Unlikely Hypocrite? Costco versus Amazon Prime

Photo courtesy of SeniorLiving.Org

 

I’ve got retail on the brain these days. Recently I talked about the new Starbucks Rewards program, and then more recently I talked about Amazon Prime.

And now it’s on to Costco. Why Costco? Because as I was reviewing the Amazon Prime program, I was thinking about how it auto-renews, and I contrasted it with my Costco membership, which doesn’t renew.

And then I asked myself: Is it hypocritical to not support Amazon Prime while at the same time having a Costco membership? Am I listening to my own advice?

Read on and decide for yourself.

What is Costco?

Costco, for those who don’t know, is a membership-based warehouse. Members need to pay a yearly fee $55 at the time of writing that allows you access to purchase items at the store.

And why would someone pay $55 for the privilege of shopping at Costco? Because it is a “bulk” warehouse, selling many items in quantity or in larger sizes than one can get in a regular store.

People love Costco. And I get it. There’s something so fun and bizarre about buying in so much bulk, seeing your favorite brands in sizes and quantities you never knew existed. (One of my favorites was finding motor oil in actual barrels. Not that I had a use for it, but it amused me greatly.)

And buying in bulk can translate into big savings.

Note, of course the weasel word “can“. Just because something can translate into savings, it doesn’t mean it will. So in the spirit of fairness, I must be as critical of Costco as I was with Amazon Prime.

Estimating costco…sts

First, the money. In order to make the Costco membership a good deal, you’d need to save more than $55 in a year. Can you do that?

Obviously, the more you buy at Costco, the easier it is to do this. But as someone who’s buying for just me, I can personally do that just by buying one product.

As an example, I’m a big fan of Vega protein powder. I got into this when I went on a meat-free Slow-Carb Diet, and I liked it enough to keep up with this part of the program to this day.

No whey!

No whey!

At my local Fred Meyer, an 18.6 oz container retails for $29.99. At Costco, the price is the same, but the container is 26.8 oz, a 44% increase in size.

If I were to buy the equivalent size of product, at Fred’s it would cost me $43, $13 more. And as I can go through up to two of those containers a month, it’s not hard to see how I make up the $55 membership in a year.

But there are other reasons for me to get a Costco membership. Gas is cheap (for now), but it’s always the cheapest price in town (sometimes by a lot). And as I’ve already mentioned, even just a single multi-day car rental can more than pay for the membership.

Contrasting with Amazon Prime

An argument against Amazon Prime is that it can induce you to buy with them even when a different store has a better deal. Costco, while often carrying the same products as elsewhere, gets around this by offering some products that aren’t available anywhere else. Its store brands can rival that of any other name brands, and I routinely find items that I go specifically to Costco to pick up (from food stuffs to bedding).

Also, unlike many of the services of Amazon Prime, Costco isn’t a service one uses every day. (And if you’ve ever been there on a Saturday afternoon, you’re surely glad of that.) Personally, I usually take a shopping trip to Costco once every two months or so. It seems less likely to induce spending, even with a membership.

Lower the costs

Unlike the streaming services of Amazon Prime, a Costco membership can easily be shared. In fact, almost every year of my Costco membership has involved going in on it with someone else. You then go together, and your friend can pay for their purchases separately. (They tend to frown on more than two people using one membership card, but in practice I’ve used up to three.)

And since Costco memberships don’t auto-renew, I usually take a shopping trip right before my membership expires, wait at least two months, and then renew my membership. This way, I can spread out the cost of the membership over 14-15 months instead of the usual 12. (You have to wait at least two months, otherwise the new expiration date will be based on the original expiration date, not the renewal date.)

Results

I know this might sound self-serving here, but I don’t think I’m a hypocrite for having a Costco membership while not being in favor of an Amazon Prime membership. A lot of this may be my own personal shopping habits. I don’t care at all about streaming anything, and I don’t buy enough things online to care about fast or free shipping.

But I also think that the hazards of the Amazon Prime membership (the induced spending, for one) plus the higher yearly cost are much more of a hazard than at Costco.

If you take nothing else away from this, remember: subscriptions can be financially dangerous. They cause a recurring drip feed of money out of your wallet, and can become automatic enough that you can forget that you’re actually paying for them. This can cause a lot of wasted money.

The solution to this, of course, is keeping track of your monthly bills. And asking yourself, do I really need all of these payments? Or could I just buy what I want, when I want it?

But enough about me. What do you think of Costco versus Amazon Prime?

Mike Pumphrey

Mike Pumphrey

I'm the founder and author of Unlikely Radical, a site to help people succeed with money, achieve their goals, and live intentionally.

I offer a free phone consultation to anyone who is interested in changing their financial narrative. Are you ready? Click here for details.
Mike Pumphrey
Posted on April 7, 2016
  • mpinard

    I think your points pretty clearly make the argument that Costco is right for you. Motor oil in a barrel?? I’ll leave that to you, since I don’t think I have any products like the supplements that would give me such a big savings, and I have little storage space for the bulk products anyway… I’ll stick with Trader Joe’s! Hey, maybe you can profile their business model next?