retail musings

I don't particularly like shopping anywhere (except of course Costco). What I do like doing is observing how retail stores and other businesses try to make money, and thinking about ways they could make more of it. I wondered why they don't sell batteries at a local used children's clothes, toys, and accessories store. Seems like an easy high margin impulse purchase to go along with your battery operated toy.

I wondered why my gym let an extremely annoying issue with their electronic gate entry linger for months before fixing it. Do they know the staff are on Facebook while the paper towel dispensers are crying for new rolls? What is the threshold number of members that a gym wants anyway? There must be a target members:equipment ratio. Too high causes problems with overcrowding and disappointed members waiting for free equipment. What percentage of members never work out? I'm sure those couch potatos are their favourites, no wear and tear on the equipment or bodies in the hot showers while their membership fees keep rolling in through direct withdrawal. I'm sure there are stats on all of this. Would it be possible for the energy expended on the cardio equipment to power the gym?

Some Previous Retail Ranting I've Done On the moneygardener:
I don't like shopping at Canadian Tire. I even bought my washer fluid at Costco this year!
I really like shopping at Costco, maybe too much.

getting more for less$

A recent report shows that Canadians are paying more out of pocket money for less stuff. Retail sales rose 0.5% in June but actual retail sales volumes decreased by 0.4% from May. Basically the 0.5% rise in retail sales came from higher prices at the gasoline pumps, to the tune of a 4.2% increase in sales of petrol. The Canadian consumer spent more in dollar terms during June, but bought less with their money in terms of the volume of goods and services. I am sure that the increase in food prices is not helping.

Where does that leave the average consumer? Well spending more for less is never a good scenario, but I like to think that we are beating this trend by buying smartly in bulk. By doing this, we are actually getting more for less. We buy the following items at Costco Wholesale for prices per unit that are far below what you would pay at any traditional grocery store.
Bread, toilet paper, Ziploc bags, baby wipes, diapers, fresh and frozen vegetables, fruit, salmon, tuna, lunch meat, paper towel, granola bars, juice, toothpaste, cottage cheese, shampoo, conditioner, deodorant, cheese, garbage bags, ketchup, sausages, and chicken among other items

I would estimate that we probably save thousands of dollars per year doing this. Obviously you must be careful not to buy goods that you don't really want or need, and careful to not buy something in bulk that perishes to quickly. If we could only do this for gasoline...we'd be set. We have an area in our home ('the stock room') where we store these items so that we can take advantage of sales and not take space from the kitchen and bathrooms. The prices on these items may rise, but we are still gaining the benefit of cost savings through buying in bulk.

Another added benefit of doing this the elimination of hassle. I hate having to think about whether or not we need bread, toilet paper, or paper towel every time we're at a grocery store, as we constantly buy the same items over and over. By buying in bulk we're always covered, and we only buy and stock the best stuff, as Costco never carries inferior products. We've actually eliminated the need to make a large weekly trip to a traditional grocery store.

'Do we need baby wipes?' , 'Let me check our inventory'.

Costco the enigma

Costco Wholesale (COST) announced their latest quarterly earnings today and the surpassed expectations posting a 32% increase in profit. In my "Costco" post back in October of last year I posted about why I choose Costco over any other retailer for most purchases.

Even in these times of economic hardship in the U.S., Costco just keeps blowing past expectations while retailers like Sears and Target are struggling. Even so, the leading warehouse club operator remains somewhat of an enigma to most. I have heard the business media describe Costco as a higher end retailer, while I've also heard the chain described as a place where people might shop when times are tough and they are 'trading down' to obtain some bargains. So which one is it?

So why is Costco shooting the lights out? They are because they know how to retail, they know what people want out of a shopping destination. Their focus on low pricing has not clouded their view of what is really important. If low prices was the only attribute Costco had going for it, then I'd certainly not visit the store as often as I do. Retailers know that if the story starts and ends with price they become a commodity trader fast. Wal-Mart has realized this as well.

Costco is successful because they've discovered what people want, convincing one customer at a time:

• Quality - Second to none goods in every category, simply the best brands, and the best private label anywhere (Kirkland Signature)
• Price - Determined that they are not the lowest price? You simply aren't doing the math. Or you're comparing apples to oranges with respect to product quality.
• Service - Every employee is pleasant; perhaps they like their jobs. Returning an item is easy, their online store is great to use and delivery is often free.
• Experience & Surprise - Food samples for all, new and interesting items seem to pop up every week, coupons that actually save people money, photofinishing, optical centre, the list goes on and on.

I believe that Bloomberg, CNBC, and alike have it all wrong on Costco. There is no trading down, or stocking up for the oncoming economic collapse going on. Rice hoarding aside, Costco is taking market share because they are simply BETTER, and they are getting BETTER at being BETTER all the time. Sub-par department and grocery stores are giving Costco market share as each new Costco customer realizes the benefits above of shopping at the warehouses.

diaper mayhem III - going shopping

"diaper mayhem" is a series of posts where I describe my experience trying to get the best value for a new fixed cost in our budget....diapers. In diaper mayhem II - an act of treason
I described how I felt like a traitor seeking atonement, as I finally tried Kirkland Signature Diapers from my favourite retailer Costco Wholesale. This post followed up on the premier post of the diaper mayhem series, where I pledged my early allegiance to the Pampers brand.

