For many people, it makes sense to join a warehouse club. You pay Costco (NASDAQ:COST) $60 (or $120 for an Executive membership that comes with cashback opportunities) and you save money on a wide assortment of goods by buying in bulk at low-margin rates. In most cases, that's a deal people are willing to make.
It's not, however, a deal that works for everyone. Before you join Costco, you should consider the pros and cons. Signing up makes sense for many people, but for some, it's a bad deal and a waste of money.
Join: You are good at planning
Buying in bulk requires planning. In many cases, the perishable things you purchase will go bad at some point. That means you need a plan to use them before they expire.
You may save a significant amount of money buying cereal, for example, in a two-pack of extra-large boxes. That's only a good deal if you eat what you buy before it goes stale.
Don't join: You have limited space
Buying a year's worth of Tylenol and bulk coffee pods requires someplace to put those purchases. If you don't have space to easily store what you buy, a warehouse club may not be right for you.
Join: You can resist temptation
Costco offers a changing array of merchandise. That can be great when the chain gets winter coats in right when you realize you need to buy one.
But it can be a disaster for someone incapable of resisting temptation. Yes, that 8-foot tall teddy bear is being offered at a great price, but what exactly will you do with it? If you're able to resist dumb purchases, then joining may make sense for you.
Don't join: You like specific brands
Warehouse clubs have limited selections. There may be a great deal on toothpaste, but only on one brand. If you're very particular about which brand you buy, then Costco may not be a great fit for you.
Join: You enjoy the hunt
Costco offers a treasure hunt shopping experience. The merchandise selection turns over often, so you never know what you will find. This can be a negative if you tend to buy things you don't need.
If, however, you have discipline, this can be one of the best things about being a member. You may visit the chain with no intention of buying a kayak, but when you see one on sale you snap it up because you had planned to purchase one and jumped at the opportunity to save a few dollars.
The key to making a Costco membership work is actually going to the chain to shop. Is the closest warehouse conveniently located? Will you go regularly?
Joining the warehouse club chain is a lot like joining a gym. It's not enough just to join. You have to actually visit the club to make it worthwhile.