At one of our recent trips to Costco, we passed by the baby formula section. We were big fans of the Kirkland formula during Little Boy Beagle’s formula needing days.
(Side note: To those who will point out that breast feeding is the best and cheapest option: We know. We tried. Eventually, formula became the necessary option.)
So, while walking around the section, a new method of packaging jumped out at me as I passed by.
Anytime a package changes, I immediately jump to the conclusion that the company packaging the product in question is changing something in some way to present a price increase, most often by giving less product at a price that works out to a higher unit price.
Once again, I was right.
With the old packaging, you received two canisters, each containing 25.7 ounces of formula. The price for the total 51.4 ounces was $19.79.
With the new packaging, you get a single 36 ounce container of formula which costs $16.49.
I have to say that Costco was as creative as can be in presenting this. At first glance, the consumer sees a taller container than they got before, which offsets the fact that they used to get two. They also see a lower price, which makes them think they’re getting a pretty good deal. In fact, I bet some shoppers probably think they’re getting a better deal.
Not so fast.
By cutting 15.4 ounces from what you get, they cut 30% of the product you receive. Yet the price went down by a mere 17%.
What this works out to is a price per ounce increase from $0.385/oz to $0.458/oz.
This results in a 19% price increase for Costco / Kirkland Baby Formula!
Look, I get the fact that prices go up. This doesn’t bother me. But, very few products have gone up by 19% in cost over the past year. The fact that Costco is sneaking this in by way of attempting to confuse the customer disappoints me.
My wife raised a good point; They’re still cheap. Before, they were about half the cost of the name brand formulas such as Similac and Enfamil. Now, assuming those companies haven’t likewise raised their cost by 19%, they’ll be 35-40% cheaper.
Still a pretty good deal. But you know what? Other stores (such as Target and Wal-Mart) have lower priced formula as well. In the past, it was cheaper than the name brand but still not as cheap as Costco. If they are now more competitive in price, Costco could end up losing customers altogether if enough customers realize the big jump that just took place.
Here’s the rant portion of this post:
I love Costco, but I have realized that you really have to keep an eye on them. I am certain that one of their strategies is to bring customers in with ultra-low prices, get them hooked, and then raise the prices. This isn’t groundbreaking retail strategy, but I put Costco on a higher level of expectation than I do most retailers. Why? Because Costco is the only retailer I shop with for which I pay the privilege of shopping with. When I hand over my $50 membership fee every year, I am saying, ‘Yes, I agree you are awesome enough to pay $50 to walk through your doors’ but you know what? I’m also holding them to a higher standard.
The price increase of 19% is bad enough. But, where they haven’t ‘earned’ their membership fee on this one is that they implemented it in what I consider a sneaky way. I would have much rather seen them just raise the price on the stuff they used to sell from $20 to $24 and be done with it. Now, you know darn well that there are customers walking out who aren’t paying attention and are ending up shorting themselves on formula, thinking they are getting the same amount they used to, or other customers who aren’t unit price shoppers who are going to have a hard time understanding why their formula costs spiked.
Costco has to make money. I get that. But sometimes companies go too far in their quest to make money. I’m not saying Costco went too far, but a near 20% price increase and hiding behind ‘new packaging’, well that’s toeing the line into questionable territory. In my opinion.