March 2, 2005 - Ed Bulks Up

At Costco, all things good and bad, come in large packages.  Some would call it bulk. They also sell for lower prices. And, as many a skeptic has admitted, their quality ain’t so bad either.  The lots-of-good-stuff-for-cheap model works very well in American business today.  It even works better than lots-of-bad-stuff-for-cheap model. And, it works a lot better than the daily-emails-for-free model.

Costco carries a lot of bulk in the business world.  They own the bulk of the warehouse club store market. Other businesses do bulk mailings in an attempt to bulk-up their market share.  But, up against Costco’s bulk, they often fall flat.  The bulk of Costco’s advantage comes from their efficient distribution system and their ability to negotiate effectively with their suppliers.

Of course there is one retailer with much more bulk than Costco. But, Wal-Mart hasn’t made it to Santa Barbara … yet.

The dedicated staff of edhat.com wanted to see if buying things in bulk at Costco really does save money.  We wanted to see if making room in the cupboard for 10 cans of soup, 15 bags of Ramen, and 120 loads worth of laundry detergent is prudent. Wouldn’t it be a joke on all those families loading up the SUV, if the whole savings thing were a scam?

Still hanging on to fond memories for our hour at the Harbor watching boats, the dedicated staff put our heads together - our bulkheads, as we called them - and figured out a way to measure Costco savings. The bulk of our problem was that on any given day, you never know for sure what Costco is selling. The only method to use was to go to Costco first, price the items they were selling in large quantities, and then, armed with a precise list of items, go to a grocery store to price the small quantity lots.

For our grocery store comparison we chose Albertson’s, the successor to Lucky as the ‘low price leader’.  The items we chose were traditional Costco items like, Mac and Cheese, Ramen, dishwashing detergent, laundry soap, etc.

The only rap against Costco that ever really sticks relates to diversity.  Seriously, doesn’t it seem like every party, meeting, or barbeque given these days is catered with Costco muffins, Costco veggie spreads, and Costco fruit platters? The pizza, soft drinks, cookies, and cheesecake are all very good, but by now, we’ve had them so many times, they are as interesting to our taste buds as Melba toast!

We quote this week’s Wayside Pulpit - The less routine, the more life.

Or, to quote a poem written by Ed in his youth:

We live in the 7-11 of times
Where nothing cost a dime
No twenties after two
Only one kind of shampoo

The same lack of diversity can be applied to Costco’s packaged goods as well.  The grocery store, for good or for bad, sells ten different kinds of Kraft Mac and Cheeses, six different scents of Dawn detergent, four different kinds of eggs, and three kinds of chicken, while Costco only sells a few of each.

This all said, our research found substantial savings across the board on Costco items, despite the fact that many of the items we picked were also on sale at Albertson’s.  The only item cheaper at Albertson’s was Mac & Cheese. The biggest savings were on Mission tortilla chips – a salty 60% savings. Overall the average item was 26.1% lower at the membership store.

Check out this chart to see all the items we compared. Since we couldn’t find pads of paper and 1000 mg vitamin C at Albertson’s, Rite Aid prices are shown instead. However, the Rite Aid percentages were not used to calculate the average.

In yesterday’s contest, Rizzle came the closest with a guess of 26%. Rizzle wins 2 tickets to Aquila Theatre Company’s performance of Shakespeare’s Twelfth Night on March 9th at UCSB. Of course, if Costco did Twelfth Night it would 26% off and would be called, Ninth Night.

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