Every year or two I revisit my assumption that I’m spending my money in an optimal way. Sometimes this means shopping my home and auto policies to several new insurers to make sure I’m getting the best rates available. More recently, I questioned whether I could save money by buying in bulk at Costco or by shifting more grocery spending to Target or Walmart.
Enter the cost comparison. During September and October 2017 I stealthily visited five stores near me in the Raleigh area to check prices on sixteen different staple foods. I chose Trader Joes, Costco, Walmart, Aldi, and Target.
Going into the experiment, I assumed Walmart and Aldi would be the cheapest, with Target slightly more expensive than those two. Costco would come in fourth place while Trader Joe’s would stand out as the most expensive. This was exactly the results of my study (with the exception that Target was noticeably more expensive compared to Aldi/Walmart). Walmart was the cheapest while Trader Joe’s was the most expensive with the other stores falling in between in the predicted order.
Here are the raw numbers with lowest cost for each item bolded:
|ITEM:||Trader Joes||Costco||Walmart Supercenter||Aldi||Target|
|apples, per pound||$1.31||$1.00||$0.98||$1.10||$1.40|
|organic apples, per pound||$2.00||not available||$1.83||$1.83||$1.74|
|bananas, per pound||$0.57||$0.46||$0.57||$0.44||$0.52|
|mac n cheese 7-7.25 oz||$0.99||$0.72||$0.26||$0.33||$0.69|
|whole milk, per gallon||$3.29||$2.45||$2.38||$2.49||$2.55|
|loaf bread, 20 oz||$2.08||$2.15||$0.88||$0.83||$0.99|
|fresh chicken breast, per pound||$4.99||$2.79||$1.99||$1.89||$1.99|
|pork loin, per pound||$3.99||$1.99||$1.94||$1.89||$2.49|
|ground beef, per pound||$3.99||$3.29||$2.39||$2.99||$3.09|
|eggs, large dozen||$0.99||$1.85||$0.67||$0.74||$0.91|
|cheerios, 14 oz||$1.86||$1.92||$1.15||$1.49||$2.50|
|peanut butter, 16 oz||$1.99||$1.67||$1.16||$1.08||$1.20|
|canned pinto beans, 15.5 oz||$0.99||n/a||$0.57||$0.53||$0.54|
|spaghetti sauce, 24 oz jar||$1.65||$1.25||$1.06||$0.99||$1.57|
|spaghetti noodles, per pound||$0.99||$1.09||$0.74||$0.75||$0.76|
|TOTAL (except Costco)||$33.04||incomplete||$19.57||$20.30||$24.26|
|Vs. Costco comparison*||$28.68||$22.62||$16.17||$17.00||$20.66|
|% More Expensive than Walmart||77%||40%||0%||5%||28%|
* Since Costco only stocked 13 out of 16 items in the comparison, the total price for those 13 items is shown in the “Vs. Costco comparison” row
Walmart is the clear price leader based on a comparison of these 16 items. Looking at only the 13 items that all stores had on shelves (the “vs. Costco comparison” from the chart), Aldi was 5% more expensive than Walmart. Target was 28% higher priced than Walmart. Costco was 40% more than Walmart, while Trader Joe’s was 77% higher priced than Walmart.
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Aldi looks slightly better when it comes to comparing the cheapest store for each item. Aldi took the lead with the lowest prices on 8 out of 16 items. Walmart was a close second with 7 out of 16 items. Target, not wanting to be outdone, came through on organic apples that were 9 cents per pound cheaper than Aldi and Walmart.
Nothing was cheapest at Costco. However, Costco’s prices on some items like pork loin, bananas, milk, and apples were within pennies of the cheapest alternative. Though not on my comparison list, I went on a search for things that are great values at Costco. I mostly came up empty-handed but did notice a few things. Their store brand paper towels looked like a good deal (if you have a spare closet to store 16 huge paper towel rolls). Blue cheese and parmesan cheese were good values with prices similar to Trader Joe’s but both came in ridiculous two pound blocks.
