By Michael Beyman
CNBC
On a warm, late November morning in Augusta, Georgia, workers are putting the finishing touches on a brand new Costco Wholesale warehouse, set to open in less than 24 hours. This is the 597th Costco location – the 20th opened last year – and employees are racing to install light fixtures, paint doors, and stock the last of the shelves in time for the grand opening.
Warehouse manager Waymon Bell is keeping track of every last detail as he begins his tenth lap around the building, inspecting the aisles of merchandise and checking in with his workers along the way.
“We’re in a facility that is three acres under one roof, so we do a lot of laps around here,” Bell said. “There is still a very long list of things to do, but we will, without question, make it. I’m looking forward to tomorrow morning.”
Though the last-minute burst of activity may seem like the typical preparations for any store opening, Costco is anything but a typical store. Its floors are bare cement, its ceiling nothing but stark steel beams and skylights, and most of the newly-delivered merchandise sits on the same industrial pallets on which it was shipped. There are no signs or directories, and customers have to pay a membership fee before they can even walk in the door.
Such a lack of frills might seem like a deterrent to would-be shoppers, but there is no evidence of that in Augusta, where individuals line up patiently to join 64 million other Costco members in a retail revolution.
Costco’s low prices and bare-bones operation have not only changed how people shop, but how much they buy. Those unmarked aisles force customers to wander, creating opportunities for them to stumble across – and pick up – items they weren’t expecting. It’s a common Costco experience for customers to spend more than they anticipated.
“I thought I would spend about 25 dollars, and I ended up spending over 700,” says Gail Creighton, as she left the Hackensack, N.J., warehouse. “It’s why my husband never lets me come here.”
Brian Wansink, a professor of consumer behavior at Cornell University, says it’s no coincidence people overspend. “Shopping at a warehouse club gives us license to spend like we otherwise wouldn’t if we were in a normal store. We are motivated to save money, we are motivated to recoup our membership fee, and as a result, we might even end up spending a bit more.”
Spending more can be tough to avoid when almost everything is sold in bulk. Waffles are sold in packs of 60. Costco’s eggs are available in packs of 90. Mayonnaise is sold in gallon jugs. “It’s part of the American psychology,” explains marketing consultant Pam Danziger. “More and bigger is better.”
Despite the idea that customers like more, Costco stocks surprisingly few items, only around 4,000. The lack of selection is deliberate. “There’s only one variety of ketchup,” Danziger explains. “You don’t have to choose from a variety. They’ve edited it down for you. You’ve paid them to do it.”
Costco’s selection in any one category of goods may be limited, but it actually features a wide range of products. Three-quarters of what it sells are what it calls “triggers,” staples such as cereal, detergent and paper towels. The remaining 25% are what Costco calls “treasures,” items that make shopping an adventure. Turn the corner and you might find Sony flat-screen TVs, Cartier watches, and Prada handbags that appear on Costco’s shelves one day, but are gone the next. That uncertainty creates a sense of urgency, and is all part of the Costco shopping experience.
“What Costco does is it really understands their consumer,” Danziger says, “understanding what’s going to excite them, and then making sure you have the product that’s going to be there to excite them.”
Costco does draw complaints from its members. The biggest? Long lines at the checkout.
“It’s too damn long” says Costco member Peter Million. “It takes a long time to make your purchases.”
Another common criticism: having to buy everything in such large quantities.
“The real peril of the warehouse club is not that you spend too much money,” says Wansink. “I think it’s that you actually waste the food because it goes uneaten or you end up eating way too many calories.”
Costco’s sparse layout and no-frills shopping experience certainly create an image of a discount operation. But do shoppers really save money by shopping there? The company says that nothing in the warehouse is marked up more than 15% - considerably lower than the 25% mark-up at an average supermarket, or the 50% mark-up at a typical department store. And a recent independent study by Consumers’ Checkbook, a non-profit consumer advocacy group, confirms that Costco’s prices on food alone are about 30% lower than the largest supermarket chains.
