I had worked for a while in a warehouse club and will agree with those posters who note that membership fees are a significant form of income for those businesses. A $50 annual fee is roughly equivalent to a customer purchasing $1000 worth of goods given the small margins on many items. However that is not the only reason for its existence.
As it was presented to me, the math went something like this:
Restricted membership
+ membership fee
=====================
fewer credit defaults (both check and credit card)
fewer returns
less theft
&
greater store loyalty
more $$$ spent annually
By avoiding many of the problems of general retail stores, they are able to negotiate better terms with vendors, keep staffing to a minimum, and reduce the number of write-offs. That reduced overhead means lower prices.
Think about it. They are effectively filtering out deadbeats from their customer base. Everyone who shops at the warehouse is guaranteed to have employment and most likely good credit. In the case of a default, the store has complete employment and credit records, plus they can completely blackball any customer who is problematic.
It is like the difference between public and private schools in the US. A private school has a scholastic advantage since they can chose who attends and can kick out students who do not perform or who are causing problems.
Sorry for starting this hijack. I brought it up because last Sunday afternoon, when we foolishly went, every line had 20 carts, and I saw some poor guy with two items looking for a place to check out. The lines did move fast.
Express lanes make sense when there is a large variance in the number of items people buy, which is not true in department stores and Best Buys. I’d stop in at our CostCo after work to get a loaf of bread (the bread at our store is awesome) but I’m afraid of getting stuck in a gigantic checkout jam, so go to the Safeway instead where the checkout time for a small order is more predictable.
Costco in the U.S. will take any American Express, but the clerk always assumes that you want to use there card, since you already have it out as your membership card. I just used a Hilton AmEx at the Costco in Maplewood, Minn.
I’m impressed by the number of people flummoxed by the Costco Cafe only taking cash and gift cards. Do people really carry no cash?
FFIW, wholesale stores like Sams Club and Costco have to have separate liquor stores in Minnesota (and in Minnesota “liquor” includes everything except 3.2% beer, and those liquor stores are open to anyone, member or no.
NC law also requires membership stores to sell alcohol to anyone. Very few people know this so they probably sell very little beer and wine to non-members.
Unless I’m going to the farmers’ market, I almost never carry cash. However, if you really want to, you can go through the normal lines at Costco and order cafe food from there.
I worked for them as a consultant on a project to automate bakery processes years ago. We talked about the margins and whether the software should attempt to help them optimize margins and they responded absolutely not. If they can cut costs then they will cut price and keep the margin at X% (I always remembered it being 14%, maybe that was then or maybe he said 18% and I remember wrong). He told me that any perceived action like I was talking about would turn away customers, which was a much bigger deal than the value they would gain.
I have never gotten a great fix on whether the liquor in the “affiliated” stores is as much of a bargain as I generally find the main store merchandise to be. I get the feeling that Costco does go to local liquor chains and get some commitment from them to be very competitive on price. God knows they should be incentivized to do so with the amount of traffic the store funnels right by their door. I’d imagine it’s less than one in four times that I hit Costco that I don’t pick up at least a few bottles of wine (the product mix, like Costco’s, tends toward high-middlebrow SWPL, and is equally accessible). Importantly I think, you go to/leave Costco with a “stocking up on staples” mentality, which (for me) carries over to wine, booze, etc. – if you drink wine with dinner/entertain, semi-regularly you’re always going to eventually find a use for whatever half dozen bottles catch your eye, so you’re not worried about over-buying, and the virtuous house-in-order, now-I-don’t-have-to-worry-about-buying-X-for-six-weeks, glow that goes with stocking your larder carries over to your booze cabinet.
I think it’s only mentioned once upthread, but I personally feel their major reason is that a small membership fee keeps out the riffraff. I doubt they’d ever admit it, but in the brutal retail biz, the ability to pre-screen store clientele is huge. And the cool thing is, they never even have to admit that anywhere, publicly or internally. They can just come up with other good reasons, all mentioned upthread, and pretend they just happen to have loyal and wonderful customers.
It’s a small minority of people who create problems with “shrinkage” (aka shoplifting), messing up displays, showing up only for the free samples (or getting their filthy hands all over the sample tray and disgusting other more washed customers), kiting checks, looking for a place to get warm without buying, and so on. That small subset is the same segment that also doesn’t pay membership fees to shop somewhere. Lovely coincidence.
