Saving money on food is a huge part of saving for financial independence. For the average family in the United States, food counts for seven thousand dollars of annual spending. It’s the largest single spending category outside of housing and transportation.
Love it or hate it, buying in bulk saves money. Costco has been a champion on this front since the 1980’s, and a big force in lowering our grocery spending over the years. I’ve been a huge fan of Costco, and once even had the opportunity to meet and speak with Jim Sinegal (Costco’s founder).
Lately though, Costco has been sucking eggs — the groceries aren’t as affordable as they used to be. While the famous Costco rotisserie chickens might still be $5, many of my favorite “regular” products have been removed in favor of “luxury” options. Costco (to my eyes) now appears to be a retailer of “luxury” goods.
Thankfully, there is finally some competition in the bulk food arena — Cash & Carry. For those of you not familiar with Cash & Carry, it’s a regional wholesale food retailer with 61 locations in Western states: California, Washington, Oregon, Idaho, Nevada, Utah, and the first store in Montana opens in a few weeks. The chain is growing like gangbusters, with new locations opening all the time.
Cash & Carry styles themselves as a retailer where “restaurants buy better”, but any Joe-off-the-street can walk in and buy a 5 gallon bucket of mayonnaise if they like. (Maybe you want to take a bath in mayonnaise?)
Since a Cash & Carry recently opened in my area, it’s high-time I did a formal battle between the two!
Let the Battle Royale begin!
OK, so technically a battle royale is a fight between many competitors. In this case, I’ve already narrowed the field down to just two competitors…. but a Battle Royale just sounds so much cooler. So just go with it, OK?
To begin this battle, we’re going to start with the most important factor on every shopper’s mind: Price.
While both retailers offer thousands of items, I’m going to limit my comparison to just the items that currently matter to me.
Why do these items matter to me? They were on my shopping list this month! Feel free to run your own price comparison if I’ve neglected something you purchase with regularity.
While both retailers do offer many of the same items in bulk, there are often slight differences in packaging and size. Larger volumes typically have larger discounts, so I’ll be attempting to match packaging sizes where possible, and comparing the unit pricing to determine the winning retailer (price per pound, price per gallon, price per barrel of mayonnaise, etc).
Without further ado here are the numbers:
This was pretty much a landslide in Cash & Carry’s favor. Yellow wins. In most of the categories I priced, C&C was the clear leader with an average unit price advantage of 38%. That huge! The only categories they didn’t win were avocados, butter, and pork tenderloin.
Overall, C&C was the winner with a 31% advantage in the total shopping cart. Smaller sizes and cheaper unit prices made the difference here.
Advantage: Cash & Carry
When it comes to a large selection, it would appear that Costco takes the advantage by going wide instead of deep. They have far larger stores, and carry an impressive number of non-food items… yet according to reports, the stores only sell 4,000 different SKUs at any one time. (In comparison, the average Walmart sells 70,000 SKUs.)
You can buy your groceries, tires, diapers, and t-shirts all in one location, but only in one color. 😉 If you enjoy the “treasure hunt” that Costo provides, they’re clearly the winner when it comes to a wide selection.
A typical Cash & Carry store stocks about 8,000 products, some of which are very unique items that I’ve never seen at Costco — various kinds of rice noodles, dried beans and lentils, mirin, tonkatsu sauce, mini tortillas, a huge variety of spicy peppers, and many more. Basically anything you might need to make a variety of ethnic dishes is available at C&C.
It’s tough to call a winner here, so I won’t. Instead, I’ll call it a tie. Both stores have advantages and disadvantages in their product selections.
Most warehouse stores typically have membership fees, and we would be negligent if we didn’t include these fees in our battle.
A standard Costco membership is currently $60 for a year. If you shop there once a week, this works out to be $1.15 on top of your weekly bill. Every other week, and that’s $2.30 per visit.
Cash & Carry does things a little different. They have no membership fees. Clearly, $0 is better than $60, so I’ll declare Cash & Carry the winner.