Costco is the lone store studied that comes with a membership fee. Yes, they charge you to enter their store and charge you for everything you buy (except the samples; they are free). Though you don’t always have to have a membership to enter Costco. Like ninjas, we snuck into Costco while the door attendant was distracted to complete our clandestine comparison shopping and scored some free quesadilla samples in the process. Costco’s $60 annual fee for basic membership would add a 2% average surcharge to all items if you spend $250 per month (only 1% if you spend $500/month). Paying $120 for executive membership makes sense at the $250/month spending level since the 2% cashback covers the added cost. And after hearing from several hard core Costco aficionados, it’s impossible to spend less than $250/month at Costco (probably because they are 40% more expensive than Walmart!).
Trader Joe’s made a weak showing on prices with the highest or second highest price for each individual item. This wasn’t a surprise at all since we never shop at TJ’s for regular groceries. We do buy a lot of specialty items at Trader Joe’s that are very competitively priced for great quality items. Things like frozen dim sum potstickers, frozen edamame, fancy/imported cheeses, $3 Buck Chuck (Charles Shaw) wine, other imported wines, craft beers, nuts and seeds, capers, and marinated artichokes. On the bright side, TJ’s offers free coffee samples and the TJ staffers are super nice and friendly, plentiful, knowledgeable and helpful (things I mostly can’t say about Walmart staffers other than the friendly part).
A few notes on methodology
I tried to pick the most reasonable items that many buy for a fair comparison. It’s not necessarily a representative sample in proportion to the categories of groceries people actually buy. The totals in the chart don’t make any attempt to weight certain products more than others. If you buy a lot of ground beef and mac n cheese, Walmart would appear much less expensive, for example.
I tended toward the larger packaging when that drove the unit price down. For example, in the peanut butter category I priced out the 40 ounce container at Walmart, Aldi, and Target because our household can consume a jar of that size before it goes bad. Costco only offered one size: a two pack of 48 ounces per jar. Trader Joe’s only offered a 16 ounce container. The cost data in the chart (above) reflect the unit cost, which was based on a 16 ounce container size in the case of peanut butter. Costco was the only store that sold larger sizes than I thought we could reasonably use before the food expires or suffers from loss of quality (bread, apples, and bananas for example).
I didn’t look for organic, all natural, non-GMO, gluten free, free range, grass fed, vegan, kosher, halal, or other specialty designations except for the organic apples. This reflects the way we shop and probably results in the least expensive basket of groceries. Your mileage may vary if you have specific constraints on your grocery purchases. I have, however, noticed that many store brand items at Aldi are now non-GMO, all natural, with no artificial coloring without any increase in price.
I looked for store brand or generic products when available. This might partially explain why Costco was relatively expensive since all of their non-perishable items in this comparison were name brand (Cheerios, JIF peanut butter, Nature’s Own loaf bread, Kraft mac n cheese, Barilla spaghetti, and Prego pasta sauce) whereas the other four stores generally offered comparable quality store brand products. I’m sure I’ll see some debate in the comments claiming name brand / Costco store brand is better than the other stores’ store brands and I’m okay with that – there might be noticeable differences between name brand and store brand in some cases, with the name brand not always being the best.
I left out local grocery stores like Harris Teeter, Kroger, and Food Lion. The main reason is that I already knew Walmart and Aldi were cheaper than the local grocery stores. I didn’t visit Whole Foods because it’s all the way on the other side of Raleigh in the “nice” part of town. Not exactly in my grocery market area at 12-15 minutes drive and 6-8 miles away while most of the stores listed in this study are within 6 minutes and 2.7 miles.
Grocery Shopping Strategy
How does this cost comparison help me? It affirms my belief in my current grocery shopping strategy. In a nutshell, I shop at Walmart and Aldi for most things and supplement those stores by shopping the sale items at a regular grocery store occasionally.
For those more curious about my grocery shopping strategy, I summarized it a few years ago in a post: “Extreme Grocery Shopping Without Coupons“.
Here are the main takeaways from that article:
- Shop at stores that are generally inexpensive
- Buy stuff that’s on sale that you normally buy
- If you see a great deal on non-perishable items, buy as many as you will use by their expiration date
- Plan your meals around fresh fruits, vegetables, and meats that are on sale
- Try something new occasionally
- Know what things cost and buy things at the store where it’s least expensive
- Skip juice, eat fruit instead.
