If you haven’t visited a warehouse grocery store such as Costco, Sam’s Club or Bjs, or even if you have, you might be wondering how they can bring you such good prices on groceries and other items. While it is true that these stores can discount the prices on your food and goods because you are buying more from them, buying in bulk, there are other factors that contribute to the low prices.
If you have ever wondered why the prices at warehouse stores are lower than at traditional grocery stores or mart-type stores, then you’ll want to read this. The more information you have, the better shopping decisions you can make.
There are three main reasons why warehouse stores offer discounted prices.
The first reason why you can get food cheaply is because the stores have a different way of making a profit. Costco, BJs and Sam’s Club make their money not on the markup of groceries, as traditional stores do, but through their membership fees. Because these stores aren’t focused on profit from the things they sell, they can charge only a small mark up on the products, just enough to cover basic operating expenses. Compare an 11- 15 percent markup on goods versus a 20-25 percent mark up at the traditional grocery stores.
The second reason is that these warehouse stores keep the number of items they sell down in terms of selection. With less inventory selection, they can negotiate better deals. If they are buying only one or two types of pasta, for example, they can carry larger quantities of fewer items and get better deals when they buy them. That savings can be passed on to the consumer.
Finally, the last reason that warehouse stores can offer discounted prices is because they don’t spend a lot of extra money on frills, such as dressing rooms, paper or plastic bags or attentive customer service. Skimping or eliminating these extras helps keep their costs down.