Costco also claims a low price doesn’t necessarily mean something is cheaply made. The company’s single best selling product – its Kirkland Signature bath tissue – undergoes regular, intense scrutiny at Costco’s headquarters in Issaquah, Washington. Blue-coated lab technicians subject toilet paper to a constant battery of tests, checking its thickness, strength, softness and color. Corporate buyers also make repeated visits to the eight paper mills that make it, checking every detail and searching for flaws. All that effort may sound a bit obsessive, but Costco sells $400 million worth of toilet paper – more than a billion rolls – each year.
Whether it’s redefining the store layout, keeping prices lower than its competitors, stocking an eclectic mix of products, or building a better toilet paper, Costco’s success at redefining retail is undeniable – the company weathered the recession far better than most, and its stock price has continued to perform strongly.
Costco’s also created one of the most devoted followings of any store in the country. On the morning of the Augusta warehouse’s grand opening, Rachel and Danny Devine arrived early with their children to be among the first inside.
“We’ve been waiting for a Costco ever since we moved to Georgia. We were members in Maryland and Utah,” Rachel Devine says. “We’re really happy Costco is here.”
For Costco, it’s doing the little things right, over and over again, that has made the company a success, and made its co-founder and recently-retired CEO, Jim Sinegal, a very wealthy man.
“I think to most stories, there’s always a bit more behind the curtain than you expect,” Sinegal told CNBC. “Generally speaking, when people ask, I tell ‘em ‘all we’re trying to do is sell stuff cheaper than anybody else.’”
Editor's Note: Carl Quintanilla's hour long CNBC Original documentary, 'The Costco Craze: Inside the Warehouse Giant' premieres Thursday, April 26 at 9pm ET/PT on CNBC. The documentary will re-air on April 28, April 30 and May 4 on CNBC.
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Costco is way better than Sam's/Walmart. They are a good fair and ethically run business. Sam's/Walmart is not. They do not purchase from companies that observe child labor laws, animal rights/cruelty laws and do not take care of their employees (specifically woman and minority discrimination). My family has stopped shopping for ANYTHING from Walmart stores for well over a year and are more than happy with the choice. Costco gets a lot of asupport from my family and we love their products and shopping experience... and we all love the Saturday sampling scattered throughout the store. It really is a good company all the way around!
I think the most annoying thing is the way they rotate merchandise a few times a month, constantly making you walk around to find what you want, perhaps enticing you buy things you wouldn't have seen.
CHEAP TRICKS.
And people say apple fans are crazy!!!
I see no problem with the way costco is doing business AT ALL. If you don't like costco it's probably because you like to spend more for less, and that's just fine by all the other retailers out there, they love you for it and even give you points on their store cards. Go for it ....
Do they take food stamps.
I think they do on a state-by-state basis, but I'm not sure. Check the website?
I love Costco. It has a good selection of quality products. They treat their people well. The two secrets to beating long lines - 1) Don't shop Sat AM, 2) Shop Friday night. I shopped last night about 45 minutes before closing, very few customers, no hassle. Their checkers and packers are very fast and efficient. PS - nothing beats a Costco steak cooked at home. You will not get a steak this good at a restaurant. PS2 - I do not work for them, I am just a very happy customer and appreciate their business model.
I love Costco. They have high quality fresh meats and prepared foods, wonderful gourmet cheeses, and better fruits and veggies than what is offered in our local grocery chains. Its true the amount you have to buy is problematic for a small household, but I share with friends and family. I figure its smarter to buy 3 english cucumbers for $3 and give two away, than to pay $2 for one at the local grocery store.
I also like knowing that Costco employees receive decent salaries and benefits, unlike Walmart.
Costco does have a status of employee called "limited" who do not qualify for employee benefits such as health insurance but they do qualify for others such as holiday pay based on average hours. These employees cannot work more than an average of 24 hours per week. That being said Costco does offer a very decent hourly wage for our community.
