Editorial: Channel 9’s A Current Affair One Eyed Look At Costco

Editorial: Channel 9’s A Current Affair One Eyed Look At Costco

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As I mentioned in an earlier price comparison post on Loaded Trolley, A Current Affair on Channel 9 ran a story that was essentially one sided.  The story made out that Coscto was ripping off Australian consumers, and was no better than the Colworths duopoly for prices. A Current Affair’s reporter Ben McCormack and the staff at ACA tried to infuriate Australians by claiming that this big American ‘multinational’ was complicit in over charging Australians for profit and then presented a fragment of evidence to back up their claim.

My first frustration with this story is it actually presented two very separate arguments which ACA then attempted to link to Costco as a basis for being a big bad multinational. One issue presented was on the so called ‘Australia Tax’ where the cost of many goods are higher here than in the USA, and the second was that Costco and bulk buying don’t actually save you money. So ACA first seek to make Australians angry and then help us to aim the loaded gun at Costco just leaving the viewer with the trigger to pull.

Now the ‘Australia Tax’ frustrates me too, but it is not just GST, labour in the store and shipping that adds to the cost for goods being sold in Australia as ACA so simply put it. The cost of doing business here is also impacted by internal logistics cost (that includes labour costs, resource costs and inefficiencies of a small distribution network servicing a large area), property prices, cost of finance to the business, business related taxes and many other impacts that need to be accounted for. The manufacturer or importer also have to amortise expenses over a smaller volume than they do for the US market including the cost of certification to Australian standards, such as electrical standards, and they also charge a premium for design and manufacturing changes for localising products for Australia, which could include items like putting Australian power plugs and 240V systems into their products. It’s not as straight forward selling a product in Australia as you might think and a 15% difference isn’t always going to cover it. And don’t worry people, it’s not just Australia that cops it. I just came back from Taiwan where I visited Costco and the prices there for non-food items are more or less the same as Australia and in many cases significantly higher, the difference is that the average wage in Taiwan is much lower than in Australia.

In the second half of the story the presenter, Ben McCormack, lays claim that ‘some’ grocery items are the same or more expensive at Costco than they are at regular supermarkets. The prime example is beef sausages but many people will know that quality and actual beef content can vary massively from manufacturer to manufacturer. It is simply not a fair comparison. Other examples are Coles being 12% cheaper on Kleenex tissues because they happened to be on special that week and cans of Coke being less than 8% more expensive at Costco when they checked, again because the product is on sale that week at Coles. I also wonder when the two data points for Coke were taken because in my experience if ‘Colworths’ have a special on Coke then Costco meets their price. If the data was gathered on different days they could have been on different sides of the discount cycle. Ben McCormack then fails to show the other side of the story as we do in our ‘basket of Goods’ comparisons, where Coles and Woolworths prices are higher by 50% or more as we saw in the last cost comparison post here on Loaded Trolley. Ben also shows that Chemist Warehouse have nappies the same price as Costco, so now the comparison is not fair because the consumer need to waste time going to a different store to get a the special.

ACA then rolls out Cath Armstrong, from the Cheapskates Club, touting her as a consumer advocate. Actually Cath is not so much a consumer advocate as an entrepreneur in her own right. Cath has her own vested interest in getting her name into stories like this because she makes money showing consumers how to save money through her membership fee based website and book sales. Now you might say, “But Corey, you make money from your website too” and I do make a modest sum, but that is through Google ads that I do not control the content of those ads just the placement. I actually make very little from those ads, just enough to cover my web hosting and Costco membership and car parking at Docklands. Also, I do not do this as a business and I get nothing, and want nothing, from Costco other than great prices. I certainly don’t charge you to read what I write, as Cath does for Cheapskates Club. In the commentary from Cath there is also no discussion on how much time and effort one has to expend in order to make a few modest or perhaps not so modest savings. Remember that old chestnut kids, ‘Time Is Money’.

So by the end of this story your average ACA viewer is so angry and convinced that Costco is going to cost them so much more money between the prices and the membership fee that they may as well not bother. Now I can’t say why A Current Affair would run a story like this but given that Channel 9’s ad breaks are filled with jingles like ‘Down, Down, Price are down’ and ‘Fresh Food People’ I guess Ben’s wage is covered. And if you believe ACA’s story, perhaps you should click through to a few of Loaded Trolley price comparison posts listed below. If these don’t convince you, then I offer my services to you via the contact page to submit your very own ‘basket of goods’ for price comparison.

8 COMMENTS

  1. I notice that you compare Woolies, and Coles to Costco (a great thing btw !!), but have you thought to include Aldi in your comparison ?? I have numerous friends who shop at Aldi and think that they will save more by shopping there than at Costco. Cheers Randy

    • Hi Randy… We did originally plan on including Aldi in the comparison but it was difficult. Our terms of engagement on price comparisons was to be like for like. An example would be to compare the price of Arnotts Tim Tams at all outlets which we definitely cannot do with Aldi. If the identical product is not available at an outlet then we select the best priced competitive product, and competitive product also means that we need to be confident the quality is about the same. We don’t select the really cheap brands like ‘Homebrand’ as we don’t consider them off the same quality. Because Aldi has no name brands and the unique brands they do have can be hit and miss for quality we do not feel that in general Aldi can be included in the regular comparisons. I do plan on doing the occasional direct comparison to Aldi and perhaps even a blind taste/quality test of the house brands each store stocks.

  2. they did the same articles when ALDI decided to come to Australia and so far Aldi have got a majority of consumers shopping in their store because they are legitimately cheaper than the 2 big shops coles and woolworths, who are sometimes very deceiving in their advertisments and specials.

    I for one will be going to Costco when they finally open their doors at Northlakes in Brisbane as I have a family of 10 to feed and love bulk buying to save $$

    thank you and keep up the good work 🙂

  3. Corey, you have to remember that most savvy shoppers only purchase staple products (TP, tissues, cleaning products, groceries, etc) when they are special, which for most goods is every second or third week. This is the relevant price that should be compared to Costco, because it’s what the vast majority of people pay.

    Although I do shop at Costco now and then it’s not because the products are cheaper (the vast majority are either the same price, or more expensive that what I pay at Coles/Woolies on special. When you factor in the membership cost they are significantly more expensive). I go there because they have a fun range of unique products that you often can’t find elsewhere.

    • I would say that most shoppers are not savvy and buy things on an as needs basis. The point that normal Costco prices are the same price as Coles/Woolworths on special only holds true for a few lines from our analysis so far, but this is a comment that I hear a lot. So my plan in the new year is to select a range of items people would regulalrly buy and test the prices weekly. Any suggestions as to what should be included on this list of products to compare is welcome.

  4. The ACA tossers are pulling the exact same hatchet job with the exact same talking heads tonight. (17/02/14)

    In the UK a TV station would hauled over the coals and face fines for running wilfully misleading interference for sponsoring commercial interests like this.

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