Costco is a good place to buy furniture!
Does it sell high-quality brands?
Does Costco have a good warranty?
Answer:
Costco is an excellent place to buy cheap or mid-range furniture products.
Costco has 4 big advantages over its furniture store competition.
1) Costco sells at lower profit margins than furniture stores.
When a furniture store buyer purchases a sofa at a wholesale cost of $500 and sells it for $1000, this is considered a “Gross profit margin” of 50%.
[Note: Readers who have not worked in retail stores may look at the example above and think the profit margin should be 100%, not 50%.
If you want to understand the difference, check out this article from Investopedia.]
Furniture stores typically aim for a 50% gross margin (markup).
If they actually achieve a 40% gross margin (after price reductions, returns, damages, shrinkage (theft), etc.) that is considered “excellent.”
Other types of retailers work on different gross profit margin percentages.
For example, Walmart’s gross profit margins are closer to 20 – 25%.
If Walmart buys a sofa at a $500 wholesale cost, the selling price will be around $650.
Costco’s gross profit margins are typically closer to 14%.
When Costco purchases a sofa at a $500 wholesale cost, it will be sold for approximately $570.
Costco features “Sale prices” on some of the furniture they sell.
These are typically the result of a supplier offering a special discount to Costco from the wholesale price.
Most “Sale prices” at furniture stores do not start with a supplier’s special discount. (This will be explained in detail in the next section of this article.)
Although Costco occasionally offers discounts for discontinued or slow-selling furniture, they offer far fewer of these than furniture stores.
How is Costco able to sell furniture so much cheaper than furniture stores?
Membership sales provide a major source of additional income.
Lower marketing, administrative, and operational costs.
Higher sales per sq. ft. of showroom space.
2)Warranty
Costco is the only furniture seller that allows its customers to return furniture for a full refund, with no questions asked.
Costco’s Risk-free 100% Satisfaction Guarantee.
The Risk-Free 100% Satisfaction Guarantee states that (with a few exceptions) Costco will refund the purchase price to you, if not completely satisfied.
There is no time limit on this guarantee.
The “few exceptions” noted in the 100% Satisfaction Guarantee are for items such as electronics, appliances, diamonds, cigarettes and alcohol.
There is no exception for furniture.
Furniture is completely covered under the 100% Satisfaction Guarantee.
Furniture suppliers who sell to Costco are expected to accept returns for 3 years.
The furniture isn’t actually returned to the manufacturer, but the cost is deducted from the next invoice.
After 3 years, Costco still accepts furniture returns, but does not bill the supplier.
There are no other furniture sellers that offer full refunds for returned furniture with no time limit and no questions asked.
For a detailed explanation of the tricks and traps found in furniture store warranties, read my article, What do Furniture Warranties Really Protect?
3) Costco’s limited product selection has advantages for its shoppers.
4) Costco does not “merchandise” its furniture.
“Merchandising” is a very common strategy in retail stores. It involves pricing specific products either higher or lower than the average for similar items purchased at the same cost.
There are dozens of different ways to “merchandise” furniture.
Some of them are extremely complex, but here is a very simple example:
The retailer buys a sofa from a manufacturer at a cost of $500.
The average retail selling price for other sofas purchased at a $500 cost is $1000.
The store buyer puts the sofa in his showroom with a price tag of $1500. The sofa may or may not actually sell at that price to any of the store’s customers.
The store announces a “Holiday Sale” and places a Sale Tag of $900 over the original $1500 price tag.
The sofa is now advertised to the public at 40% off.
From the store’s perspective, the price has been lowered only 10% from the average sell price.
For more information about buying furniture at Costco, see Clark.com’s article, 7 Things to Know About Buying Furniture at Costco.
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Hi Jeff, thanks for this write up. Are there any specific sectionals/sofas you’d recommend from Costco? I couldn’t find the foam density on their website – just that it says “plush” with pocket coils. I’m in the market for a sectional w/ chaise and am debating between DreamSofa (which seems to be one of your recent top picks since they are DTC and have higher quality, customizability, and longevity) and Costco (for the more immediate convenience and bang-for-your-buck value).
Sorry for the delayed response.
On Costco, when it describes the cushions as pocket coils, the foam padding above the coils is usually either 1.8 or 2.0.
Low priced pocket coil cushions are non-reversible. They are usually 6 inches thick. The coil springs take up 3″ of depth. There are 2 inches of foam padding (which are often two 1 inch layers of different densities.) A 1 inch polyester fiber topper is above that.
Since there isn’t much foam padding, pocket spring cushions are usually firmer than foam cushions.
In contrast, Dreamsofa’s top grade Plush coil spring cushions are reversible. The 4 inch Marshall unit coil springs (more expensive than pocket springs) are in the center surrounded by 2 inches of 2.5 density foam on each side and a 1 inch polyester topper.
Although mathematically that works out to 10 inches, the cushions are actually only 9 inches thick compared to the 6 inch thickness of Costco’s pocket coil cushions.
Dreamsofa’s Plush cushions last several years longer than pocket coil cushions and are far more comfortable.
