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  • Agh, that's higher than it was last week.

  • [Employee] Excuse me, sir. Just gonna squeeze right by you.

  • Oh, come on! I haven't even had time to check out.

  • What can I say? Inflation is crazy.

  • Oh, you look at that.

  • Are you serious!?

  • Hello, Internet! Welcome to Food TheoryThe only show that stretches your mind and your hard earned dollar.

  • Man, inflation has been brutal lately.

  • Higher interest ratesegg shortages, even price hikes on Diet Coke.

  • And you know what they say, things are likely going to get worse before they get better.

  • So today I'm going to inflate your brain with some money saving tips, and expose a couple of food myths along the way.  

  • If you're a fan of dough and I know that you are considering this as a food channelafter all, hit that subscribe button so you're always notified of when we post a new video

  • For many of us, shopping at Costco is a rite of passage.

  • From purchasing your first yearssupply of toilet paper to unlocking the secret that is the 4.99 rotisserie chicken.

  • Costco has become the place where you go for a jumbo pack of toilet paper and you walk out with a camping tent, a food processor, and 12 lb of mozzarella cheese.

  • Just leave your manners at the door and hover over that sample table like the pizza vulture that you are.

  • Bulk bulgogi and giant teddy bears asidethe point of Costco is that you get a lot in one stop and you save a lot by buying in bulk.

  • In case you're not familiar with this pinnacle of U.S. consumerism. Let me explain

  • Costco's model is based on offering a limited stock of bulk only products at lower rates than anywhere else.

  • The premise is that for any item you know you'll use, whether it's paper towelsblueberry muffins or TVs, I guess?

  • Costco can sell you an enormous amount of that thing for what should be a lower price.

  • That said, all of this so-called cost savings is going to come with its own heaping helping of traps, pitfalls and marketing ploys that'll stick it to you faster than a 50 ounce bottle of maple syrup.

  • But what if I told you that I have the secret to beating every trick in the old Costco handbook?

  • In fact, I know the single best technique for saving you the most money on meals, and you can do it whether you're a family of one or 11.

  • Come on, grab a flatbed cart that's big enough to carry a mattress, and let's start talking about the Costco pro-strats

  • To begin, before we even enter Costco, we're going to need to get past that bouncer waiting out front.

  • You see, Costco is a members only storemeaning that we can't get in without flashing this piece of plastic with our own little face staring back at us.

  • As of today, Costco offers four types of memberships: a basic or gold star level starting at 60 bucks and a premium or executive member level that will run you $120.

  • These memberships are designed to be an investment in yourself where you're basically betting that you can save $60,

  • the cost of membership, over the course of the entire year a few pennies attime on each gallon tub of Gray Poupon that you're  lugging home.

  • But this isn't always a bet that you know you're going to be able to win unless you've done some serious math to calculate how many rolls of toilet paper, pounds of salmon and bags of frozen broccoli you actually buy in a year.

  • And Costco is well aware of this.

  • They know that some people with a membership are only going to enter the store a couple of times a year, meaning that they just collect a membership fee and walk it straight to the bank.

  • In fact, memberships are where Costco's raking in the most cash to the tune of 72% of their entire operating budget.  

  • You heard that right. Nearly three quarters of their entire operation is covered by membership costs alone.

  • In 2021, they collected $3.9 billion from 61 million members, which means that even when the cost of their products fluctuates or customers are shopping less for a few months because of things like massive inflation, Costco is going to be doing just fine.

  • But memberships are doinglot more than extracting just some upfront cash from you.

  • It's also doing something much darker and more sinister.

  • It's manipulating your mind

  • You see, one reason companies require memberships is because they're powerful tools that get you to come back more often.

  • Since our brains see those membership dues as sunk costs or money that can't be recovered.

  • When you buy something, you always want it to be worth it, right? Whatever that means to you.

  • If you buy a cool jacket, you want to use it enough times to feel like you got your money's worth.

  • If it's food, you want it to taste good and live up to the price that you pay. But how does this work with a Costco membership?

  • Well, you paid all this money to get the membership upfront on the promise that you'll save money later when you actually shop in the store.

  • So what does this make your brain want to do?

  • Buy a ton of stuff in the store so you can get back the price of that membership and savings.

  • Seriously, spending money on a Costco membership makes your brain want to make up for it by spending even more money at Costco. It's actually brilliant.

  • This is what's known as the Sunk Cost Fallacy, or the idea that we're more likely to invest in an action if we feel it'll make prior investment seem justified

  • This is true even when the action no longer brings us joy.

