10 Things Your Warehouse Club Won't Tell You

Their raison d'etre is to help you save money. But look out — warehouse-clubs can give you a lot more trouble than you bargained for.

1. "You paid your dues? Good, now wait in line."
More than 50 million Americans now shop in a BJ's, Costco or Sam's Club each year. That's 11 million more than five years ago. The attraction? For the annual membership price of $35 to $100, discount hunters can spend their weekends stocking up on 36-roll packages of toilet paper and nuclear-canister-size boxes of detergent. Too bad they also spend plenty of time doing anything but shopping.

Michelle Wilkes usually waits in lines of no less than 15 minutes on the weekend at her Lake Zurich, Ill., Costco. There are often four to five shoppers ahead of her at the register — and that's despite what Costco CFO Richard Galanti claims is a company-wide checkout policy of "no more than one in line and two behind." What further frustrates Wilkes is that her store never has all its registers open. "I have never seen it fully staffed," she complains. Galanti agrees that "there's nothing worse than having half the 20 registers open. Shame on us."

2. "You'll need a hard hat when you shop here."
Heads up this holiday season: Warehouse clubs are notorious for letting products drop on unsuspecting customers. In 1998 a woman in Cincinnati was hit by five 38-pound containers of kitty litter while shopping in a Sam's Club. She sustained head, neck and shoulder injuries. And during the summer of 2001, a woman shopping in another Sam's Club, this one in Hagerstown, Md., barely avoided serious injury when a sofa, weighing nearly 100 pounds, fell from the top of a shelf.

Plaintiff attorney Jeffrey Hyman says injuries often occur when unsecured merchandise slips from shelves, either because a store employee stocking an adjacent aisle accidentally pushes it or because another customer is trying to take down an object. Hyman says that despite the accidental nature of the incidents, "if you know you have a problem and you know you have a dangerous condition, you need to fix it." Sam's Club spokesman Tom Williams insists that "our shopping environment is very safe. But when something like that happens, it causes us great concern." The company, Williams adds, tries "to put in safety rules to prevent anything from happening."

3. "Our credit card will burn your savings away."
Since Sam's Club honors only the Discover card, many shoppers decide to get a Sam's Club personal credit card. But before you sign up, beware: The standard card carries a variable APR of 19.90% — almost six percentage points higher than the current average for variable credit cards, according to Bankrate.com. And don't expect the rate to go down. The card's application states that the APR is "the prime rate plus 12.90%, but in no event less than 19.90%." Peter Toshes, spokesman for GE Consumer Finance, which services the Sam's Club card, says the rates "are competitive with the industry. I wouldn't say they are high."

Worse, you may find your phone ringing off the hook with telemarketers once you sign up for the Sam's card. Unless you mark "no" on the application, Sam's Club will share your phone number, address and purchase history with insurance companies, mortgage lenders and travel clubs — just the folks you want calling at dinner time. Toshes says that the policy is an industry practice, which "gives us the opportunity to tell our customers about other products that might be available."

4. "Jewelry experts trash our gems."
Survey the landscape at a Costco or BJ's. There are stacks of corn flakes, mountains of mayonnaise jars and . . . diamonds. Diamonds? You bet. A jewelry counter is now standard at most club stores. Costco and BJ's even offer a diamond appraisal guarantee. The $1,000 band you fell in love with at BJ's, for instance, comes with an appraisal certificate stating that it's valued at $1,500; at Costco, it's as much as $2,000. Not even Tiffany offers that.

Both BJ's and Costco say they have a simple explanation for why they can guarantee the value of their gems despite the discounted price: bulk. BJ's spokeswoman Julie Somers says that because the store purchases jewelry in volume from dealers, it can provide "members with tremendous savings" without skimping on quality. There's just one problem: Jewelry experts say the stores' appraisal guarantee is sketchy at best. As Edwin Baker, executive vice president of the American Society of Appraisers, puts it, "If the clubs consistently sell an item for $1,000, then it's obvious the market value of that item is $1,000, not $1,500." Joyce Jonas, jewelry appraiser on the PBS show Antiques Roadshow, agrees. She calls the guarantees "misleading. You're not dealing in the kinds of goods that could ever be appraised for more than what they're selling it for."

5. "You'll leave when we tell you to."
Ed Fritz and his family had just finished shopping at a warehouse club in Northern California. As Fritz got to the store's exit, an employee stopped him and said, "I have to check your receipt." When Fritz declined to show it (he says he wanted to safeguard his credit card number), the employee grabbed his cart and then his arm to prevent him from leaving. Once Fritz freed himself, he headed to the parking lot, followed by six other employees. As one of them took down his license-plate number, Fritz was told never to return to the club. "I said, 'After this treatment, I never want to come back here,'" Fritz recalls.

