You mean I have to pay you, for you to charge me less?
May 27, 2009 9:24 AM   Subscribe

How do I tell if a "Discount Club" is worth it?

An online retailer I use somewhat frequently has the option to join a discount program where you pay $49.99 (yearly) and in return, you get 10% off (almost) everything in their catalog, a lower target for free shipping, and a couple sales a year where you get 15% off.
I know that in order to break even, I'd have to buy $500 worth of stuff (maybe a little less due to shipping). Adding up the cost of supplies for an upcoming project (that I was going to do anyway) has me coming close to this magic number, but the little nagging voice in my head is saying that's not such a great deal. Am I wrong on that?
posted by ArgentCorvid to Shopping (7 answers total)
The advantage for the retailer is obviously that they get money up front for doing nothing. You're essentially giving an interest free $50 loan to them. I'd say skip it if it's going to be close.

If you want to figure out more precisely what the break even point is taking into the time value of money, you'll need to do a Net Present Value calculation.
posted by electroboy at 9:32 AM on May 27, 2009

If you knew you had upcoming, necessary expenses that amounted to significantly more than the "break-even" point (so that even if your needs were reduced, you'd still be past that point) which you were planning to purchase through this company anyway, then it would be a good idea. But if you're already having to plan additional purchases just to break even, then you're much better off paying full price. 10% off of $500 still has you spending more if you had originally planned to buy only $400 worth of merchandise.
posted by Meg_Murry at 9:37 AM on May 27, 2009

The math on this is pretty easy, absent the interest thing, which is negligible in a situation like this where you're only talking about a single year.

Have you spent more than $500 a year with them in previous years? Do you typically do more than the project you currently have planned in a given year? Are they your go-to choice for supplies or do you have other equally good options that might be cheaper for some things?

If you can that yes, you pretty much will definitely spend $500 there in a year, or a little less given shipping, then it's worth it. If there's a good chance you'll spend less, then it's probably not worth it, since it'll drive you into spending more to take advantage of the discount.
posted by jacquilynne at 10:30 AM on May 27, 2009

You seem to have a handle on the math. This seems pretty straightforward to me -- you know the break-even point. If you know you'll pass the break-even point, you'll break even and it will be "worth it" for any purchases beyond that.

This is pretty much the same with a lot of rewards programs that don't require upfront fees, though. For instance I just spent about $180 at Staples to take advantage of a $30 discount coupon. Some of what I bought was necessary (new toner cartridge), but some of it was a bit iffy and now I'm experiencing buyer's remorse (half-price thumb drive I may never use). That's what discounts are supposed to get you to do -- buy stuff you wouldn't otherwise.

Plan ahead.
posted by dhartung at 11:24 AM on May 27, 2009

If you will save money this year then go for it. There's no reason you have to renew it next year.
posted by kindall at 2:28 PM on May 27, 2009

Thanks all. I was thinking in the same direction, I guess I just needed to see it in someone else's words.
posted by ArgentCorvid at 3:32 PM on May 27, 2009

Also, when counting your savings, make sure that you would have bought those supplies from that particular retailer. If the $500 of supplies could have been bought from somewhere else for $475, you're only saving $25. And, if you factor in the risk of buying more crap just because it's 'cheap,' the club may not be worth it.

OTOH, a lower point for free shipping is very liberating and can save a lot of money by preventing you from padding your order with things you don't really need just to get the shipping.
posted by bsdfish at 5:40 PM on May 27, 2009

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