Friday, July 23, 2010

Wholesale clubs - do you really save?

Amelia surprised us all by entering the world at a whopping nine pounds. She looked like a 2-month old compared to the other newborns in the hospital. And she was hungry. Really, really hungry. The pediatrician required that we supplement her with formula due to her size. So thus begun our relationship with Similac.

The price was pretty hard to ignore. Formula costs a fortune! And this little baby could easily consume 4 ounces in one feeding - at 9 days old. A friend told us to join Costco. Not only did Costco sell Similac in larger cans, they also accepted the $5 Similac coupons we received periodically. In the initial year, we easily regained our $50 membership fee in formula purchases alone.

Once we switched to regular milk, however, I began to wonder if there was any real savings. And if so, how much. Costco's sizes are larger than what you'd find at the other stores, so a simple comparison doesn't work. Last year, I embarked on a mini research project to figure out if Costco was, in fact, worth the $50 membership fee:

  • I looked only at household non-consumable goods. I didn't look at food, since Costco brands are often unique and hard to find elsewhere.
  • I documented the size and price of 25 common purchases at both Costco and Target (trash bags, toothpaste, shampoo, shaving cream, ibuprofen, Jet Dry, fabric softener, Ziploc bags, etc.)
  • I converted each product to a "price per" (price per toothpaste tube, price per ounce, etc.)
  • I estimated the # of purchases I would generally have for each product in one year.
  • Then I calculated the annual cost difference per product, purchased at Costco and Target.

It turns out, on general consumer goods alone, we save almost $200 per year by purchasing from Costco. In addition, the gasoline savings is always $0.10 - $0.12 per gallon, compared to any other station in the immediate area. If between our two cars, my husband and I fill up 50 times per year, we save an additional $80. And again, this doesn't take into account any food/drink purchases, which definitely add up the savings further. As does the Costco American Express card that recoups 1%-3% of our purchases in cold, hard cash each March. A $200 check right around tax time is a always fun surprise.

It was a lengthy project, and totally nerdy (I know!), but now I can keep my $50 membership card without remorse.

(Disclaimer: Costco had nothing to do with this post. I'm just a research dork sometimes. Maybe someone out there in blog land will find it useful.)

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