Saving Money

How Warehouse Clubs Trick You Into Overspending

photo: Orin Zebest

Warehouse retailers like Costco and Sam’s Club are supposed to save you money, right?

Think again. These retailers are actually quite strategic about getting you to spend more — even though the whole idea of buying in bulk is to save. Whether it is limited edition items, free samples or bargain bins, you should assume a “buyer beware” mentality as soon as you enter the warehouse.

“When people go into those warehouse stores they confuse saving with spending,” says Kit Yarrow, a consumer psychologist and professor at Golden Gate University. Most people are so focused on how much they’re saving, they don’t realize they end up overspending. Here are six of their top tricks.

Free Samples

Walk into any warehouse store and chances are you will be inundated with free samples, whether it’s a new pizza bagel or exotic cheese spread. Try it and before you know it it’s in your shopping cart.  Yarrow says one out of ten times people buy the free sample products. Since warehouse stores are filled to the brim with things to buy, samples narrow down the options in a shopper’s mind and something you may not have needed quickly becomes a must have.  Not to mention that too often, consumers will strike up a conversation with the vendor offering the sample. That relationship can drive a sale of the item. “It creates a sense of obligation, which translates into a purchase,” Yarrow says.

Treasure Hunt

Consumers inherently want to find a bargain, even if it’s not something they need or want — and the big warehouse retailers know that. Enter the Treasure hunt. Costco is famous for employing this tactic to get people to spend more, says Nicole Thompson, owner of consulting firm Ripe Purchasing.  You may not need that $90 pair of designer jeans, for example, but you buy it thinking the same brand retails for $200. There will always be something new that may not be there next week, customers learn. That creates a sense of urgency, resulting in an impulse buy.  While Costco started the strategy, Thompson says, other warehouse retailers are jumping on the bandwagon.  “The fear of missing out weighs heavily on [consumers],” Yarrow says. (Costco did not immediately return calls seeking comment.)

Bargain Bins

Throw a bunch of stuff in a large bin, place a big sign over it and a single-digit price tag and it’s a sales hit. Warehouse retailers know that if consumers are presented with what seems like a deal, even if it isn’t, they are more apt to engage in the impulse buy.  Many of the warehouse retailers and even department stores will have bins filled with things like play balls or pool toys and as long as the price tag is under $10, it’s a surefire way to get customers buying.  “If you think it’s a deal and it’s presented as a deal, it’s easier to justify that you need to buy this item,” says Thompson .

Another tactic that plays up to consumers’ need to justify purchases  is loud signage that screams things like low price or hot buy. It may cost the same price in the local drug store, but signage does increase the number of sales and consumers walk away feeling good about getting a deal, Thompson says.

Piles of Merchandise Means Deal

When shopping at a warehouse retailer, the chances are high that you are going to stumble on stacks and stacks of merchandise, whether it’s clothing or books. Those piles may not necessarily be a deal, but in the minds of many consumers it is. According to Yarrow, most people will see a pile of merchandise and their mind will compute “bargain” just as it would think expensive if they saw one item sitting on a table.  The need to get a deal kicks in and in the basket the item goes.

Ease of Access

In most neighborhoods, the grocery store is a five minute drive away, while getting to a warehouse club may take more effort and a longer drive. While the warehouse retailers may not have set out to make it more difficult to get to the stores, it does end up resulting in more sales. According to consumer behavior scientist Herb Sorenson, studies show that people that have to drive to the store or exert more effort to get there spend more time shopping than, say, if the store is in a mall and the shopper is already nearby. After all, if it took you a half hour to get there, you are damn sure going to spend time perusing the aisles. The more you window shop, the more apt you are to spend money.

Using More Product

Warehouse retailers do offer many products at cheaper prices, especially since you are buying in bulk. But the deal disappears if  you end up consuming more simply because you have it.  According to Yarrow, research shows that consumers do just that: when buying high quantities of a product, they tend to use more of it. Take paper towels as an example. If you know you only have one roll on hand, you may use it more sparingly.  But if you have a 24-pack case in the cupboard, the paper towels become an all-purpose cleaning material.  The end result: you end up spending more because you go through the merchandise quicker. “The more we buy, the more we consume, the more we spend,” Yarrow says.