- Buy more perishable goods than you can reasonably use before they will expire (unless you can freeze them with minimal reduction in quality)
- Drive long distances just to save a few dollars at a store with a good sale
- Focus too much time and attention on extreme couponing
- Buy a lot of prepackaged convenience foods
- Be afraid to spend money on expensive foods if it helps avoid dining at an expensive restaurant
To get a sense of how much we’re saving on groceries by frequenting Walmart and Aldi instead of Costco, let’s look at our grocery spending for a year. Last year we spent $5,753 on groceries. Given that Costco is about 37% more expensive than the average of Aldi and Walmart, our grocery bill would be $7,880 at Costco, an increase of more than $2,100 for the year. That’s what we spend on a week aboard a cruise in the Caribbean or two weeks in Europe (in other words, a substantial cost).
On top of $2,100 in extra spending if we shopped at Costco, I’d also have to have a larger refrigerator and pantry plus a deep freezer to store the much larger size of products. Some of the food would still go bad (for example, what if we can’t eat the whole 10 pound bag of apples before they rot?). I can’t quantify the added food waste and spoilage but I assume it would add at least 5% to the overall grocery bill.
Costco Isn’t All Bad, Right?
So many smart people love Costco. I assume I’m missing something. For some, I assume they have very poor alternatives to Costco. Maybe there is no Walmart, Target, or Aldi nearby (the horror!!) and the regular grocery stores are too pricey. It’s certainly possible that the 40% additional cost I observed at Costco could be specific to Raleigh and not broadly true across the US.
Costco sells a lot of products beyond groceries. I’ve heard Costco has great deals on travel and new tires, for example. The times I have compared costs to my usual providers, Costco didn’t come out ahead.
It could be the customer service and ambiance that sets Costco apart. However I didn’t see very many available Costco associates walking the aisles when I was comparison shopping. The check out lines were long and the parking lot was full. And this was mid-week while everyone was supposed to be at work! Costco’s return policy is legendary, but Walmart and Aldi have been very kind to me on every occasion I’ve sought out a refund or replacement. In fact, Aldi offers a 200% money back guarantee – a free replacement product plus 100% cash refund of the purchase price. I’ve used this refund at Aldi many times but I refuse the cash back if there was nothing wrong with the product other than I didn’t like it.
I tend to make the assumption that everyone is like me and tries to optimize costs where feasible. However, I realize that some just might not care that Costco costs a lot more than their much cheaper rivals. In other words, the ~40% premium for shopping at Costco is “worth it” (and I’m okay with that – I don’t optimize for lowest cost in all situations either). I hope it’s not their decor people love because I found Costco to be more depressing than Walmart. The huge warehouse shelving at Costco gives it a raw, industrial feel in my opinion (but then again, I didn’t see The People of Walmart at Costco).
Walmart and Aldi are the cheapest stores in my price comparison that also included Target, Trader Joe’s, and Costco. In our case, Aldi/Walmart saves us more than $2,000 per year versus shopping mainly at Costco.
Though none of the sixteen items in my comparison were cheapest at Costco, I did find some bargains on items that I didn’t include in my comparison such as paper towels and imported cheeses. Other items were within pennies of being cheapest at Costco. With some effort, I could include Costco into my shopping rotation and buy only those few items that were actually cheaper (or better) at Costco compared to my usual stores. Then again, I like the relative simplicity of having Walmart and Aldi as a default to take the thinking out of the equation.
After I completed the cost comparison research for this article, a new grocery store popped up next to the Aldi and Walmart in my little corner of Raleigh. Lidl, another German grocery discounter like Aldi, began operations in mid-November here. We visited the store on their opening day and after taking a quick look, their prices appear to be on par with Walmart and Aldi overall. We revisited Aldi the day of the Lidl grand opening and noticed that many prices were slightly lowered to match Lidl’s prices down to the penny. As happens so often in the grocery game, prices fluctuate over time so it’s good to periodically revisit assumptions on which stores are cheapest.
Where do you shop for groceries? Do you shop at Costco? What items are cheapest (or best) at Costco – and give me some prices!!
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