We touched briefly on this question earlier this past week. I can remember when COSTCO first came on the scene. It championed ordin-ary folks looking to save serious money. But it appears COSTCO has drifted far from its orig-inal goal over the past 40 years…
The idea was, average folks could join an exclusive club which gave them access to a broad range of consumer goods at warehouse prices. The catch was, you had to ‘join the club’, paying a significant annual membership fee for the privilege.
Subsidizing lower prices?
‘Members’ assumed their sign-up dues were subsidizing the cost of the goods they were purchasing. The bare-bones, warehouse-racking decor of the airline hangar-like mega-stores was saving money on the cost of running the operation. And regular specials on ‘multiples’, ‘Club Pack’ and case-lot ‘deals’ on many products supported that perception.
The sheer novelty of the new retailing concept drove hordes of shoppers to ‘the store with the over-sized shopping carts’.
Membership ‘gold mine’…
The original COSTCO annual membership fee, back in 1983, was $25. The most recent fee hike, brought in last fall, raised the basic membership $5, from $60 to $65.
In addition, today’s complex membership structure encompasses a range of fees for individuals, fam-ily groups and corporate configurations.
I was shocked to discover that annual membership fees paid by COSTCO’s 58.3 million members ac-count for (US)$4.83 billion of the company’s revenues!
What about prices?
COSTCO’s day-to-day prices and pricing structure have evolved over the years, too. You’ll find fewer case-lot deals now. But Club-Pack and multiples ‘specials’ have become more common. As they have at ‘regular’ supermarkets.
Certain ‘signature products’ have remained at markedly lower price points over the years. There are a few in every ‘department’ that have become legendary. And they’ve become perceptual ‘anchors’ for the company’s ‘discount’ image. Witness the uproar when it was suggested that the price of the clas-sic COSTCO Food Court ‘$1.50 Hot Dog’ deal might have to go up amid soaring food cost increases.
A basic flaw
There’s always been a basic flaw in in he COSTCO marketing model. Not at first, maybe, but in recent years, since the mainstream supermarket model has evolved toward big, showy deals on case-lot and multiples deals. Non-perishables such as toilet paper, bar soap and other common household items are increasingly being offered by the supermarkets in mega-multiples and shrink-wrapped case lots at truly phenomenal per-unit prices. Bottled water can be had any day of the week in 24-bottle or larger cases at 1/10 or less of what you pay by the bottle from the convenience store or restaurant cooler.
When you consider, there’s no membership fee or other restrictions on those every-day supermarket specials, it seems less and less attractive be a COSTCO member…
One more thing… There’s almost always a regular supermarket closer to the average family’s home than the nearest COSTCO.
My take
This post resulted from my own musings over the past week about where prices are, and what kind of products the deals are being offered on. I’ve heard more than one shopper remark that even the su-permarket ‘bulk’ deals are more than they need, more than they use in a reasonable amount of time. And in some cases, more than they have the room to store.
Put up Walmart’s prices, decor, shelving and product variety against COSTCO’s. And see where it makes sense for you to shop…
My questions for you:
Does it make sense for you to buy, say, trays of 6, 8 or 12 steaks or pork chops at a time to save a few cents per unit?
Does it make sense, from a healthy-eating standpoint, to have case lots of ice cream bars in your freezer, which will only tempt you to over-indulge?
Does it make sense for you to buy big bags of fresh fruits or veggies to save a few cents per piece when you can’t use them all up before they spoil, wasting food?
When was the last time you exercised your God-given privilege as a COSTCO member to enjoy that $1.50 Hot Dog deal?
Muse on that…
~ Maggie J.