The concept of shopping in a warehouse and buying directly from a distributor is an appealing idea for money saving minded people. But do today’s warehouse clubs really save you money or are they merely a carefully marketed retail store that has lots of stuff in it, designed to separate you from your money?
What is a Warehouse Club?
Warehouse clubs are in truth a retail store, that has been strategically designed to look like a warehouse. They utilize tall heavy duty shelving, high ceilings, wide aisles and simple cement floors. a
They carry a wide range of merchandise from mega-sized groceries to computers. The stores are designed to make customers think they are getting wholesale pricing. In truth, some prices are warehouse clubs are less expensive, however, there are other drawbacks . . . keep reading below to learn what they are.
Warehouse clubs are able to keep their prices low because they offer fewer frills than smaller retail stores. And the biggest difference is that they charge a membership fee, which generates much of the club’s profits.
The History of Warehouse Clubs
Warehouse clubs have been around since the 1970s.
Sam’s Club – Discount mogul, John Geisse established The Wholesale Club in Indianapolis in 1982, and in 1991 sold it to Sam’s Club
Costco, Pace, Sam’s and BJ’s – In 1983 the warehouse club market became more crowded as three more players entered the marketplace: Costco Wholesale, Kmart’s Pace Membership, and Sam’s Club all opened their doors. BJ’s Wholesale Club was found the next year in 1984.
Each year more than 460 billion dollars are spent at warehouse clubs, while spending at 38,000 U.S. grocery stores stands at around 606 billion dollars.
How to Shop strategically at Warehouse Clubs
Warehouse clubs have been referred to as the $200 clubs because many people can’t get out of there spending less than $200.
Warehouse Clubs versus Grocery Stores
We’ve done a price comparison of several items at the club stores and have found that we could save 17 percent to 55 percent by purchasing the same items, on sale, at the grocery store. When factoring in the annual membership fee, the savings at a grocery store are even greater.
If you are a careful hunter and have a select few items that you purchase at warehouse clubs, you might save a little money. But for the vast majority of people, the club stores will cost more because of impulse buys and because it takes a long time to “earn” back the $50 membership fee.
The Danger of Impulse Buys and Limited Availability
At the grocery store, you might pick up a $1 to $3 item impulsively. But at the warehouse stores, the impulse buys are more expensive: $5 to $100.
The clubs also prey on impulsiveness by stocking lots of seasonal or limited quantity items. This causes the average consumer to think that they have to purchase it now or it will be gone.
Plus most folks a very reluctant to take something back once it leaves the store.
While it’s true you may miss that deal on a fancy foosball table, you will miss the cash in your bank account even more. Shop around and you’ll find better deals and greater savings.
If you want more detailed reasons why we don’t like shopping at warehouse clubs, check out these links.
- AARP Bulletin—Do you save money at warehouse clubs
- 7 Ways Warehouse Clubs Make You Spend More Money
- In our book, Cut Your Grocery Bill in Half, we present research we did between grocery store sale prices and warehouse club prices on some commonly purchased grocery items. The savings at the grocery store were staggering—between 17 to 50 percent cheaper! Do your own research and let us know what you find.