Do You Really Save Money at Warehouse Stores (Costco, Sam's Club, etc.)?

With the economy the way it is, a lot of people are turning to warehouse stores like Costco or Sam's Club to save money. But does it? I know that I save money on baby formula, that's for sure. But there are three things I can think of that might not be saving you money.

First, just because you are buying in bulk, doesn't mean you are saving money. I am a real tight wad, so I always check to see how much I am spending per ounce, per pound, etc. I have found that Costco isn't always cheaper than say, Walmart; especially if you buy that particular product on sale. For instance, at Costco, I can get diapers for like .14 cents a piece. At Walmart, I can get diapers for .10 cents a piece. That's not to say there aren't a lot of savings to be found, especially on products you use daily, but don't take the savings for granted, compare prices.

Second, will you save enough money over the year, to justify the $50 +/- membership fee? Does saving .10 cents an ounce on the 10 gallon drum of maple syrup justify the annual fee? Maybe, if you shop there a lot, and have a big family. But if you only go there for the $1.50 Polish dog and Coke, then perhaps not. Though, please note, I'm not knocking it, I love the $1.50 Polish dog and Coke... Mmmmm, now I'm hungry.

The third potential money waster I see, is buying more than you need. Buying in bulk can lead to consuming in bulk, and possibly throwing away in bulk. The following is from the WSJ article "Do Warehouse Stores Really Save You Money?:"

Consider this brain buster: You go to a discount warehouse and buy two dozen frozen bagels for, say, $9.60. Or you go to your local bagel shop and buy them for 75 cents apiece. Which one saves you more money?...

...Michael Norton, a Harvard University marketing professor, co-authored a yet-to-be-published paper that found people buy more than they intend at Costco because they perceive that prices are better. He believes people end up throwing out food as a result.

Mr. Norton should know. He once bought an enormous amount of pasta from a discount warehouse and ended up pitching some of it. You get tired of it "looking you in the face," he said.

Researchers say the Costco Effect is probably most pronounced with items like fruit or bread that tend to spoil if they're not soon eaten. But it can be true with any item, especially if large quantities of it are kept in open view at home. "If you see 20 cans of tuna lying there, you're much more likely to be thinking tuna when it comes time for dinner," says Ms. Raghubir.

What does Costco have to say on the subject? Richard Galanti, chief financial officer of Costco Wholesale, told me: "There's an old saying: 'If you buy a three-pound bag of potato chips, you're going to eat more potato chips.'"

But Mr. Galanti went on to say that he believes customers save a lot by shopping at Costco, as long as they're disciplined. "The average markup at Costco is 10% or 11%, and the average markup at traditional supermarkets is over 20%," he says. "You've got to save substantial amounts of money. But not if you're throwing stuff away."