From a Slate article titled “Why you can’t get iPods at a discount:”
I have always thought that express lanes were a crappy business model. Could you imagine going to any other business and saying “I’m only buying a few things, could I go ahead of your customers who are purchasing hundreds of dollars worth of merchandise?” and having it work?
It makes sense to me. Why alienate a good customer who has one or two things he wants to buy this time around?
I mean, is that so odd? I go to the grocery store weekly and I buy my regular stuff. I pop back in once or twice a week to get one or two things. With express lanes, you keep all of your customers happier - they can’t distinguish who their “big customers who use express lanes” are versus their “small-fry customers who use express lanes” are, and they don’t try to.
Yes, this scales to warehouse clubs, too, because of their change in product composition: they sometimes sell good versions of products that you may need to pick up in a hurry: loaves of bread, cakes for a party, a rotisserie chicken. that i pop in on the way home from work to pick one of these up doesn’t mean that i’m not back in there saturdays buying a twin-pack of LCD TVs.
also, what “any other business” are you talking about? you can only consume a good or a service. most goods retailers have express lanes, or if they are specialized enough it’s usually not as much of a problem (like I don’t need an express lane for best buy)
Yet another possible reason: zoning regulations. Many zoning codes prohibit regular retail uses in industrial zoning districts, but they allow wholesale operations. Industrial zoned land is often cheaper than commercial zoned land. The membership makes the business a “wholesale” operation, since it is not open to the general public. Thus, a loophole around a zoning code that otherwise prohibits retail stores in industrial areas.
What happens when a Costco, BJ’s or Sam’s Club is proposed for a site that has commercial zoning, and the zoning code prohibits warehouse or wholesale businesses in commercial zoning districts? They’ll appeal the interpretation of the zoning code to a Board of Adjustment or Board of Zoning Appeals, and make the case that the store is actually a retail use, not wholesale.
In the past two decades or so, many zoning codes have sealed the loophole by defining membership wholesale clubs as a retail business that is distinct from traditional middleman or “sale to the trade only” wholesale businesses, and allowing them only in commercial zoning districts.
When I belonged to Costco, I was amazed at the speed that customers with two or three loaded flatbed carts would be rung up, compared to someone at a grocery store with 20 or 30 items. Get behind someone buying groceries at a regular grocery store with W.I.C., and the amount of time it takes for them to be cashed out can seem as long as for several flatbed-wielding Costco shoppers.
To explain more, Costco says that paying for your stuff is what slows the line down so that’s why they say express lines don’t help. Of course it might also turn out that a large chunk of their shoppers buy > 10 items so it’s not a big factor for them.
One thing I’ve noticed at Costco is that almost everybody pays with a credit card, which really speeds things up. I’ve been a member for two years and in that time I don’t recall ever getting stuck behind the old lady who waits until everything is rung up before she starts digging through her purse for her checkbook. But in general, those lines at Costco really do move fast. There are always at least two employees at every register, once ringing stuff up and the other packing/loading the merchandise into boxes and back into the cart, whereas at the grocery store there isn’t always a separate person to do the bagging.
I also paid slightly less for my iPod Nano than I’d seen advertised elsewhere.
When I’m at Costco, the thing that holds up lines are people buying gift cards, people who dawdle or get precious about unloading their cart (don’t let the well wrapped meat touch the sealed jars of peanut butter!!!) or people who don’t have their membership card and/or means of payment ready.
Of course, I’ve dropped about $1k in Costco in the last 72 hours so I’ve got it at the forefront of my mind.
While standing in line I get bored. So I watch what is going on. What I have noticed is that if you get in line with lets say 5 people waiting in it but with only a few things, and someone gets in another line with 5 people in it but with full carts. You will be fininshed ringing and just getting your reciet as the other person is about half rung up. Now this does change getting behind the person with two carts or a cart and a flat.
Normally it is not the volume of products but the number of customers.
To be honest I think a lot of the proffered explanation are a bit overthinking the matter.
Furthermore, I simply don’t believe Costco when they say they do it to keep prices down. That’s ridiculous; it doesn’t make any sense on any level. Why would they charge you LESS for Product X because of a completely unrelated stream of revenue? Think about thsi logically; suppose you’re running a business on the side making and selling widgets. You’re selling quite a lot of them, in fact. They one day your old uncle dies and leaves you $50,000. Why on earth would you reduce the price of the widgets you’re selling? You’d have to be an idiot to do that; it’s senseless. Costco charges whatever their market clearing price is.
I suspect they do it for one very straightforward reason and one somewhat more nebulous reason:
STRAIGHTFOWARD: It makes them money for, effectively, a near-total profit.
NEBULOUS: It’s a marketing gimmick, as others have said, to make what is essentially a Wal Mart with bigger packages feel more important. People who have thrown a sunk cost into something like a membership feel obliged to continue using it.
Huh? I thought Costco only takes cash or debit. Except in the USA once, I tried to use debit and they only take a certain bank’s debit (at least, in Minneapolis). Except for their affilated American Express, they don’t do credit cards because of the card’s percentage adn the hassles of processing.
Or is that different where you are? This was IIRC Minneapolis.
The trick if the lines are really long is to find a line next to an empty lane with a closed register. When they open up a new register, it will be the one next to you, and all the people ahead of you in line will be moved over, leaving you on deck.
They take debit cards.
I would guess that the membership fee had its origins as either a way to ensure the store was only really dealing with other businesses, or in some kind of legal loophole that allowed sales to people with memberships but not to the public. I also think it now survives because of RickJay’s reasons
Though I’d add another semi-nebulous reason: Because part of the cost is shifted from the item price to the membership fee, the bargains seem bigger to shoppers, who will compare the low price at Costco to the price somewhere else, without adding in the membership fee. Low prices is the way Costco competes, so anything that makes their prices seem lower is a big advantage.
In fact, this is a perfect example of how warehouse clubs try to make their prices seem lower, I read a trade magazine article once about a brand new warehouse club building. One of the things mentioned was the poured-concrete floor. The owner explained that of course you couldn’t actually use the rough original slab; it needed some kind of floor over it. Putting in the poured concrete floor wasn’t actually any cheaper than putting in tile like a traditional grocery store, but the important thing was it that the concrete looked cheaper to shoppers, so they figured they must be getting bargains at this store.
I <heart> marketing, don’t you?
Also when people see those giant boxes of stuff they assume they are cheaper when in fact they might not be. In a normal grocery store the largest box is not always the cheapest per unit - but everyone assumes it is if they don’t check the per unit price.
While growing up, there was no such thing as Sam’s Club or Costco, but there was a warehouse club called Pace. At the time, only qualified employees of (certain?) businesses were able to get a membership. My aunt was a union government employee for a county agency, and as such was entitled to a membership. I’m not sure at what point warehouses started accepting just anybody (and I don’t remember who bought out Pace).
Not being a member of either Costco or Sam’s, I don’t know what’s on the membership application - but presumably there is some value for them in tracking your shopping habits demographically?
Many people pony up membership fees and shop rarely, or never at all. These members supply money at virtually no cost to the business. These are consumers who probably would never shop there, but since they might, they pay the fee.
It’s like a gym membership. Gyms take in new clients, get their membership cash up front or monthly, and then never have to expend a dime on those members. And those members basically made a ‘donation’.
So, wholesale clubs pull in revenue via member fees from an entire base of customers who will probably never shop there more than once. If you can’t make them shop and buy products, take their money via a fee.
Not sure how many join but don’t shop, the people I know who join are really into these places and shop a lot. Some people go every week just like other grocery stores.