No one has mentioned the rebates a customer/member receives from the American Express credit card and the "executive" membership which costs at present $100 per year. The annual rebate usually makes our membership about $10 to $20 as our rebate is $80 to $90. The American Express rebate is 3 % on gas, 2 % on dining and travel and 1 % on everything else.
As others have said with some control on impulse shopping Costco is a great place to shop and save money and usually get quality merchandise. Very liberal return policy.
I buy certain things at Sams that are way cheaper than the store like milk, meat, TP, papertowels, buns, cheese and lunch meat. The best bet is to get a food saver for meat as mine can get some freezer burn if it is for too long. Get place when having a party....can get a huge pork butt for 20 bucks that is 15 pounds for smoking.
I go to Sams because there are 3 close to my house to 0 costcos...would switch it it was closer
We have saved quite a bit of money buying unusual big-ticket items. But, as always, you have to plan and be flexible.
For example, where I live, the power can be unreliable. I noticed that CostCo had a huge generator on sale over the web at a REALLY attractive price last year.
To cut to the bottom line ... It took them eight months to actually deliver the thing. (I think that they underestimated the demand and had to get more from the manufacturer.) But they never lost the order and kept updating me with emails about once a month. When I finally got it, it was a really great product!
My cost: putting up with their internal procedures to make their system as low-cost as possible. That can be irritating.
My gain: A great product at a super low price when I finally got it.
I love Costco, even though I only normally use a few of their brands and am single. I don't always get a membership, however, it depends on where I am living at the time. Presently, I am only about 2 miles away, so going there for gas and no fee ATM withrdrawals alone compensate for the membership fee. Of the items I do buy, fortunately they are easily stored. They carry Amy's, which I can keep in the freezer. I chop up the giant blocks of Jarlsburg and Irish or VT cheddar into 3 or 4 pieces, which I then wrap in foil, and they last for a month or more that way.
Movie passes save me even more than the ones I can buy online through work, as the latter charges $.50 per ticket processing fee. Electronics can be hit or miss. There are also some occasions where you can buy clothing - I scored 3 cashmere sweaters a few years ago - for 1/3 the price I had paid at a department store - and the quality was the same. At Christmastime, they have some nice hostess or office gifts, such as biscotti in a porcelain jar, etc.
Some items - even non-perishables - can often be cheaper per unit at your local supermarket, so, just like outlet shopping, you just have to know your prices. More is not always cheaper, but quantity isn't the only reason to shop at Costco.
I split a membership with my best friend.So much cheaper,only drawback is ,she gets the couponbook in the mail.But it is just me and my hubby,and my friend is widowed,so we even split some of our purchases.It works out great for us!
Last year I purchased a GPS from a Las Vegas Costco to travel across the country for the summer. When I arrived at my destination, my GPS was no longer working. I figured since my packaging, other accessories, and receipt were at home, I would have to go without the device for the remainder of the summer. I was wrong. I decided to bring the GPS to a Costco in Michigan where I was visiting to see if there was anything they could do for me. I was pleasantly surprised when the customer service agent looked up my membership information, verified the purchase, and traded the broken GPS for a new one. This experience is evidence of how well they treat their members. If I had purchased this device from a typical big retail store, I would have never gotten a new one during my trip.
I refuse to do business with Costco since they have a big sign at the entrance to their store stating that they are not going to allow legally issued Concealed Carry Permit holders the privilege of exercising their Second Amendment rights while shopping in their store.
This wouldn't affect me, since I am a Law Enforcement Officer, but their attitude gives me the right to not do business with them on behalf of those legal gun carrying citizens I am sworn to protect.
not only do they violate your second amendment right going in but your fourth amendment rights on your way out with guy rummaging through your groceries. i always ask them if they have a warrant they say no. then i ask what their probable cause is and they say none. so i say no you can't see my receipt or look through my groceries at which point they call someone like yourself who then informs them that they can't look through my stuff or receipt without a warrant, probable cause, or my permission in addition they are told i am being held illegally against my will and they have to let me go. i do really appreciate that! i mean it. they are called rights for a reason. you stay safe out there man!
you are NOT an LE. Armed security maybe. But your attitude belies you.
how the hell do you know he/she's not a cop?
