How to Figure Out If a Warehouse Club Will Save You Money
Warehouse clubs promote themselves as being a fantastic way to save -- and there are bargains to be had. Warehouse clubs often offer competitive prices on electronics, small appliances and many household and food items -- provided, of course, that you buy them in bulk.
But do warehouse clubs really save you a lot of money over the course of a year? Most clubs have an annual membership fee of at least $40, which means in order for a warehouse club to actually save you money, you need to save $40 on purchases, and then some.
How can you tell if a warehouse club is actually a bargain? Here are the key things to look for.
Is the warehouse club in a convenient location?
In other words, are you going to have to drive out of your way to get to the warehouse club? Or is it located near places where you already go on a routine basis?
If the warehouse club is located in a place where you don't normally go, then you're incurring an additional expense for travel each time you visit the warehouse club, which adds to the cost of the membership. Unless you're saving a lot of money by going there, it's probably not worth it if you have to make a special trip to use the club.
Does the warehouse club sell gas at a lower price than other local gas stations?
This is the easiest way for a warehouse club to save you money. Compare the price of gas at the warehouse club to other gas stations in your area. How does the price a gallon compare? Then, consider how often you drive by the warehouse club and actually use it for filling up.
I'll use myself as an example. I tend to fill up at my local Sam's Club about once a month, putting about 12 gallons of gas into my car. Each gallon at Sam's Club is about 7 cents cheaper than at other nearby gas stations, so I save about 84 cents a visit on gas, which adds up to about $10 a year. That means I only need to come up with about $30 in savings over the rest of the year to make up for that $40 membership.
How do the prices on nonperishable food and household supplies at a warehouse club compare to the prices at your grocery store?
The important thing to think about here is not the price of the item itself, but the price per ounce or price per serving. Often, nonperishable foods and household supplies are sold in large quantities at warehouse clubs, so you need to focus on the relative sizes of the package by converting all the prices to a standard unit -- an ounce or a sheet or a serving.
The best way to compare prices is to use your smartphone. While shopping at your local grocery store, pull up the website of the warehouse club you're interested in. Then, use the website to compare prices between the items you normally buy and the ones listed at the warehouse club.
Remember, it's often hard to get value out of bulk purchases of fresh goods from a warehouse club, as some of them may go bad quickly, undoing the bargain. Save the price comparisons for the nonperishable foods and the household supplies.
Are you planning a major purchase in the next year that the warehouse club sells, and are the prices on that major purchase lower than where you might otherwise buy it?
If you're considering a major purchase in the near future, such as replacement tires for your car or a replacement television, you may be able to save some money by buying the item at your local warehouse club instead of at the local department store, auto store, electronics store or online.
Again, this is not a guarantee. You need to do your homework and compare prices. Are the tires at your local warehouse club actually cheaper than what you can find at the department stores and auto stores in your area? Is the television you're considering (or a similar model) less expensive at the warehouse club than at other stores and websites?
As with the bulk purchased food and household supplies, you can check this easily on the warehouse club website. If you find that you would save money on just that single purchase, it's worth joining the club for a year just to save on that item.
Warehouse clubs offer many avenues for potential savings, but you need to do the homework to find out if they translate into actual savings for you. You may find that they're a nice bargain, but you may also find that you're not saving much at all by shopping there, in which case your membership fees are better spent elsewhere.
Trent Hamm is the founder of the personal finance website TheSimpleDollar.com, which provides consumers with resources and tools to make informed financial decisions.