Advantage: Cash & Carry
Online Price Checkability
If you’re anything like me, you end-up buying groceries from a few different stores — There is no one-stop shopping for everything a family needs.
Before we head out the door, we try to check prices online first. Some stores will have sales, and prices will vary from week to week. It’s to the consumer’s advantage to not get into shopping habits — check prices before you ever step foot in a store.
Unfortunately, some retailers aren’t very forthcoming with pricing information online. Costco doesn’t put grocery prices on their regular website (notice I said “regular”… more on this later). Instead, they want you in their stores shopping at the “treasure hunt” while you stock up on cage-free eggs and organic bacon.
Here’s a trick I learned years ago — While Costco’s regular website doesn’t offer online grocery prices, their business delivery site does. Just pop in your zip code, and start searching. They carry many of the same items as the retail store, and prices are the same.
It’s not a perfect solution though — the business delivery site contains many items not available at regular Costco stores — be careful when pricing Costco items online using this method. If you can’t match the brand and product size, it’s probably a product only available for business delivery.
Cash & Carry has a completely different set of online tactics — They allow customers access to product prices without jumping through extra hoops. All products found online are available in the stores, including those with sale prices.
Advantage: Cash & Carry
While Cash & Carry does carry many organic items, the clear winner here is Costco. With 20% organic SKU growth in 2016, Costco has been moving into organic groceries in a huge way the last few years. They now stock organic options in most grocery categories.
Not everyone wants to buy 100% organic, but for families looking to eat organic, Costco has many good options.
Have you ever walked into a Costco on a Saturday and been overwhelmed by the crowds? I know I have. It’s a complete zoo!
Shopping at Costco on the weekend feels like a war, and the free food samples don’t help the situation. With people crowding around the sample tables it can be impossible to move quickly through the store.
They do have lots of employee though, so the wait at the checkout line is never terrible — fifteen minutes at most. My average shopping trip at Costco takes about 1 hour on the weekends, and 30-45 minutes during the week.
Meanwhile, Cash & Carry is a relatively peaceful shopping experience. The lines are much shorter, and the aisles are not crowded. They don’t have samples, but who really needs to try all that processed food anyway? (We try to skip processed foods)
Compared to Costco, C&C is a much faster trip. What’s the longest line I’ve ever seen at my local Cash & Carry? Three customers in front of me. My average shopping trip takes about 30 minutes. I’m in-and-out relatively quickly.
Advantage: Cash & Carry
And The Winner Is…
The ultimate winner here is the consumer — with more price competition grocery spending can be lowered. Savings for financial independence can increase! It’s a clear win for the consumer.
That said, Cash & Carry won the battle today by winning 4 out of 6 categories. Yes, they don’t sell shampoo, clothes, and kayaks like Costco… but they aren’t trying to either!
Could Costco win the price war again tomorrow? Sure, Costco could decide to cut prices and become more competitive. Will they? I doubt it. Cash & Carry is a tiny speck compared to Costco. People will continue to shop at Costco for luxury goods, and pay those annual membership fees for a very long time.
I know my family will continue to shop at Costco for things like shampoo, toothpaste, toilet paper, and diapers. That said, we’re beginning to wonder if paying the annual membership fee is still worth it.
It’s clear to me that Costco has lost some of it’s magic. It’s no longer a frugal shopper’s dream. A small upstart like Cash & Carry can come into town and provide a better shopping experience, and better prices. It shouldn’t be that easy to ‘beat’ a giant like Costco, but they clearly do.
Costco’s “moat” probably isn’t as strong as it used to be. Even “regular” grocers are competitive with Costco’s prices these days! Competitors like Cash & Carry are now taking market share from Costco. If I was a Costco investor (like my blogging buddy Tawcan), I’d be very worried about that.
With Amazon’s recent purchase of Whole Foods, I believe Costco is going to come under some significant pricing pressure over the next few years. For consumers, this is going to be a fantastic time to buy groceries.
In the meantime, look for a Cash & Carry in your town to enjoy the savings!