Why are prices in stores like Costco and Sam’s Club much cheaper than your average grocery store?
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My experience is limited to Costco. My understanding is that revenue from sales covers expenses and that memberships are where the profit is made. Costco actually carries a very limited number of items and what they do carry is generally packaged in multiples of what would be an ordinary retail size/quantity, members are essentially forced to buy in bulk so Costco’s cost to sell, say, 3 jars of salsa as a single unit is not much more than a grocery store’s cost to sell a single jar. Add to that they don’t have to stock more than one kind of salsa so stocking their shelves is simplified and less expensive.
There are only 2 of us so I don’t think Costco would make sense if it wasn’t that we piggyback on someone else’s membership. I haven’t done a strict cost accounting so I am not sure what we save over the grocery store. We buy a very limited selection of goods so I don’t actually know if the cost of a membership would pencil out. What I do notice is that sometimes I come back with things I don’t need, (3 pack of scissors,) or buy things I wouldn’t normally, (dried apricots,) so I tend to think that their store is not strictly about cost savings but actually a pretty sophisticated marketing theatre that nudges you to buy.
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