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It's common practice for supermarkets to send out a weekly circular with coupons attached. If you're lucky, you may not have to clip a physical coupon because you'll be given the option to load a digital one to your store card instead. Either way, remembering those coupons is a good way to save money on groceries.
Costco works differently, though. If you're a member, you may have noticed that Costco does not issue coupons for the items it sells. It also doesn't accept manufacturer coupons for the items it carries. But there's a reason for that.
A totally different business model
The reason Costco doesn't accept or issue coupons boils down to the fact that its business model is different from that of traditional retailers. Costco charges members an annual fee. Currently, that fee amounts to $60 a year for a basic membership or $120 a year for an Executive membership that comes with 2% cash back on your purchases.
Because Costco derives so much revenue from membership fees, it's able to use that revenue to offset its cost of procuring inventory. Costco also negotiates with its suppliers to source great deals for its members.
As such, the warehouse club giant is able to offer consistently low prices on the goods it carries. Since Costco is confident in the prices it offers, it doesn't feel the need to accept coupons that might further reduce the price because customers are already getting a great deal to begin with.
Plus, Costco discounts its inventory on a rotating basis. It usually informs customers of sales in the form of a monthly mailer.
You may find that your go-to laundry detergent is available for $3.50 off of its usual price one month, while your favorite cereal is $4 off the next month. But as a Costco member, you're just plain entitled to those discounts. You don't need to clip or present coupons to enjoy those savings.
A practice Costco members really shouldn't complain about
As a Costco member (or would-be member), you may find it annoying that the chain won't accept coupons. But as Costco puts it, manufacturers often incorporate the cost of a coupon into the original pricing of their products they sell. Costco says, "Because it ultimately doesn't provide any advantage to the member, we don't permit our vendors or buyers to carry out that practice at Costco."
To put it another way, a given manufacturer might put out a coupon that most retailers accept, offering $5 off a given item. But what that manufacturer might then do is make the original price of the item $35 instead of $30. In that case, it might seem like your coupon is saving you money when it's not.
Costco, on the other hand, might only charge $25 for that same item. So while you can't use your $5 off coupon, you're still coming out ahead financially at the end of the day.
One really nice thing about Costco is that it's very transparent about its pricing and business model. Costco doesn't hide the fact that it doesn't accept coupons -- it boldly explains why it doesn't have to. And as a member, that's a practice you should try to appreciate.
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We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.