  • Despite being the opposite of what economic theory tells us is rational, these sunk costs have been shown to have a massive impact on your behaviors.

  • So geez. We're already dealing with an upfront investment, followed by the psychology of sunk costs and crippling guilt that comes with it.

  • And we haven't even stepped foot in the store yet.

  • That said, it's only after we're over the threshold pushing our shopping cart the size of a rowboat that the mind games get even more intense.

  • If you're familiar with our video on how grocery stores trick your brain into spending more than you think, wellyou probably know where this is going, but Costco actually takes things up to a whole other level.  

  • You see, a major key to Costco success is impulse purchases.

  • Items that you wouldn't normally buybut you do it on a whim.

  • And you can bet over the years that they've come up with some pretty sneaky tactics to get you to do just that.

  • The first comes with the brand itself, making you think that you're in a quote unquote cheap store. That's right.

  • They're not leaving all the floors as concrete and all the heating pipes expose just the pinch pennies.

  • They're doing it to make you think they're pinching pennies. They're saving moneyThey're passing those savings on to you.

  • We're all on the same team here, right?

  • Wrong. If you feel like you're in a thrift store, you won't be as careful about checking prices.

  • You'll feel like those prices are better even when they're not, and leaving everything barebones makes you feel like you're in a place that's attainable.

  • A place  that's not outside of anyone's league.

  • On top of that, they start, you right off at the front door  with an interesting mix of stuff. Some things that you need and some things that you want.

  • They want you seeing something that you use every day the second you walk in.

  • That wayeven if you're not running low, you might as well pick it up to save time later or use eventually.  

  • Vitamins, big volume snacks, toothpasteThose are the things that are going to meet you right at the front door because who doesn't need to stock up on stuff like that

  • The other thing that's flashing in front of your face when you walk in are the TVs, the stereosthe expensive electronics, things that represent spirational purchases that most people aren't buying every time they go to the store.

  • But you could potentially buy them one day if you managed to save enough money by shopping at Costco.

  • They give you a goal to shoot for

  • And hey, if you said no to that 70 inch OLED forcouple thousand dollars at the door, look how much you just saved.

  • Might as well reward yourself with an extra tray of 24 fresh cinnamon buns from the bakery: Only 11.99

  • Bating you with expensive items that you want makes it a lot more likely that you'll impulse buy something much smaller later to feel like you weren't completely depriving yourself.

  • When in reality, you wouldn't have wanted anything extra in the first place if you didn't see beautiful displays of MacBooks.

  • All you came in for was just several cows worth of milk

  • Next, have you noticed how things kind of seem randomly sprinkled throughout Costco?

  • Like some cheese over there, some blenders over here, some random barrels of pretzels somewhere in the middle.

  • It's no accident. In fact Costco's distribution of the staples you actually needproduce, milk, condiments and snacks.

  • They're all designed to be a treasure hunt through the store that forces you to stumble across a huge array of products that you didn't actually need or didn't realize that you needed,

  • but, wellwhile you're here you might as well pick them upright?

  • And all of that wandering and hunting around helps you to feel just a little bit more peckish, right in time to pass by their most devious tactic of all, the free samples.  

  • Yep. All those tiny little crackers with goat cheese that money bloggers want to convince you constitute as a free meal.

  • All of those nice little freebies are actually just putting their hands down in your wallet.

  • A study from the University of New York showed that whengrocery store offers free samples, impulse purchases in that category go up over 50%.  

  • But just think about what that means for CostcoIf you like a free sample, you're not just buying one small wedge of cheese or one little packet of cocktail weenies.

  • You're buying the farm.  

  • Free samples are especially valuable at Costco because every time they convert a single salewhat they're really doing is converting 2 tosales worth of a regular store.

  • CongratulationsYou are now the proud owner of 20 pepperoni pizza because you like that one little two by two inch square.

  • That is some serious marketing psychology, no matter how you slice it

  • But okay, let's say that you've come in incredibly prepared.

  • You have your budget, you have a listyou've arrived on a full stomach, ready to resist even the most inviting little old lady proffering you a free Tuscan meatball.

  • What if I genuinely only buy the staples? Willsave a lot of money?

  • Well, I did an analysis of what it would cost to buy common groceries at Costco compared to Walmart.

  • I looked at common food items like eggs and milkproduce like potatoes and broccoli, even meats like chicken and beef.

