s Club also have basic store designs, fewer employees, and advertise less.
“They can achieve a kind of operational efficiency here,” said Kim.
At these stores, you won’t however find a lot of variety.
“We carry about 4,000 items,” said Don Christensen, the Burnsville Costco General Manager. “A grocery store is going to be about 25,000 (items), Target, Wal-Mart could carry 100,000.”
At warehouse clubs, there may only be a couple types of spaghetti sauce instead of dozens, which is easier and cheaper to stock and ultimately cheaper for the customer.
Experts say membership fees can be worth it the more you use them, but say be careful of the big-ticket items. Dr. Kim says impulse buys can set you back.
“Consumers can save money at these warehouse clubs, but to do so they have to be very disciplined shoppers,” said Kim.
Shoppers may not be able to get everything they want at one warehouse store. These stores may not carry a specific kind of deodorant or toothpaste a customer is looking for.