10 Things to Know About Shopping at Warehouse Clubs

Millions of Americans belong to a warehouse club, whether that’s Costco Wholesale (NASDAQ: COST), BJ’s Wholesale Club Holdings (NYSE: BJ), or Walmart's (NYSE: WMT) Sam’s Club.

Many join to get savings on bulk goods. Some like the shopping experience, and others take advantage of some of the lesser-known perks available to members.

The model has long been popular, and these chains have continued to grow during a time when many brick-and-mortar chains have struggled as the rise of Amazon has threatened the retail industry broadly. The warehouse clubs have even thrived during the pandemic as Americans have stocked up on groceries, and their cavernous stores make them a natural fit with social distancing.

But there’s more than meets the eye with warehouse clubs. Here are 10 things you should know about shopping at these bargain basements.

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A basic (Gold Star) membership to Costco costs $60. Sam’s Club is just $45, and BJ’s is $55. As long as you shop at these stores semiregularly, you should make your money back pretty easily. According to Consumers’ Checkbook, you can save 30%-40% at Costco and Sam’s Club compared with the typical supermarket chain, while it found BJ’s was a little more expensive than its two peers.

Still, the average grocery budget for a family of four is about $900 per month, or close to $11,000 a year. If shopping at these stores saves you 30% on groceries, you would only need to spend $200 to recoup the costs for the membership, though you’ll have to buy in bulk.

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When you’re shopping at a warehouse club, you have to be somewhat strategic. It can be easy to be enticed by limited-time offers and closeout sales, as well as something like an extra-large jar of pickles. However, you’re better off using the membership for reliable savings on items like gasoline, paper products like toilet paper, beverages including alcohol, and other nonperishables. Dairy is also a smart way to save, provided you consume what you buy before it expires, and organic foods and meat are also usually a good buy at club stores, though again you have to watch the expiration dates.

Tires are also a good way to get savings and often come with free installation.

The easiest way to waste money with warehouse club membership is to buy things that you eventually have to throw out. Therefore, it’s probably a good idea to avoid buying fresh fruits and vegetables, unless you’re planning a party or have a big group to feed. The fruit is often unripe in the store due to the nature of their supply chains, another reason to avoid buying fruit.

Similarly, large packaged foods can easily go bad before you’ve finished them.

Electronics can sometimes be a good purchase at a club store, but the selection is generally more limited than what you’ll find at Best Buy or online so it’s a good idea to compare prices before purchasing.

Savings on gasoline is one of the best reasons to join a warehouse club, especially if you live near one or regularly drive by it. Gasoline at Costco is $0.21 per gallon cheaper than at competitors, on average, meaning that if you got about 300 gallons of gas at Costco in a year, you would make up for the $60 you spent on your membership.

Buying gas at a warehouse club also doesn’t come with any of the disadvantages that making bulk purchases inside the store would come with. It’s the same gas, same experience, but just a better price.

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BJ’s, Costco, and Sam’s Club all offer a higher-level membership for approximately double the price. At BJ’s and Costco, the main perk with the executive membership at Costco or the perks rewards membership at BJ’s is that you save 2% on purchases. With that level of savings you would need to spend $2,750 in a year at BJ’s or $3,000 at Costco to make it worth upgrading. If you are regularly buying your groceries at Costco and like to pick up big-ticket items there as well, it’s almost certainly worth it to upgrade your membership.

At Sam’s Club, you get perks like cash rewards, free shipping, early shopping, pharmacy, and optical with a Plus membership.

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Another way warehouse club members can take advantage of their membership is by signing up for the clubs' credit cards, which come with no annual fee but offer many of the perks of other rewards cards that would generally come with a fee.

At Costco, for example, you can get 4% back on gasoline, 3% on restaurants and eligible travel, 2% on Costco purchases, and 1% on everything else.

Sam’s Club’s credit card offers similar rewards including 5% cash back on gas and 3% back on Sam’s Club purchases for Plus members.

Finally, BJ’s offers the same kind of savings with $0.10 off gas per gallon and 5% off on most BJ’s rewards purchases.

Though warehouse clubs generally prefer you to visit the store as this is how the business model is designed and you’re more likely to make add-on purchases that way, you can also use your membership to shop online.

Costco offers free two-day shipping on nonperishables with a $75 minimum, and you can get same-day delivery on perishables through Instacart with a $35 minimum.

At Sam’s Club, Plus members get free delivery on most items, while Club members get free delivery on a few items.

BJ’s offers delivery through Instacart as well, and has free pickup and delivery with a fee.

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Another way to benefit from your warehouse club membership is to pick up a snack from the food court while you’re shopping.

Costco’s $1.50 deal for a hot dog and soda is legendary, and the company also offers dirt cheap prices on other food court items like sandwiches and pizza. It’s also famous for its $5 rotisserie chickens.

At Sam’s Club, members can pick up food like pizza, pretzels, churros, salads, and other items. BJ’s used to have food courts, but contracted with Dunkin’ Donuts in 2016 to replace them.

Costco, Sam’s Club, and BJ’s all offer discounts on travel packages and other such deals.

Just as they buy products like food, paper goods, and electronics in bulk at a discount, these companies do the same thing with travel packages, bundling stays in resorts or cruises with flight, rental cars, and other such deals.

You can even buy new and used cars through Costco and Sam’s Club, a great way to use your membership to get savings on a big-ticket item.

While a warehouse club membership can be a great way to save money, it’s not right for everybody. It’s best suited for families and people who have enough space in their homes to store everything that they pick up at a Costco or a Sam’s Club.

If you’re young and single, live in a walk-up or a small apartment, or don’t own a car, the inconvenience of shopping at a warehouse club probably outweighs the savings you’ll get.

Instead, you might want to consider shopping on Amazon Prime, or an online bulk-discount brand like Boxed, which offers low-priced bulk goods without a membership fee.

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If you’re thinking about joining a warehouse club, you’re not alone. Around 40 million households and businesses are Costco members, and millions more belong to Sam’s Club and BJ’s.

The model has long been a popular one for a reason, both in the U.S. and around the world. It’s a great way to save money on basic household needs. For that reason, the model is likely to be an enduring one as consumers are always looking for a ways to save money, and e-commerce can’t compete with bulk goods in a warehouse.

All three of these companies have continued to grow in a difficult environment for brick-and-mortar retailers, adding new stores both in the U.S. and internationally.

That’s good news for both shoppers and investors at the warehouse retail sector.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jeremy Bowman owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon and Costco Wholesale and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool has a disclosure policy.