Charlie ❤️ Costco and so should you

by | Jan 15, 2019

When a new person joins our team at Charlie, we all celebrate. There are lots of little surprises in store for Day 1 and I won’t ruin them here. I will only share one: we take each new team member to a very special lunch… at the Costco food court. That’s right, we pamper our new hires with a lavish welcome meal: a $1.50 hotdog, soda included. We are acutely aware how hard it is to attract and retain top talent in Silicon Valley. We don’t offer crazy perks (sorry, no masseuse on site), but we do offer free lunches. Lobster ravioli, chicken tortilla soup, pork shoulder, quinoa, baked salmon and kale salads have become staples for us. But we do it our way! We cook ourselves, on site — it takes one engineer about 45 minutes to feed our team, a welcome midday respite from coding. And we always, always shop at Costco. The average cost per meal, per person? About $4.10. Sure, our lunch operation won’t scale as we grow. But most families won’t ever face our scaling challenges. Many Charlie users already shop at Costco regularly. If you are one of them, you may have gotten an excited message from Charlie to congratulate you. If you’re not — we think you should join our ranks. Here’s why.

Great value

I already mentioned the $1.50 hotdog + soda combos, but Costco also offers ridiculously delicious rotisserie chicken for $4.99 (for the whole chicken!), $1.50 for a pound of bacon, and more. While you may not be getting the best deal out there on every single item, on average you’ll get the most bang for your buck. Here, I’ll prove it to you! Being the financial nerds that we are, we looked through the most recent quarterly financial statements of the biggest grocery chains in the country to compare their gross margins. “Gross margin” is the difference between the price we all pay in the store and the wholesale price the store pays to manufacturers. The lower the margin, the closer retail prices are to wholesale prices and the better off we are! Here’s what we got:

Costco has the lowest gross margin out of the major public grocery chains, which means they put the smallest surcharges on top of what they pay wholesale. And this is only half the story! Costco sells vast quantities of goods each year (e.g., 87 million rotisserie chickens in 2017) and their limited selection per category means they are the biggest retailer in the country for many of the individual items they stock. They are likely getting the best wholesale prices to begin with!

 

Good stuff

If you want to get “primo” vodka, top shelf, what do you get? Grey Goose? A large, 1.75L bottle of the crystal clear beverage distilled five times in the legendary Cognac region of France will typically set you back $60. Lucky for you, it’s “only” $47.99 at Costco. But you see that Kirkland Signature bottle right next to it and it’s just $19.99… Should you compromise? Here’s the thing: Kirkland Signature vodka is, in fact, manufactured by Grey Goose — with the same ingredients and equipment in the same location. Kirkland Signature coffee? Brought to you by Starbucks. The diapers? Made by Kimberly Clark, the manufacturer of Huggies. And the list goes on… Most store brands are widely perceived to be cheaper, lower quality knock-offs of the branded, premium, “good stuff.” Costco’s Kirkland Signature items very frequently are the good stuff, identical with their expensive counterparts, just under a different name. Costco is not allowed to disclose the identity of their private label manufacturers — that’s kind of the whole point of these deals. But various unofficial reports are regularly published to confirm this. Sure, the Kirkland Signature bottle may not have that same “wow” factor at your party. But it won’t “wow” your wallet either. Sometimes it pays to impress. Most times, however, it pays to be smart.

 

They take care of their own

Here’s a stat that might surprise you: Costco was named America’s Best Large Employer for 2017 by Forbes in a survey of 30,000 people in partnership with Statistica The #2 on the list? Google. (Google does have a free masseuse on site… And even some of their masseuses have become millionaires.) How did Costco beat Google as the Best Employer for 2017? I am no expert here, but it looks like they just treat their employees really well. According to Glassdoor, the average cashier at Costco makes $13 per hour, compared to $8.48 at Walmart. Over 90% of Costco employees get a compelling benefits package: healthcare, dental, vision, and life insurance plans, as well as 401(k) retirement plans. (Charlie loves retirement plans!) Costco also prides itself on its Promote from Within mantra. You work hard, you go above and beyond, you get promoted ??. Their CEO, Craig Jalinek, is the perfect example of this mantra:  he joined the company in 1984 and got the top job 28 years later, in 2012.

The bottom line

Costco is not the right store for everyone and every occasion. Singles and small families or city dwellers in small apartments may find it impractical to deal with Costco’s large quantities. Perishables can be particularly tricky to buy at Costco — not everyone can buy milk in 2-gallon increments. But the more of your budget you move to Costco, the better off you will be over time. Sure, that first trip will likely be daunting and even disorienting. But, as you stick with it, you will find that your monthly expenses and unit costs — the average price you pay for lunch or dinner, for example, or per can of beer or soda — will come down over time. It’s the unit costs that you want to manage — the average price you pay for lunch or dinner, for example, or per can of beer or soda. Costco allows you to spend less than you would at a fast-food chain and eat much, much better. If you are not a Costco member already, I hope you are already looking up the nearest location. Remember — they have free samples on weekends. People go nuts over them. Make sure you load up the car with gas while you are at it — you’ll save an average of 20 percent.

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