ANOTHER reason to like Costco!! Thanks!
ANOTHER reason to like Costco!! Thanks! I feel safer there already.
eh guns don't bother me. most people are responsible with them. besides someone who wants to go in and shoot up a costco will do so whether they have conceal the weapon or not. so much ado about nothing. at least open carry laws mean folks can see the weapon and thus make securities job easier for tracking purposes.
as a wise man once said: "sunshine is said to be the best disinfectant."
Here in Kahului Maui the Costco, Wallmart, Home Depot, Lowes, K Mart and Safeway are all about two to three miles from where I live. Could not live here if it wasn`t for Costco.
Maui, I dont se how anyone can afford to live in HW.I was at K Bay on Oahu on R@Rand rented a pink@whie jeep but the gas was prohibitive,wowser.
I'm a single person on a very low budget and COSTCO has helped me make it through the last few years. Its only items with a short shelf life that run the risk of expiring so either have freezer space for them or only buy them for parties or find a friend to share the items with. I only have to get one item at other grocery stores (red wine vinegar). You do have to be a bit organized and a list is very helpful. I go twice a month and find even the cut up salads last at least 10 days unopened.
I agree with the person that said it's the quality as well as the quantity that is the bottom line for me and the great customer service I've always gotten.
Their return policy for electronics is what I like best. 90 days, no re-stocking fee. Sometimes cameras and TVs fail in that time or you don't like the picture that the cameras take or the TV displays. When in doubt, I can return the electronics without any fear of 10-30% re-stocking fee.
but i remember the good old days when they took anything back. i remember an old girlfriend took a dead plant we bought at costco back after almost 5 years cuz it died and we got a refund. in the late 90's folks wondered how i got a 55" projection tv. i got it from costco and i started with a $200 tv. basically what i did was save up another $200 take the tv back exchange for credit. now i have $400 to spend on a tv i kept doing this every 6 mos until i had like $3000 in credit. this was no scam and the employees knew i was doing and knew it was ok, it just wasn't advertised. i miss the days when costco would take anything back they sold at any time with or without a receipt..../sigh the good 'ol days.
Costco is very good to its employees and generally employees are loyal. Costco goes out of its way to accommodate school (college) schedules, new parents, National Guard members etc. They are strict and will not abide theft, tardiness, laziness or harassment but go out of their way to treat employees fairly and provide training to all employees re harassment, bullying, CPR etc.
They have an average benefits package (was much more 'Cadillac' back in the day) and advancement is obtainable with good work ethic. Women and minorities have no complaints about their prospects either. They employ both full time and part time.
I am not an employee but am married to one who has worked there for over 25 years. Great business.
The only thing that bothers me about Costco is that they only take American Express for a credit card (as well as debit, cash and check). I get cash back using my Visa I pay off monthly and don't want an American Express.
My mother used to call that card "American Excess."
I save twice the cost of annual membership in beef alone.
Prime Ribeye's are 2 or 3 dollars less per pound than any butcher and as good if not better.
They also have the best return policy of anywhere I have ever shopped or even heard of.
really, i know several professional chefs who know a thing or two about meat and the said they wouldn't feed their dog costco beef. i believed they used the words bland, tough, and flavorless. two of the chefs have earned 1 michelin star each.
fresh is best.
Costco doesn't make much sense for me as a single person in a small living space. I usually get my gas there, but most times I only buy items like batteries or dishwasher detergent. Some clothes look acceptable, but Costco is aimed at families in large four bedroom houses. I am not sure it is worth $50 a year to join when I can shop at Target or Walmart for nothing.
I joined Costco when it was known as PRICE CLUB. I more then make-up for the cost of my annual membership on just ONE item Glucerna Drink. I buy it approximately 13 times a year at 24 cans for 29.99 At the supermarket or CVS 6 cans average $11.00-11.50.
Additionally I found the COSTCO "signature brands" both in foods and OTC vitamins, etc. a BETTER quality or at leased equal too the BRAND-NAME products. The best microwavable Burgers I have ever found is at COSTCO.
