Costco is so much fun to shop at, and that is why we can get pretty carried away in there. But we know that all good things come at a price, and in Costco’s case, that price is the amount of money you end up spending. Here are the top 10 Reasons Why You Spend so Much Money at Costco.
10. Buying Bulk
Costco has built a profitable business for the last 30 years solely on the fact that they are a large-scale warehouse selling bulk food and cheap household goods. Everything about Costco is big, including the deals, and they want to keep it this way. But did you know that it is their mission and strategy to actually encourage consumers to buy more? By packaging items in large quantities, they are forcing you to buy in triplicate. We still go for the deal, thinking the savings will work in our favour in time, but let’s be real—we will never ever consume all that food. Time again, we fall prey to Costco’s marketing gimmicks and wind up buying more than we need or want—with too much of it ending up in the trash. Of course, it is up to us to control our spending, but sometimes we can’t help it when it comes to the good prices. Next time, think of it this way: your money is collecting dust in the pantry, instead of collecting interest in your bank. Buying in bulk can add as much as $130-$140 dollars more per month to your grocery budget. You’ve got to make those bulk purchases very wisely.
9. Free Food Samples
You could make a meal out of just walking around Costco sampling free food. We all love the experience of shopping at Costco, because it allows us to discover new products. Once you’ve tasted something good, you are hooked and more inclined to buy it. One-way Costco gets us to spend more money is by filling their aisles with demonstrators or brand ambassadors during peak hours. These brand ambassadors put together free samples of anything from canapes to cooked meats. You have certainly spotted them during one of your shopping sprees and stopped to try some free food. By offering free samples, not only is it a good way to showcase new products, but it is essentially almost guilt tripping you into buying more. Proven fact that not only does a free food sample translate to increased sales of more than 30%, but it makes for more loyal customers who in turn buy more goods. Psychologically, we are inclined to give something back if somebody gives us something free. Call it a sense of obligation, or a savvy marketing technique often used by retailers in hopes of getting new customers. Costco is the biggest user of this strategy to get products off their shelves quickly. You may end up with a dozen cans of tuna that you would normally not have purchased just because they tasted so good on those crackers.
8. The Costco Layout
Costco’s easy store layout and simplicity is how they get you. Most large warehouse stores stock everything on pallets and racks up to the ceiling, and it is by no means fancy, chic, or sophisticated. But it is very attractive to many consumers who believe that they have a wider selection of choices at better prices. Costco’s “racetrack” design functions with the purpose of leading customers past as many products and potential purchases as possible. Warehouse shopping can be very daunting and tiring for many consumers. Yet at the same time, it can be exciting and exhilarating, leaving you on a high. Costco knows this, and their layout is designed to capitalize on this feeling, leaving you victim to your bad habits. Aside from walking a large store that is triple in size compared to your local grocer, it uses many strategies to keep you in their store for longer periods of time, in hopes you will buy more. One way the store works to get more of your money is by strategically laying out items in a way that encourages impulse spending. It’s similar to how grocery stores have magazines and chocolate bars at the check-out line. Costco takes this principle up a notch, with traps everywhere. All you came for was a 5 pound bag of coffee, but you’re leaving with a new patio set. In a study in 2018, the average shopper in the U.S. spends around $5,400 dollars per year on impulse buys, and it’s impossible to get around Costco without encountering a few of these pitfalls.
7. Aisle Sales
Even the die-hard scrooges have a hard time not overspending at Costco. They avoid going down each aisle and tend to stick to the main center aisle, bypassing everything. Their motto is that there is no need to descend deep into the bowels of each aisle, they’re here for a quick fix. But it is at the forefront of each aisle that you will find the best sales. Costco regularly moves items to the forefront of the two main center aisles to quickly get rid of products. All products strategically placed are eye catching and tempting and also, a trick to get you to spend your money on things you don’t really need. With one quick swish of the wrist, you can easily drop that pack of 100 light bulbs into your cart. You feel that sense of urgency, especially if they are marked down or indicated with an asterisk, signifying that they will be off the shelves in a couple of weeks. Regular Costco shoppers know that it’s not uncommon to see products offered one week and not the other. “For A Limited Time Only!” is the oldest gimmick in the book, and it still works today to promote sales! Costco is an expert at using this tactic, out of the 3,600 different items on Costco’s shelves at any time, as many as 1,000 of them may be limited time offerings. Sure, customers can get some great discounts, but only if they need the product, because otherwise it’s a waste of good money.
6. Big Ticket Items at Costco
There are many ways Costco tries to get you to spend more money, some are subtle and some are right in your face. Let’s look at the fact that the most expensive big-ticket items are right in the front of the store as soon as you enter. Such items include large television screens, computers, cameras, video equipment, and smart devices. These big-ticket items come with a big, hefty price tag too. You can always try looking away to avoid them all together, but it is hard and you are tempted to take a peek. Jewelry is beautifully displayed behind glass cases, with lights shining so bright that those diamond rings can be blinding. Also located in the front are the Service Centers, and these are by no means cheap either. They have a combination of services from Optical Centers, Car & Tire Centers, and Travel and Leisure, which can cost in the thousands of dollars. Costco is a one stop-shop where you can purchase more than just food. Costco is banking on the fact that you’ll end up with a big new purchase. They have some pretty good deals, but you can easily end up leaving spending more than what you’d bargained for.
