Costco: Big Store, Big Savings
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Costco: Big Store, Big Savings

Posted on Monday, January 9th, 2012 at 8:42 am
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When many people think of Costco, they think of a big warehouse store that offers savings on bulk items. This is true. However, there is much more to the savings at Costco.

Limited Product Markup

One of the things I love most about Costco is that they limit their product markup to 15%. This means that the retail prices you pay at Costco are never more than 15% above the wholesale price that Costco paid. General products at Costco are usually marked up 13-14% and Costco’s Kirkland brand usually carries around a 14-15% markup. Now consider these low markup prices along with the already low bulk prices at which Costco obtains their product – that’s some serious savings!

Of course, before I proclaim the greatness of Costco’s limited markup any further, let us take a look at some other retail markup prices. When shopping at a regular grocery or retail store, you shouldn’t be surprised to find the following markups.

  • Produce: up to 75%
  • Bottled water: up to 4,000%
  • Meat: up to 60%
  • Cereal: up to 44%
  • Prepared foods: up to 40%
  • Canned foods: up to 26%
  • Pain relievers: up to 398%
  • Vitamins: up to 395%

In general, comparative grocery and retail stores will carry an average 50% markup. Therefore, shopping at Costco will save you an average of 35% on markup prices.

How Does Costco Do It?

Costco’s main focus is providing low-priced products in high volume. Thus, you will primarily find bulk products lining the aisles of Costco. Costco also keeps their prices low by refusing to carry multiple brands or varieties of items that similar or the same, with the exception of Costco’s Kirkland brand. The result of this strategy is lower prices based on high volume sales per product and reduced marketing expenses. Costco also refuses to stock a product when they feel that the wholesale price is too high.

Furthermore, Costco maintains low prices by not offering bags or fancy shelving. Most products are sold straight off the pallets or out of the shipping boxes. Costco actively reduced its energy usage by installing skylights in their stores. When there is enough sun to light the store, appropriate lights are powered off. All of these savings are transferred to you, the consumer.

What’s the Catch?

Unfortunately Costco’s big savings don’t come entirely free. To shop at Costco, you must be a member. A Gold Star membership costs $55 per year, but comes with a 100% satisfaction guarantee. Thus, Costco will “refund your membership fee in full at any time if you are dissatisfied.”

Another inconvenience of shopping at Costco can be the sheer bulk of many of the items. If you are shopping for just one or two people, Costco might not be the best place to save on perishable goods. However, you can still save on non-perishable goods without needing to worry about expiration dates. Learn what you should buy in bulk here.

By shopping smart, you can find how to balance your shopping for ultimate savings. Buy what you can at Costco in order to take advantage of their limited markup, but be careful not to buy bulk perishable items that will go to waste. It’s also a good idea to keep track of your savings throughout the first year of your Costco membership in order to make sure you savings are exceeding the cost of your membership. For those perishable items you don’t need to buy in bulk, look for coupons and check for sales in our matchups section. Happy savings!

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