I’m just an objective capitalist here; not particularly judgmental. But in my area you got yer WalMart shoppers, your Target shoppers and your Costco shoppers. A quick check of the parking lot cars gives you an idea of the average buyer at each of those stores. (We also happily shop Walmart and Aldi, so I am not pointing fingers or pretending to be my usual uppity self) For us, the small fee we pay Costco ($100/yr) is easily recouped for us in direct savings (they do have better prices on most of what we buy), remarkable store-brand cheaper equivalents, and very easy no-hassle returns. In addition, the amount we buy per year easily covers the Bennie with the yearly refund check.
What Costco gets by not letting everyone in the store is a nice little screening out of the bottom tier. They can take a chunk of their profits and give it back to the community but they are in much better control of those profits.
Ditto w/ Sam’s, to which we also belong, although we consider Sam’s–at least in my suburban area–the next tier down for shopper protoplasm.
Lot of truth to that. A significant proportion of the shoppers I see are clearly bodega/cafe owners stocking up for their own establishments. I’d imagine they skew pretty radically anti-shoplifting.
I will admit not minding the bourgeois atmosphere at Costco – and while it’s true I rarely see black people there, it’s not a racial thing; it’s socioeconomic, as one of the biggest perceived “problems” at WalMart seems to be po’ white trash clogging up the aisles (www.peopleofwalmart.com).
I read the Costco newsletter, which (used to?) run(s) letters to the editor. For a store newsletter, it was written at a pretty sophisticated level, and the editorial/letters came across as very solidly on the pro-business economic libertarian side of the spectrum.
It is absolutely NOT a color thing. It is totally a class thing. Seedball white underwashed fast-fingered homeless panhandlers are no more welcome than any other non-member, and I don’t think anyone in my neighborhood (or business/social circles) looks twice at color anymore anyway.
I don’t carry cash, and a lot of people I know don’t either. I get my paycheck direct-deposited into my bank account and I pay for everything with my credit card or my check card. I don’t own checks, nor have I even physically been inside one of my bank locations. I don’t even know what I’d need cash for since virtually everyone takes credit cards (and the ones that don’t, I usually pass on unless it’s desirable enough for me to go out of my way to an ATM).
I almost never carry cash any more. I stopped carrying cash during the long stretch I went without a car and I found myself walking or bicycling to or from work in the dark. Nearly every place I shop regularly cheerfully accepts my Visa debit card. The only place that doesn’t is the local comic book store, simply because it’s so small that it’s not economically viable for the owner to pay the fees required to accept plastic. So he gets a check. If I’m going to patronize someplace that takes cash only (which is really only the movie theater and the pawn shop), it’s usually a planned trip and it’s no trouble to stop by the ATM to withdraw the amount I need as I’m on my way there.
I was actually wondering this last Christmas season what effect the ubiquitousness of debit cards has had on the Salvation Army’s bell-ringing donation solicitation efforts outside stores. For the last several years I’ve walked past those guys as I go in and out of Safeway, and I can never drop anything in the kettle because I’m not carrying any cash.
At Costco … I see black people there as often as I see them anywhere else in my town, which is almost never. There just aren’t many living around here. Our biggest minority is Mexicans, and I see plenty of them at Costco.
Back when you had to belong to a business to join, they freely stated that they limited membership to businesses and their employees because it meant that all customers had paying jobs and thus would be unlikely to not be able to afford their purchases, cutting down on bad checks received. Back then, it was only $25 to join.
I’ve gone in with a ‘free pass’ as a looky-loo, mostly, though I did do some Christmas shopping there and felt I got some real bargains. What happens if someone sneaks in without a membership card, does some shopping, and they catch you at the register as an unauthorized shopper? Do they just add a non-member fee onto what you owe?
In order to ring you up, you need the membership number first.
So you’d have to buy one on the spot or leave without buying. At one point Sam’s would occ give a one day test membership card, I think. I do not know if they still do.
I’ve used the pharmacy at CostCo without showing my membership ID. The guard at the front looks mad, but you say you’re going to the pharmacy and they let you through. The pharmacy rings it up just like any other retailer. But don’t take my word for it.
The person who wrote that is an idiot or just flat lying. The smooth concrete floors are because of forklifts and order pickers. A typical forklift weights about 5 tons, that ain’t gonna work on tile. Floors need to be smooth because forklifts have no suspension, a rough or uneven floor would have loads teetering and spilling all the time.
And to clarify, it is not straight ahead rolling that causes problems, it is when the vehicle turns producing lots of shear which causes the tiles to slough off.