5. Costco’s Return Policy
Costco’s return policy may sound very generous, as you have more than a month to return any item. But don’t kid yourself, it’s part of a bigger picture. Used as a cool marketing tool that makes the consumer believe that Costco is doing you a big favor. It is actually keeping you humble and loyal. The fact of the matter is that their return policy is not really used that much and they know it. According to one article, by allowing customers more time to return items, it dissuades customers into actually returning the product even if they don’t need it. The longer they hang on to it the more likely it is they will keep it. Heading back into the store and waiting in long return line ups is not feasible. Costco’s “risk-free 100 percent satisfaction guarantee” return policy is a good thing not only for you but for them. By removing any self-doubt that you might get stuck with an item you don’t like, Costco is betting that you’ll be more likely to make a purchase, knowing you can return it if not happy. Marketing experts have found the more lenient a store’s return policy is, the less are the returns. In fact, it’s exactly the type of marketing tactic that just might sway a customer to make an impulse buy on a limited time sale. And that’s why Costco is king.
4. Treasure Hunting at Costco
Costco is a true treasure hunt for any consumer. If you’re a regular Costco shopper, you have had to deal with the frustration of rotating items from week to week. We are not just talking about moving some items to the center aisle. They have also been known to switch up entire aisles from time to time, placing them in completely different areas, sending you on an elaborate treasure hunt to look for your favorite goods. By doing so, you are passing by hundreds of items that you may not have noticed before. Chances are the newly moved products look interesting and you will place them in your cart anyways. It’s all part of a psychological game to make you spend more money. A Costco employee confirmed that they purposely move products around to different locations to constantly rotate a certain percentage of their inventory. Many of the aisles also don’t have signs, so it is hard to locate certain items. When you consider the sheer size of a Costco store, looking for a single staple item that’s always on the move can turn into an expensive trip, then you are so tired and parched, a pit stop to the food court for bottomless drinks is in order.
3. The Costco Food Court
So, you are exhausted, parched and your feet hurt. You will need to take a break from shopping. So, you head to the food court. Walk into just about any Costco and you’ll see the food court placed right up at the front. Sometimes you don’t even need a membership to get in. They want to catch you either on the way in or out. Either way, no trip to Costco is complete without a $1.50 hot dog and drink combo and you know it. It would be insanity to pass up this great deal. Costco wants you to think this way. They claim that they do not make any money with the food court, but they are always full and research shows they make quite a few millions on the hot dogs alone annually. Don’t kid yourself, you don’t need to be a chartered accountant or financial whiz for this one, a penny here and there adds up. Okay, it’s a few million here and there. Going to the food court or picking up a snack before heading home is just another strategically smart marketing scheme to get you to spend more money at Costco. This is why Costco has never messed with their Hot Dog & soda combo since 1985—they know they have a good thing going for them.
2. Rotisserie Chicken Is a Loss Leader
Once you have tasted the $4.99 rotisserie chicken at Costco you will be hooked for sure. Especially considering the rock bottom price and value. Let’s be realistic, we all know someone, who at some point or another has either picked up one or two while shopping or has made a special trip to Costco just to pick up that delectable rotisserie chicken. We can surmise by now that the chicken is not the only thing they will purchase. Guaranteed, a prepared salad, a fresh baguette, and maybe more will end up in the cart. This kind of thinking is how Costco has us justifying our little weekly expenditures. Make no mistake about it, it will lead to frivolous spending in other parts of the store. In retail, this is called the “loss leader” strategy. How it works is that Costco will price their Rotisserie chicken below its market value to persuade you to make other purchases that may cost more. You saved a ton on the chicken, so you can afford some bread and salad. Costco doesn’t make much selling the chicken in fact, they claim they lose as much as $40 million dollars a year. But they keep selling them, like their hot dogs, to encourage people to go to Costco and spend more money.
1. Costco Membership
The last and most profitable way Costco gets you to spend more money is by paying for membership fees. Basically no other store has membership fees right off the bat, so they have you at number one. The basic minimum membership is $60.00 dollars annually. Multiplied, it can lead to huge profits with literally no cost to them. Moreover, Executive or Business memberships cost double and triple that. They are vigilant at up-selling more expensive memberships every time you pass the cash. Of course, people like to feel important and a part of something, so Costco capitalizes on this with a range of memberships to keep you feeling like a VIP, all while sucking money out of you. This basic marketing strategy is not only just getting you in the door, it keeps you coming back too, because now you will need to maximize on the membership. Even if some people might hesitate about renewing, 90% of customers do it anyway. This in turn, leads to pressure to make good on the membership by regularly shopping there. Costco customers pay over $2 billion dollars in membership fees alone.