Instant Expert: How Costco takes aim at your wallet

Take a store that never advertises, has no signs in its aisles to direct you, doesn't bag what you purchase and charges you a fee just to walk in the door and you’ve got Costco.

Wanita Bates · CBC News · Posted: Apr 09, 2016 12:21 PM EDT | Last Updated: April 9, 2016

Instant Expert columnist Wanita Bates explores the toilet paper section of Costco's warehouse store in St. John's. (Wanita Bates)

Take a store that never advertises, has no signs in its aisles to direct you, doesn't bag what you purchase and charges you a fee just to walk in the door … and you've got Costco.

This American company has been around since 1976. The warehouse store on Stavanger Drive in St. John's has been here for more than 20 years.

Why would you want to go there? My, oh my, but people want to go there.

According to Costco's 2015 annual report, there are 44.6 million members worldwide.

I'm told that on average each location has 65,000 members, and that there are 5.9 million members in Canada or about 11.5 million cardholders. That is one third of Canada's population.

No one goes there for the ambience

So they're doing something right, and I know you're not going for the ambience. Costco is your no-frills warehouse retailer, from the bottom of its concrete floors to the top of its steel-beamed ceilings.

Costco supplies its customers with extra-large carts, all the better for buying in bulk. (Paul Sakuma/Associated Press)

There are a lot of psychological tricks going on, and they all seem to be working. Bottom line: you're going to Costco because you're looking for a deal.

So if the store looks like they're not spending cash on decor, you may feel the prices are low, and you become more excited about the deals you're going to get.

The merchandise is stacked on the same industrial pallets on which they're shipped, which saves millions of dollars on labour.

Costco charges a membership fee but they also offer a lower markup than other retail stores. For example, a supermarket may have markups to around 25 per cent and department store markups could be as high as 50 per cent, but Costco keeps their markups at 15 per cent or less.

Buying in bulk, and then some

The membership fees they charge allow them to sell their items at a lower cost. And they buy in huge quantities. Huge quantities in huge sizes some might say.

Many goods at Costco are presented to customers on shipping pallets. (Associated Press)

So let's pretend I'm Costco. I'd approach a manufacturer and say, "You know, I'm going to buy a trillion bottles of ketchup. What's your best price?" Before you know it, that oversized ketchup is sitting on a pallet in a shopping aisle at Costco.

You'll also notice that it might be the only brand of ketchup to choose from in the aisle. Psychologically, you don't have to stand and ponder which ketchup you want to buy, you can only buy one and you will be getting it at a good price. This saves you time and money.

This differs from other stores where you could be faced with having to decide from six or more labels. Is ketchup by any other name not still ketchup?

An average Walmart could have 100,000 items, my local supermarket has 48,000, and Costco offers 4,000 items.

Stopping you in your tracks

Have you noticed that the most desirable, fun and non-necessary items are at the front of store or against the "fence." They stop you dead in your tracks, and make you cast your eyes at the super-huge high definition televisions, iPads, cameras, jewelry and fancy watches.

'We strive to create a treasure-hunt environment to your shopping experience- Costco's Ron Damiani

This area has the most foot traffic and grabs your attention — and with any luck your wallet as well.

There are no signs on the aisles, which means you can't target the product you are looking for. If you are used to finding cinnamon in the second aisle on the left hand side, well, don't expect it to be in the same spot next week.

Costco Wholesale Canada spokesperson Ron Damiani told me in an email, "We strive to create a treasure-hunt environment to your shopping experience — and since we turn over our inventory so quickly you will always find something new so you need to come often."

So while you're looking for treasure, Costco is looking for your cash.

Free samples, and guilt

Now don't get me started on free samples, guilt and peer pressure. When shoppers hear the buzzer on the toaster oven ding, huge shopping carts are abandoned as people race for a hot sausage roll. Some stand and stuff their faces, some duck in to take a sample and move on and some feel guilty and don't want to look like they're eating free food.

Costco is busiest on Saturdays. Weekday evenings often have significantly less traffic. (Mark Quinn)

When someone gives you something you feel like you have to give something back in return. Or in this case at least throw a box of sausage rolls into your cart. I always ask where the item is located and run away with my mouth full. Oh Costco, you tease!

When you are at the checkout, whether you have one item or a gazillion, what do you come face to face with? The food court with pizza and that famously inexpensive $1.50 hot dog and drink. At the local Costco I'm told they sell upwards of 700 hot dogs a day!

When I think of it, their sales pitch starts outside with the gas bar. They sell you cheap gas, so then why don't you park and go in for a quick shop? Three words you never use together are Costco and quick shop. And when I say find a spot to park, I mean good luck.

We only have one Costco in the province but people travel from all across the island and Labrador to shop here. In central Newfoundland, I'm told that a trip to St. John's is often called a '"Costco weekend."

I can remember people coming from Iceland used to shop there when a charter airline that was making special shopping trips to the city.

You can celebrate Christmas at Costco, in the heat of summer! (CBC)

Do you have any idea what Costco's No. 1 seller is? They sell more than a billion rolls of toilet paper a year. That is enough to wrap around the Earth 1,200 times. It would add up to about $400 million worth of toilet paper every year. There are technicians who test for thickness, strength and softness. (This is not an endorsement but let me just say, it's not too hard and it's not too soft, it's just right.)

Top 10 Costco shopping tips

1. Make a list. Do not stray from the list.

2. Check out the coupons.

3. Walk around the sides of the warehouse. Stay away from the middle aisles where the pricey endcap displays are there to tempt you.

4. If you are short on storage space when you get the oversized products home, then find a friend and divvy up the deals.

5. Buy meat in the larger quantities and freeze portions separately.

6. Check the price per unit cost. It may or may not be on sale.

7. If you buy something and it gets marked down, take your receipt back to the store. As long as it's still on the floor, Costco will refund you the difference.

8. My friend Allison says,"If you see something you like don't hesitate to buy especially if it's clothes. You can always bring it back if you change your mind. But if you change your mind and want to buy it, it could be gone."

9. Watch for bargains. Items that end in "0.99" are regular priced, but if they end in ".97," they're discounted.

10. If you don't have a membership card, you can still shop with a Costco gift card.