The third episode of this series involves comparison shopping using prices from our favourite grocery store, Price Chopper, which is the value banner offered by Sobeys in Canada. Here are how the prices look at Price Chopper:

Huggies $35.00 for 144 = $0.243/ diaper
Pampers $35.00 for 144 = $0.243/diaper
Compliments little ones $24.00 for 120 = $0.20/diaper

Smaller Packages
Huggies $18.00 for 60 = $0.30/diaper
Pampers $18.00 for 60 = $0.30/diaper
Compliments little ones $13.00 for 60 = $0.217/diaper

*Kirkland Signature at Costco are $45.00 for 200 = $0.225/diaper ($657/year)

Assuming your baby goes through 8 diapers per day, purchasing Kirkland Signature diapers instead of Huggies or Pampers could save you about $53/year. Overall the most money can be spent by buying diapers in smaller packages. Buying Pampers or Huggies in the smaller packages of 60 will cost $876 per year, while the large packages will cost you only $710. Compliments little ones in larger boxes would only cost you $584 per year. I would be interested to hear from anyone who has tried these diapers, as the price is right.

We've actually been very pleased with Kirkland Signature Diapers, which are most likely made by Kimberly Clark (the maker of Huggies). I would rate them as good or better than Pampers Baby Dry, which we were previously using.

Next time I'll be looking at diaper prices from other retailers and hopefully we'll get some new brands into the fray as well.

diaper mayhem II - an act of treason

There has been something bothering me for a few days now... I have an apology to make.

Back on my popular diaper mayhem post in January of this year. I blogged about how I was a slave to the Pampers brand, after a full 13 days as a parent. I should have known not to turn my back on one of my long time allies in our quest to financial freedom; Costco Wholesale, this is my official apology:

I am sorry I doubted your Kirkland Signature brand diapers. I was a green parent and the last thing I needed on top of the stress of new parenthood was 200 potentially leaking diapers. Now that we have had the time to get into the groove of parenthood, we finally took the plunge. That's right, once again Costco came through for me, as my son is now comfortably wearing and 'using' Kirkland Signature diapers. I suspect Kimberly Clark makes these puppies, so in essence they are Huggies, but they seem to work fine now. I should have never doubted the good people of Costco, who incidentally now sell Crocs for $24.99 a pair.

Here is the breakdown on the diapers:
$44.99 for 200 diapers size 3 = $0.225/diaper...likely about $1.80/day

I will update the comparison of Costco's Kirkland Signature to other brands and stores in a later post. I am confident Costco is proving, once again, to be the best value proposition on the retail diaper scene.

Costco

When it comes to my preference for where to spend my hard-earned money on consumer goods, it is absolutely no contest. I have bought everything from toilet paper to an LCD television there and I rarely, if ever, have a problem with one of their products, or a bad experience in one of their stores. Costco has the lowest prices on a wide range of quality goods of any retail establishment that I am aware of. Often I compare their prices to other chains such as Sears, Wal-Mart, Future Shop, and even recently Target and it's usually not even close. 

I think that Costco must employ the best 'procurement managers' or buyers in the industry, as the products they stock their towering shelves with are always second to none in brand, quality, and price. Everything from their coffee beans to their garden hoses are the best quality at reasonable prices. Their private label brand, Kirkland Signature, offers some exceptional value on several goods like bottled water, baby wipes, and even dog food among many other products. Costco frequently sells books for much less than the publishers price. I can't think of really any product category where they do not offer the best products at the lowest prices.

Costco is truly a best of both worlds retailer. Their return policy is seamless, their cashiers are very friendly, and you can buy a pair of Buffalo jeans for $30. Two years ago I bought a pair of sports sandals, a pair of leather sandals and a pair of running shoes at Costco all for under $30 each, and they're all still in tact. I am slightly embarrassed to say that last year my wife and I did our entire Christmas shopping there. Everyone seemed to love their gifts, and most people received two. No, nobody received the 3 kg mayonnaise from us.

Maybe it is the smell of the samples on Saturdays, or the 2kg jar tub of peanut butter, or the glow of the warehouse-type lights but I just adore the place...Some interesting facts about Costco:

The CEO, Jeffrey Brotman earns $645,000 per year as his base salary. He also answers his own phone.
I've heard that the cashiers make over $40,000 per year with benefits.
You can buy a hot dog and a bottomless pop there for $1.99. Pretty good hot dog too...
You can buy 35 bottles of Kirkland water for $4.39. That works out to less than $0.13 per bottle.
You can get your passport photo done for about $6 and fill your BBQ propane tank for $11.
Their net profit margins are under 2%......no wonder....


Costco did not pay me to write this review, but if they did I would have taken payment in the form of raw Lilydale chicken