Which Warehouse Club Is the Best?

Cecilia Streit Used to pay no attention to her grocery bills. But then the price of everything from a gallon of milk to a package of her favorite coffee beans started going up, forcing her to cook up something new: a food budget for her family of four. Now — although she'd rather not have her neighbors know about it — the Montclair, N.J., sales executive sneaks away to Costco (COST) every two weeks or so to find bargains on groceries. As other shoppers stuff their carts with a year's supply of pickles and enough detergent to clean 95 loads of laundry, Streit sticks to basics like chicken nuggets, lettuce, sugar and eggs. And though it takes her five minutes to find a space in the crowded parking lot, she figures it's worth the trouble: She saved nearly $40 on a recent trip, with bananas alone costing half the price she'd pay at her grocery store.

Welcome to the club. As retailers of all stripes struggle to survive in a tough economy, one group is doing just fine: warehouse clubs, those cavernous, members-only stores that sell food, gas, electronics and just about anything that can be loaded into their oversize carts. They've been growing for years, of course, but with a new crop of customers looking for bargains, the Big Three — Costco Wholesale, BJ's Wholesale Club (BJ) and Sam's Club (WMT) — are in a sweet spot. Even after a recent pullback, the stock market value of industry pioneer Costco is now greater than that of General Motors and Ford Motor combined. Same-store sales at Costco and Sam's Club have grown about 7 to 10 percent in recent months, while sales have increased as much as 17 percent at BJ's.

Behind the growth spurt: sticker shock at the gas pump and supermarket checkout line. The cost of groceries was up 4 percent last year — the biggest jump since 1990. This year the increase is running at about 5 percent, according to the Department of Agriculture. Even the well-to-do are feeling a little poorer these days. A recent report from the Food Marketing Institute found that 57 percent of households earning $100,000 or more say the cost of food is very important when choosing a place to shop.

Figuring that we can pile up savings as well as the next guy, SmartMoney set out for an unscientific survey of a Costco, BJ's and Sam's Club in northern New Jersey. Our goal was to find the cost of a basket of 10 comparable grocery items purchased at each of the three stores, while checking out the selection and service along the way.

The first stop is BJ's, the smallest of the chains, with 178 stores in 16 eastern states. We briefly consider getting a day pass, but that would mean a hefty 15 percent surcharge on our grocery tab. Thinking we could save more than the $45 membership fee after another visit or two, we go for the full-year membership. As we push our cart past the $330 kayaks and head toward the food in the back of the store, infomercials blast from TVs at the end of the aisles, hyping cordless sweepers and a bladeless hair-removing razor. "It's part of the entertainment value," says a BJ's spokesperson. No one is watching, but customers are paying attention to signs that mark what can be found in each aisle.

We're impressed by BJ's wide selection, allowing us to compare prices among 11 brands of coffee, 23 types of sliced bread and 30 kinds of cereal. We go for the cheapest of each and find surprisingly friendly service. One food station attendant twice steers us to the correct aisles, and a baker walks us to the apple pies (they're a day old and "usually" made fresh every two days, he says). Michelle, our cheerful cashier, lets us use the express lane even though we're two items over. We're pleased with the modest price for the 10 items we purchase — $55.35 — but less so with the direct view into the men's washroom, where the door has been left wide open. "That would not be attractive," says the spokesperson, who promises to put in a call to the store.