It seems the longer I am a member, the more food I purchase. Learning not to waste food there however is an acquired skill.
Recently I have begun to purchase gasoline there, which is a true luxury. I save an average of 20cents per gallon.
I have never shopped at Walmart or Sams club, and never will.
but you cannot figure out your true cost until you calculate your gas expense driving to and from costco versus other retailers and the value of your time. without knowing those variables one cannot quantify your actual costs versus savings (if any).
Completely agree, art. Learning not to waste is an acquired skill. (I have to admit that it's not one that came naturally to me. My wife educated me. But I'm there now. She's great teacher!)
In my case, I have to make a trip about once a week to the city anyway for something, so the cost of the trip is not a factor. We just work at making every trip count as much as possible. (Just as a side observation, we thought we were going to have to pay more for transportation before we moved to the tiny hamlet we live in, but it's actually been the opposite. When we lived in the city, we would drive around shopping all the time. Now we only drive to the city occasionally and we can often make it two weeks on a tank of gas for the driving we actually do.)
It seems like most of you like shopping at Costco and I have no dog in this fight, since our family shops at neither Costco or Sam's.
But my in-laws come home with tons of things from Costco (to give you an idea of how much stuff, there are 2 refrigerator/freezers in the kitchen and another tall freezer in the basement). Some of the things they buy seem to be a good deal; paper products, water, soda and things like that. But when they come home with perishable food like cheese or vegetables it makes me cringe because I see so much of it turning moldy and being wasted.
Maybe bulk shopping is cheaper, but if you throw away half of what you brought home, how is that cost effective? I try to shop the sales at the grocery stores, read all their ads and see what's cheapest where. Then I buy what we need for 2 weeks and that's all. No waste. Ever. The stores where I shop are all within 4 miles of my house, and I am fortunate enough to have a little time during the day to decide what to buy and where. So gas isn't a factor. It's a little more time-consuming, but at this point, we have a lot more time than money.
Whatever floats your boat. But there are only two of us, we buy their bulk stuff, and nothing goes to waste at our house. It just takes planning and a little discipline.
You're right, Porter. And it's getting harder and harder to keep the darned thing afloat.
Local grocery chain also has its own gas station. Grocery store offers 10 cents off a gallon of gas for every $50 spent on groceries, up to $1 off per gallon of gas. Occasional weekend specials offer 50 cents off per gallon of gas if you buy $75 worth of groceries, that's the best deal. Costco is ten miles away, this store is only three miles away, so it's an easy choice, and I don't have to pay them to shop there.
Right now, I have coupons that will give me 40 cents off a gallon of gas when I fill up tomorrow. Saving on gas is better than buying in bulk now that we are down to two people and and a dog and college kids home only in summer.
i don't drive all over for cheap gas, it usually isn't worth the savings anyway but i do buy the 87 grade as the other grades are really just a myth anyway. i do however know folks that will drive 5,10, and even 20 miles because some gas station has gas $.20 cheaper than the closest local station. i warn them but they don't listen so they ultimately spend more on gas.
also where i live the closest grocery gas station is over 20 miles away. there's just no math that can justify the savings unless i could get $1.50 in savings /gal.
I just always see Costco full of Gluttons.
Y'know ... even as someone generally pleased with CostCo, I agree with that. The gluttony on display at CostCo can be discouraging if you let yourself be discouraged by it.
But it's so widespread everywhere that you really can't avoid it. I see two people going up the road in a motor home as big as a Greyhound bus ... towing a SUV ... towing a boat ... all the time. If I was willing to let myself be bothered by it, I would have gone postal on a few of them a long time ago.
This thread is about shopping at CostCo. A lot of people have posted that the jumbo sizes they sell create waste. I have disagreed because you can avoid it with a little discipline and thought in your life. It's the same with many of the disagreeable things that surround you like gluttonous people. A little mental discipline and you can get over it ... inside or outside CostCo ... and still be able to enjoy the advantages.