Hunting Big Savings at Costco
The secret: It may look like a warehouse, but it's really a theme park
By Pat Regnier

(MONEY Magazine) – Costco Wholesale warehouses may appear haphazard: The bare concrete floors, the merchandise piled up to the rafters, the conspicuous absence of signs or displays. In fact, the stores are carefully designed not only to cut costs to the bone, but also to encourage you to empty your wallet with breathtaking speed.

Cheaper by the dozen--whether you like it or not You can't buy just one bag of half a dozen bagels; you have to buy them in pairs. Why? Because Costco's razor-thin profit margins mean quantity is king. With fresh food, this can be a problem, unless your family is especially large. To make things harder, Costco adds a touch of "theater"; great smells waft over to you from the bakery and chicken rotisserie. Best advice: Toss a dozen bagels in the cart, but ask yourself if you're really that hungry after you've moved on to, say, the hair-care aisle.

Can I help you? Not really. Costco workers are famously well paid (at an average of $17 an hour), but Costco still keeps its labor costs low by squeezing more sales out of fewer people. What that means for you is that Costco employees, while they may be cheerful, are pretty thin on the ground. If you're thinking of making a big purchase, such as a flat-screen TV, do your homework before you go. You're here to get a good deal, not expert advice.

Pampers? We don't need no stinkin' Pampers! A typical Costco offers 4,000 products, compared with a discount store's 40,000 or more. Last year, brand-loyal parents got a surprise when Costco dropped Pampers (but kept Huggies). Just know that, while you're in a huge warehouse, "huge" doesn't necessarily equate with "variety."

Gray matter Some of Costco's luxury items, such as watches, are "gray market" goods: genuine products purchased from a third party. It's legal, but you might not be covered by the original warranty. Costco has a guaranteed refund, repair or replace policy, though.

Fewer ways to pay Costco doesn't take MasterCard or Visa credit cards. Your plastic options are a debit card, a Costco card or American Express. Costco also offers a co-branded American Express card with cashback rewards. But don't carry a big balance: The APR is 16.99%, higher than what you might be able to get on AmEx's Blue card.

Members only That $50-a-year membership is more than a formality--a significant chunk of the company's profit comes from club fees, and it's one big reason the price at checkout is so low. The upgraded $100 card buys you a 2% reward on purchases, which makes sense if you'll spend more than $2,500. (But check the fine print: For example, cigarettes and gas don't count toward the rewards.)

Remember, you just came in for toilet paper. Costco knows how to make shopping exciting: As soon as you walk into the store, you'll see bargain diamonds, and flashy toys such as iPods and enormous flat-screen TVs. Trying to stick to a budget and control your spending impulses? Put your head down and move through here as fast as you can.

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.
Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.