Costco’s advantages are that many of their sectionals are much cheaper than Dreamsofa and they have the world’s best furniture warranty.
You can return all furniture for a full refund no matter how long you’ve owned it and no matter what condition it’s in. It doesn’t matter how the furniture was damaged or if it was damaged at all.
Among Costco’s sectionals, my favorite is the Henredon Murphy. The Thomasville sectionals usually have the pocketed coil cushions, although some may not. Abysson sometimes has 2.2 density foam cushions, which should last 5 to 7 years.
Occasionally there are other brands with pocketed coil cushions. Costco’s buyers seem to understand the value of cushions that don’t fall apart in 3 to 5 years, unlike most other retailers.
Most retailers (including Ashley, Bob’s, Pottery Barn) have only 1.8 density foam cushions. Crate and Barrel has two coil spring cushion collections (coil springs surrounded by 1.8 density foam) and Room & Board has one collection with similar coil spring cushions.
Dreamsofa has better quality frames, foundations, and cushions, and is usually lower priced than C&B, R&B, and Pottery Barn.
Thanks for the detailed reply Jeff. We are looking at Costco’s “Henredon Murphy Fabric Modular Sectional with Ottoman” and comparing with a Dream Sofa sectional. The things that are putting us off for Dream Sofa are the many reviews we found on different forums stating it could take anywhere from 8 weeks to as long as 16 weeks to get it delivered, and it can be a pain to work with them on getting details and things confirmed since it seems like there’s only one sales manager handling everyone’s questions. When you mentioned Henredon Murphy is your favorite at Costco were you referring to that one option? That’s all we see they offered. Just curious what makes this particular brand stand out to you. Thanks again for your insights it’s greatly appreciated.
I can’t find any correspondence under your email address or the name JJ.
There are 3 good reasons to shop for furniture at Costco:
1) Costco’s 100% Total Satisfaction Guarantee is the world’s best furniture warranty.
Furniture can be returned for a full refund for any reason, no matter how long you have owned the furniture.
No charge for return shipping! No restocking fees!
No other furniture sellers offer an unlimited warranty and return policy like this.
If your Costco furniture wears out or becomes uncomfortable, you’re not stuck with it. Costco furniture can be returned for a full refund with no questions asked.
2) Tremendous buying power. Costco gets the lowest possible prices from their suppliers.
Costco carries far fewer different models than other major furniture retailers. Each item is purchased in huge quantities, not just the Special advertised Sale items.
3) Far lower profit margins than most furniture sellers.
You won’t see 40% or 50% off Sales at Costco, but the smaller discounts that are available are real bargains, not deceptive marketing practices.
I don’t know where you’ve seen that it takes 8 to 16 weeks for Dreamsofa to deliver.
It’s possible my readers get priority service, but everyone has been receiving their furniture within 4 to 8 weeks after the order is placed.
If you order during a big holiday sale period it can take a little longer (up to 8 weeks), even though Dreamsofa doesn’t have any special discounts for holiday sales.
Occasionally, during a big Sale period they will offer Free White Glove delivery, but that is the only discount I’ve ever seen from them, other than the special 3% off that my Insider’s Guide readers get.
I always suggest that my readers contact Dreamsofa’s sales manager Ryan Giordano at ryan@dreamsofa.com.
Ryan almost always responds to my readers within 24 hours. He can save a lot of time and aggravation compared with trying to figure out everything on your own.
Also, there are dozens of custom options, configurations and groupings that Dreamsofa makes which are not shown on the website at all, including their modular Skye collection.
Ryan isn’t the only one working there. He has an entire staff of design consultants who work with individual customers to get the orders placed correctly.
Dreamsofa can customize anything. Orders that require extensive customization can get complex. But for most orders, it’s very simple. Just tell Ryan or one of the designers exactly what you want (even if it’s not shown on the website) and they will put the order together for you.
Also, I’m always here if questions or problems come up, but very few of my readers run into any problems.
Dreamsofa stands out because they are one of the very few direct-to-consumer furniture manufacturers that exists in the U.S.
Direct-To-Consumer manufacturers have tremendous advantages over both furniture stores and online furniture retailers.
Although hundreds of online furniture retailers claim to ship direct-to-consumer, that is very different from the small handful of actual direct-to-consumer furniture manufacturers.
Furniture dealers sell sofas and sectionals to their customers at approximately double the price they pay to manufacturers.
If a store or online retailer sells you a sectional for $4000 (on Sale from $4800), they purchased it from a manufacturer for less than $2000.
The manufacturer’s cost to make that sectional they sell to the retailer for $2000 is about $1600, with a $400 profit.
Direct-to-consumer manufacturers bypass the retailer and sell directly to you. They can spend $2400 (50% more) to make a much better quality sectional and then sell it directly to you for $3600 ($400 less than the retailer’s Sale price.)
The DTC manufacturer earns a $1200 profit (3X as much as they would make selling a lower quality couch to a retailer or wholesaler) and you get a much better quality sectional for a lower price. That is what Dreamsofa is doing!