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Are wholesale clubs worth the membership price?

People shop inside of Costco warehouse store in New York City.

Jeremy Hobson: Well whether or not you are saddled with student loan debt, chances are you're either a member of, or you've given some thought to becoming a member of, one of those big discount clubs like Sam's or Costco to save money on groceries.

L.A. Times consumer columnist David Lazarus has been looking into the pros and cons of these clubs and he joins us now to discuss. Good morning, David.

David Lazarus: Good morning.

Hobson: What are the numbers when it comes to these clubs, and how many people are joining them?

Lazarus: Well a whole bunch. In fact, the latest numbers from the big dogs out there -- and that would Sam's Club, Costco, BJ's -- more than 120 million people are members.

Hobson: Wow.

Lazarus: Yeah, it's a lot of people. And you can understand the attraction, because in tough economic times like these, anybody who offers you any kind of savings is going to be very attractive.

Hobson: Is it really worth it, though, for people to go to these places where they can buy 500 hot dogs instead of five hot dogs, or whatever -- buy in bulk in times like this?

Lazarus: You say it like it's a bad thing, Jeremy. I guess there's two sides to this. First of all, there's the cost to join, which can be anywhere from $40 to $55. And that's going to obviously put you behind the 8-ball right out the gate. On the other hand, the savings are substantial. According to one recent study, it's about 30 percent less than your typical big supermarket, and that is the good-sized saving. According to that same survey, any family that spends about $150 a week at a typical supermarket could save more than $2,000 a year shopping at these big clubs.

Hobson: But don't you still have to go to the supermarket for some things?

Lazarus: That's exactly right. And the problem here is there's not a lot of choice when it comes to these clubs. And also, there are factors of convenience -- they're not very close to your home as say, the supermarket. But they have very, very limited choice. So if you're very monogamous with a certain brand, if you're very finnicky about the various products you can choose, this isn't going to be for you.

Hobson: But do people feel like after they've spent that initial membership fee that they've got to go shopping a lot more in order to make it up? That it actually makes them spend more money at the supermarket?

Lazarus: And that's not a coincidence, Jeremy, because these clubs know that and they know it's going to bring you out shopping. At the same time, it's a good thing because that's where the big savings are going to come in. So yes, you're going to pay that $50 or so to get it going, but if you can save $2,000 or more a year because of the roughly 30 percent discount on all these products, you're going to come out way ahead.

Hobson: L.A. Times consumer columnist David Lazarus, thanks a lot.

Lazarus: Thank you.

About the author

David Lazarus is an American business and consumer columnist for the Los Angeles Times.
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2 things caught my attention in this article: #1 - referring to Sam's Club and Costco in the same sentence is quite a stretch of the imagination! Costco is high-quality for often the best quality available for the best price available anywhere (maybe with the exception of amazon.com on select items) - great for middle-class families and people striving and researching for a better price for great quality stuff. They do research and they buy stuff based on quality - not cheapness. As opposed to Sam's Club which is Walmart on steroids for a shorter list of SKU's - basically garbage made in China and other discounted low-price, low-quality goods. #2 - the annual fee is a meaningless drop in the bucket for anyone who shops at least a few times per year. I routinely save my membership fee in buying pecans and almonds and olive oil and kalamata olives (alone!); this is not an issue in any way. BTW, I've been a member of both clubs...Sam's Club I visited once or twice (I had never been to a Walmart before this and there was nothing I wanted here). Costco I joined when it was PriceCostco (or maybe even before that) and I've happily paid to re-up annually. I don't know what BJ's is...maybe a regional club?

I'd like to see the study for details, but something that Mr. Lazarus doesn't mention is the final value of the items bought. Just because you can save 30% on something doesn't mean it's a good value to you. To paraphrase someone famous, an elephant for sale at $10 is only a good deal if you have $10 and need an elephant. If you buy four loaves of bread because it's cheaper than at the normal grocery but then throw two loaves away because they got moldy before they were eaten, that's not a very good deal.

If you have a penchant for buying things you don't need, then shopping at Costco could get you into trouble. Then again, the same would be true for malls, restaurants, the Internet, and ordinary grocery stores.

What is the recent study that Lazarus cites to support his 30% claim? It's not footnoted anywhere.

Costco saves me a huge amount on prescriptions. One of my prescriptions is $139 every place else, at Costco it is $9. So my membership fee has paid for itself as soon as I fill the prescription. I am single and have limited storage space, but I have found that if I am selective and disciplined I can get good value from Costco. I buy things like 3lb bags of organic figs for $10 - well under what I would pay at Whole Foods Market. Costco has a limited selection of organic food and sustainable fish, but what they have is good quality and considerably cheaper than elsewhere.

I like the warehouse clubs for the time I save. I am young and live alone so I can go a while without having to shop for things like detergent and foil wraps. I once went 2 years without running out of dryer sheets thanks to the 250 pack I found at a warehouse club. Worth it. :)

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