Comment by kemitchell
10 hours ago
I wish Costco were accessible to basically everyone. Among some poorer people I've got to know in the SF Bay Area, having the card and confidence in the means to use it are a mark of the middle class, an aspirational thing.
Membership is an up-front cost. That excludes those who can't part with the cash for no immediate benefit. Depending on what you buy, and what else is available around you, breakeven can take a good part of the year and a sizable number of purchases. Basically, you have to have the cash flow to play with money over time, even over a short timeline like an annual membership cycle.
Costco also sells many if not all items in relatively large quantity, so membership makes more sense for those who can afford to pre-buy and store more than they need. It's the inverse of something like a so-called dollar store, which is too often where poor people get stuck buying smaller than grocery-standard quantities at higher per-unit costs.
Of course, sometimes it makes sense to pool funds, buy together on one membership, and break packs. That costs coordination. Corner stores in poorer areas where I live often do this, with business memberships and resale certificates. At a margin, of course.
I can't pretend to truly understand what it's like not being able to afford Costco. But I've had some opportunities to hear people who see it as out of reach. And to make some trips with "guests".
I dont understand this. All Costco memberships are functionally $65 at most. How is this beyond literally anyone in America? Am I so out of touch? Why would corner stores have to pool together to get a membership when they absolutely negate the cost of the membership from the cashback? You only have to spend roughly $6,500/year for the executive membership of $130 to cost zero. That seems like something a corner store in any neighborhood wouldn't have much issue doing. As for the non store owners... $65 is the cost of one or two fast food meals. I don't believe this.
To maybe add some framing, 37% of Americans don’t have enough cash to cover a $400 unexpected expense. Obviously $400 > $65 but I think it puts some perspective on how tight cash flow is for a good chunk of the population.
https://www.federalreserve.gov/consumerscommunities/sheddata...
and what iphone model do these americans have?
I would be very very surprised if there were not adjustments that could be made that would significantly uplift these peoples situation
> enough cash to cover
You don't need to buy the membership with cash. Credit card, pay off $3-5 a week with your food savings, you'll barely pay any interest.
Also not having $400 would have to be the number after buying food with your paycheck, right? If you get the membership as part of your first food purchase, including that nice bag of rice, you'll be okay.
2 replies →
You’re probably a professional with a good wage. The working poor are too poor to have much and too rich to be poor and get benefits. They are cashflow constrained.
When I coached little league, we had parents who walked miles to games because the bus fare (1.50) for 3-4 people would push them over the edge. Vulture companies like dollar general exist because they sell consumer staples in smaller quantities at a slightly lower price, but much higher unit cost.
Costco uses an upfront membership to allow you to buy large units of products at a consistently good price. The consumer needs excess cash flow for it to work. Saving on toilet paper doesn’t work if I can’t make my car payment.
Why are the dollar stores “vulture companies”? Costco and Trader Joes only puts their stores in or on the border of higher income neighborhoods. At least Dollar General is willing to locate their stores near poorer people.
Dollar General now has a similar profit margin to Costco:
https://www.macrotrends.net/stocks/charts/DG/dollar-general/...
https://www.macrotrends.net/stocks/charts/COST/costco/profit...
Dollar Tree is slightly higher but much more volatile:
https://www.macrotrends.net/stocks/charts/DLTR/dollar-tree/p...
Shit I guess I'm out of touch lol
3 replies →
These are not out of luck people if this is a long term Problem. These are people who are chronically bad at allocating resources.
Even if they could afford the 65$ membership (yes anyone car). They couldn’t afford the per package goods. Is this even alluring to them? They demonstrate poor basic economic understanding.
> $65 is the cost of one or two fast food meals.
Okay I'm really curious, where do you live and what are you eating for a "fast food meal"? That's at least 10x what I pay for a fast food meal, and although I know California and other places are expensive, I wouldn't have guessed they are that expensive.
> $65 is the cost of one or two fast food meals.
You mean for a family... I hope?
$65 is just the cost of one or two minutes of fuel for a private jet
I've had friends homeless recently, Costco was the basis of the best choices of their poverty finance even when living out of a car.
I think it's accessible to even the poorest people who work in the US, but it doesn't mean it's cheap for them or worthwhile without a home/reasonable commute.
Time is a major commodity for people working 2 or more jobs and an hour and back commute to Costco is often not worth it.
> How is this beyond literally anyone in America?
not only is the membership cost up front, but because you're buying in bulk, the cost of the food is also up front; that doesn't work if you're literally living 2-week paycheck to paycheck. Nearly 40% of Americans have less than $500 in savings.
> $65 is the cost of one or two fast food meals ... Am I so out of touch?
yes
You are out of touch
In San Diego, we have a discount store called GTM that buys Costco closeouts and scratch-and-dent items and resells them for less. It has a loyal base of bargain shoppers, and it feels a bit like a treasure hunt.
You can buy normal or even individual quantities, like a single roll of paper towels, with no membership required. I imagine other big cities have similar stores, probably in lower-income areas, that fill a similar role.
In many cases that is the desired effect:
Cashflow constraints are a good predictor for problematic behaviour.
Example: Being poor is not the reason for drug addiction, but drug addiction will make you poor in the long run.
The one good thing about this is: As low liquidity is often used as a classifier to gate access, a single kickstart payment can sometimes do wonders.
A security deposit for a flat and money for a Costco card can change lives.
And thereby it is necessarily impossible for Costco to be available to everyone. The spending dynamic you've described is Costco.
Costo makes almost no money on food sale, and almost all of its profit from the membership fee. It's required for their business model, which is VERY friendly for its employees. This is an example of capitalism done right.