Costco to Accept Food Stamps in New York Stores

May 29th, 2009 · 23 Comments

I don’t know how many of you have been following the news stories about the push in New York City to get Costco to accept food stamps, but it’s been going for a while now.  If you didn’t know, Costco does not currently accept food stamps at any of its US locations.  Costco has cited various reasons for this in the past, such as lack of demand and the loss to efficiency, as well as the cost, of changing their processes and registers to account for limiting what items can be paid for with food stamps (only edible items, from what I understand, not even household goods like toilet paper). However, there has been so much media coverage about it in New York City (I think it has something to do with upcoming elections because one of the most vocal is a mayoral candidate) that I think they finally gave in to stop the bad press.  Of course, in an item in the New York Times, Costco cites the economic recession, but I think more likely it was political pressure and unfavorable media coverage to be honest.

In any case, next month Costco will begin a pilot program accepting food stamps at its two current New York City locations in Astoria, Queens and Sunset Park, Brooklyn.  If there is sufficient demand and no ill effects on efficiency, then Costco will continue the program and also accept food stamps at their new location, when it opens, in East Harlem.

I think the biggest argument I’ve heard (from members) against Costco taking food stamps is the cost of the membership fee.  Some current members have said that it would not be fair if Costco waived the membership fee and others also feel it would not be right if food stamps were used to pay for the membership fee.  Food stamps will not be able to be used to pay for the membership fee.  As I understand it, food stamps are given based on low income level, so the recipients do still have some discretionary funds that they can use to buy things like their $50 membership to Costco.  I know in my comparisons, I’ve definitely shown that Costco can be much cheaper than other grocery stores, so it might be in their best interest to pay the $50 to have access to the savings of Costco because they can easily recoup the fee and continue to save money throughout the year and on other types of purchases too.

Currently, Costco does not have plans to accept food stamps at any of their other US locations.  Although, I imagine if they start doing it permanently in the New York City stores, eventually they will be pressured to do it at all other US stores too.

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23 Responses so far ↓

  1. 1 Costco to Accept Food Stamps Nationally | Addicted To Costco! // 2009.10.29 at 8:39 am

    […] may remember a while back when I posted about Costco doing a test run of accepting food stamps in their Queens and Brooklyn locations.  Well, that went well enough for them to decide to roll it […]

  2. 2 Another single mom // 2009.07.31 at 10:10 am

    I too am shocked at the ignorance and hatred people have for those that have hit hard times.

    I am a single mother of one child, who is almost an adult. I am not addicted to any drugs and I don’t drink alcohol either. I worked two jobs for years to support my son and I until I had an injury that left me partially disabled. Now I am limited at what kind of work I can do, and I went back to school at a university to get a bachelor’s degree so that I could be more hirable – however when I graduated the economy and job market is terrible – I’ve been looking for work for 7 months and still nothing other than the Census Bureau for 5 weeks.

    Give me a job, and I WILL work!

    People, please look deeper to see each individual situation – don’t assume the worst of someone just because they are on food stamps.

    People should look deeper

  3. 3 WASSABIISANIDIOT // 2009.07.07 at 10:27 pm

    jewish people not just latinas and “lawandas” benefit from it too. btw, the same poor folks that benefit from food stamps are the same ones that pay for it through their taxes. we are all tax paying citizens so we all potentially can receive benefits if we go below the poverty level. you don’t need to have illegitimate children to have it even your “well off” wife with your alleged baby can get them too.

  4. 4 single mom // 2009.06.23 at 2:19 am

    Wow….I can not believe how much ignorance there is in this world. I am not a crack addict, or trailer park trash. And my children are not illegitimate . I am a single mom of 3, I hold a full time job and take care of my family. Unfortunately, we suffered a tragedy and Im doing whatever I can to make sure I keep a roof over my children’s head and food on their table. I have every right to shop at Costco. I split the membership with another family member. In the long run, it is cheaper for me to shop there than at my local supermarket.
    It is really heartbreaking that there are so many people out there who would look down on those less fortunate. What if it happened to you…..or a family member….you dont know what it is like to struggle until you do.
    Thank you Costco for allowing people like myself, to shop in your stores. It really does make a difference.

  5. 5 Dave // 2009.06.05 at 10:25 am

    “Taxpayers come first” just shouldn’t mean changing the agreement after it was agreed to IMO. That isn’t right and doing so will set back everyone’s willingness to trust the gov’t in future contract negotiations. i.e. in the long run, the people and government will lose with this strategy.

    I also think that maximum benefit is not always clearly financial. i.e. drawing people into a community is hard to correlate to any certain source because too many things are changing every day, but it certainly does happen and it certainly helps, but only some of which is immediately visible financially, especially over any short periods of measurement.