That may be an extreme example, but as club members have long known, it can often be a hassle just leaving a warehouse store. You'll wait for one of the club's employees to inspect your receipt, a procedure that will usually add several minutes to your outing. Obviously, when you join a club, you agree to follow its rules. But why such scrutiny? Galanti says at Costco the review helps make "sure the right price is on the right items" and "is a measure of inventory security." While warehouse stores do have the right to check your receipt, Washington, D.C., attorney Donald Temple, who specializes in retail discrimination law, says employees cannot cross-check it with the items in your cart.

6. "We have more animals than a small zoo."
Warehouse stores don't advertise having pet departments. But looking through health-inspection reports, you'd sometimes think they did. In the past two years, two Sam's Clubs in Maricopa County, Ariz., have been cited for having birds in the rafters and nesting under the bakery display. And this past summer the Georgia Department of Agriculture fined a Sam's Club in Atlanta $80,000 when more than a dozen mice were found in the store. They'd been snacking on food and leaving behind their droppings.

Sam's Club spokeswoman Melissa Berryhill assures us that the "problem is taken care of now." Although she can't comment on the Arizona cases, she says "at all times one of our (top) priorities is to maintain a safe shopping environment for members. If there are birds in the club or rodents, we work as fast and diligently as we can to get them taken care of."

7. "Try our Web site. It will try your patience."
So you went to the trouble of joining a club store, forking over the annual dues, and then endured the long lines — just to save a few bucks. Well, get this: You could have avoided all that by shopping online. Costco's Web site, for example, features everything from laptops to patio furniture. But unlike shopping at the store, you don't have to be a member to buy items from the site. You're simply charged an extra 5%. You'd have to buy $900 of merchandise before the nonmember surcharge equaled the cheapest membership fee.

Understand this, though: Online shopping comes with its share of hassles. First off, shipping costs could send your savings into a tailspin. Rachel Caspi of Bethesda, Md., ordered six items from the Costco online pharmacy for a total of $78.10. She was charged $26.50 for shipping — or 34% of the total purchase. She ended up canceling her order. Then there's Paul Cohen. The Valley Cottage, N.Y., resident ordered two PCs online from Costco; the first arrived on schedule, the other was MIA. Only after two weeks of calls to Costco's customer-service department — which at one point could not even trace the missing PC — was his order fulfilled.

Costco's Galanti admits that "there will be mistakes made. When we find out there has been a problem, we fix it as best as we can to the customer's satisfaction." Still, he adds, "I've had friends e-mail me saying they ordered something and it never showed up or they had a problem."

8. "That warranty is valid — in Italy."
Ever hear of the gray market? Your club store has. The term refers to merchandise that was designated by the manufacturer for distribution in another country, but ends up being sold in the U.S. Often club stores are big buyers of gray-market products, either because the goods are priced cheaply or because the manufacturer will not sell directly to the store.

Unfortunately, the warranties that come with gray products don't have to be honored in the U.S. Bret Diamond found that out when he purchased a Seiko diver's watch at his local Costco store. It was $75 less than he had seen it for in other stores. But he had to pay more than $100 to have it repaired when the watch stopped working three and a half years later. His five-year warranty was not valid because the watch was from the gray market. If he had known that, "I never would have bought it," he says. Unfortunately, it's hard to tell a gray-market item from a regular one.

9. "Your backyard would make a beautiful warehouse."
In addition to the demand of cost-conscious shoppers, club stores keep blossoming (at a clip of more than 40 new ones per year) because civic leaders see them as a way to encourage development and jump-start the local economy. But opponents of the buildup contend that politicians take short-sighted measures to gain these quick hits. Al Norman, an activist and editor of Sprawl-Busters.com, says, "Unfortunately, local officials hand over a re-zoning without much scrutiny because they think this means jobs and taxes."

That's what Donald and Sophie Mason believe happened in South San Francisco three years ago. The Masons figured that by virtue of the city's General Plan, a 15-acre plot near their home could be developed only for high-density housing. The city council, though, changed the plan to allow for retail development. The Masons and members of their group, the Concerned Citizens of South San Francisco, say the change was made specifically to lure a Costco to the area. They forced a referendum to approve the changes; to the Masons' disappointment, voters okayed them. The store opened in 2001, and ever since, the traffic near the Masons' home has been, according to Sophie, "an absolute mess."

10. "You'd better like what we like."
Warehouse membership may have its privileges, but it doesn't provide much variety. The most mammoth clubs carry only 4,000 to 6,500 different products, a fifth of what your average supermarket stocks. BJ's spokeswoman Julie Somers admits that what customers see in stores is "an edited selection of top quality. So you might not find 30 laundry detergents, but you're going to find the top laundry detergents."

The thing is, clubs have mastered how to make their aisles look more varied than they are. "Clubs like to rotate items during the year to keep the shopping trip exciting," says Christie Briggs, an analyst at Management Ventures, a retail consulting company. "This means that an item a member is fond of could be gone the next time they go." That's what got Suzy Neal so annoyed. After a year of buying Wow potato chips at a Sam's in Albany, Ga., Neal one day couldn't find the brand. Only after she filed a complaint with Planetfeedback.com did Sam's restock the chips.