  • I even threw in a pair of AirPods just to see if tech was where I'd save. It was not.

  • What I found was, drum roll, please.

  • On average, you're saving $1.14 per product shopping at Costco. Yay?! Is that a win?

  • Fun fact. The biggest savings actually came from coffee and only $0.42 per serving.

  • So, heyyou can rest easy knowing that you do in fact save by shopping at Costco, provided you buy at least 53 items there in any given calendar year.

  • Instead of buying those items at another retailer and that you use everything that you buy.

  • That right there is the biggest sticking point, isn't it

  • You only save money if you use the stuff that you bought.

  • You seethe average price of an item at Costco is a lot more than a smaller item at another storemeaning that you're going to have to be ready to make an investment in that food and you're going to be eating it like every day until it runs out

  • In my analysis of Staples that I would need to buy at Costco instead of buying at a regular grocery store or Walmart, I would need to spend over $400 to buy the bulk versions of all of those things.

  • And in the end, on an average basiswhen you normalize for the amount of products you bought, you only save yourself $20. 

  • And what happens if I don't use everything I just bought? Well, then it goes to wasteof course.

  • Meaning that I just have to go back and buy more.

  • And chances areunless my meal planning is prodigious and I know exactly how much my family is eating each day, I'm not going to get it right.

  • What the heck amgoing to do with 5 lb of lemons, four dozen eggs

  • I better be a baker or Gaston or my entire family better be eating omelets every daywhich will also help me use up the pounds and pounds of cheddar cheese that are now weighing down my refrigerator shelves.

  • And you see, this is where most people fall into the Costco trap.

  • Food goes to waste and you just end up buying it all againor you end up eating the same thing every day out of obligation.

  • Not because it was the best choice for you based on your nutrition, but because you felt guilty because wasted food equals wasted money.

  • So sure, in some scenarios, shopping at Costco makes sense.

  • Say you're an affluentcollege educated homeowner with both a family and enough disposable income to make buying in bulk a good option to stock your enormous refrigerator and freezer.

  • Because theoriststhat right there, that is Costco's target customer.

  • You might be led to believe that the average Costco shopper is lower income or a blue collar worker on a shoestring.

  • But you couldn't be more wrong.

  • According to their own accounts, who they're actually targeting are professional women between the ages of 35 and 45 who make on average over $125,000 per year and are spending well over $100 per shopping trip.

  • When I found this out, I was seriously shocked. Like, This is Costco's biggest secret.

  • A story that markets itself as discount is actually a store for rich people.  

  • Just, you know, rich people who want to feel like they're saving money.

  • It's also why you see Costco stores focused around suburban areas. It's just not that practical for an 18-year-old living incramped college dorm to buy in bulk.

  • You're going to need a home with a garage and a freezer and another freezer and probably a shed.

  • Oh, and when it comes to non-food items like their electronics, these are just price matched with other stores or Best Buy.

  • But Costco doesn't have any kind of student discount options because studentsagain, are not on the budget or the demographic that they're looking for.

  • Does that mean that all is lost for your Costco membership? Not exactly.  

  • You see, with today's unbridled inflation, I do actually believe that there's a place for that Costco membership.

  • And it's not where you think.

  • What if I told you that a Costco membership could save you money even without you stepping foot into the store?

  • Enter the $1.50 hotdog deal.

  • Introduced back in 1985, the legendary hot dog deal is one of the main attractions at Costco's food court, which is what they call the snack stand that sits immediately inside or outside the door at most stores.

  • And this thing completely slays everything.  

  • The average yearly sales for Costco hotdogs outperform all of the major League Baseball stadiums combined by a factor of four.

  • Stand aside there, Dodger Dog, the true king has arrived.

  • What's even more impressive, thoughis that this hot dog deal should be running you about $4.16 in today's money.

  • But against all odds, the price has stayed the same at $1.50 for over 35 years.

  • It's actually pretty fair to call this one inflation proof.

  • This legendary meal consists of a quarter pound all beef frank, a bun and a 20 ounce soda with free refills.   

  • I ran the numbers to see how much it would really cost someone to make this meal at home.

  • And what I found was actually shocking.

  • A quarter pound, all beef frank will cost you a $1.1, the bunanother $0.35, 20 ounce soda plus refill $1.27 , coming to a grand total of $2.80.

  • I don't know if you realize just how big of a deal that is

  • You're saving $1.30 per meal by eating at Costco and not cooking your meal at home.

  • The old saying of save money by bringing your lunch from home