  6. 6 Clue // 2009.06.05 at 2:25 am

    It should be a great learning experience for taxpayers too. When our money is used to enhance corporations, We The People should reasonably expect to get maximum financial benefits from that money. And certainly expectations should be clearly stated to all sides and all sides should go into such deals knowing that the taxpayers come first.

  7. 7 Dave // 2009.06.04 at 4:10 pm

    Hi Clue, I think we’ll just have to agree to disagree. Your use of the term “welfare” shows exactly where you’re coming from. I prefer to think of the situation as NYC “paid” Costco as part of a contracted agreement to locate store(s) within given region(s). Given there was a contract, I think it is patently wrong to imply there is an expectation of strings being attached. Though with the US Gov’t changing the laws, after the fact, that apply to bondholders in Chrysler’s bankruptcy, I guess it shouldn’t come as too much of a surprise that NYC politicians would try the same thing.

    I think we both agree that this has been a learning experience for Costco. :-)

  8. 8 Clue // 2009.06.04 at 1:16 am

    The best way for Costco and other companies to avoid these kinds of of issues at all is simply not to take public money in the first place. Welfare for citizens comes with strings, I really don’t know why Corporate Welfare shouldn’t too.

    If a company has a truly viable business plan for a given location, then it should be able to succeed without taxpayer money. If not, it’s on their plate, not the taxpayers’. Then the companies will be far less beholden to taxpayers and politicians alike.

  9. 9 Kimberly // 2009.06.02 at 8:12 am

    I actually think that the for the majority of Costco shoppers this isn’t an issue one way or the other. However, I do think that people are concerned that Costco will still be able to operate efficiently and that all shoppers will still have to pay for the membership since that is how Costco is able to maintain low prices.

    Personally, my disgust is with the politicians that didn’t have a problem with Costco’s business model when they extended them a deal for a $55 million tax incentive to build and provide jobs in the area, but do now that they are up for elections or think that they can gain some political points by getting in on this.

  10. 10 Salina // 2009.06.02 at 7:47 am

    Wow.. I didn’t realize there were so many heartless people among myself at Costco…

    Anyone ever consider that maybe someone was laid off, and needs to stretch their $170 for a family of 4? Why is it automatically assumed that low-income equals low morals, bad behavior, etc. If we know what causes poverty, then lets fight the cause not the result. Only the “elite” should have access to money saving?

    It’s like the Nazis all over again… “THOSE people are the problem”. “Those people” are fellow human beings trying to save a buck after job loss / recession / accepting 55% pay cuts / etc. Oh, but that couldn’t be possible right? Because you only support American based business with your oodles of cash…

    Money certainly doesn’t mean your mother raised you right. Yeesh…

  11. 11 Kimberly // 2009.06.02 at 7:42 am

    Here’s another story covering this topic on Forbes.com, Costco Expands Food Stamp Program. There’s also a quote in the article from the Costco CFO, Richard Gallanti, on an investor call last week saying that the company has had “a lot of pressure, including political pressure in the city and state of New York” regarding the need to accept food stamps there.

  12. 12 Dave // 2009.06.01 at 2:22 pm

    Hi Clue, a well thought-out reply. :-) My thoughts:

    First, it is my understanding that Costco continues to, and certainly has historically, seek out real-estate that would be considered “cheap” but is within reasonable distance of their target market demographics. Cheap lots that are large enough for a Costco would certainly be more likely in a down-and-out neighborhood than in the heart of the city. I doubt they actively look to minimize the number of people within non-target demographics within “trip” distance to the store. Combine all that and I believe it is unavoidable that heavily populated regions like NY wouldn’t have a good number of food-stamp users who now find themselves within range of a Costco. I would agree that they went into this with “eyes open” in regards to food-stamp users if you could show that the NYC stores are NOT reaching the same demographic as other stores are.

    Second, how members pay IS relevant in terms of the costs involved to support those sales. Costco has said publicly that they do not believe it will be economical for them to setup all the systems required for accepting food stamps. i.e. the software involved, the replacement of cash register hardware, the time it takes to convert the “stamps / charge bills” to cash in their account, the extra time it takes to take the “stamps” in the first place, etc. I don’t know all the details but, given Costco’s great behavior on supporting customers in all other aspects of their business, I see no reason to doubt them when they say they don’t know how to make it work without them losing money. For example, I think you’d need ALOT of food-stamp users to make up for something that costs $10 million to implement.

    Third, coercion / force IS being applied to Costco. You do not need a lawsuit, guns, or military action to apply force. Public pressure in the form of news stories, blog postings, e-mail campaigns, etc. can all apply a GREAT deal of force to a business that relies heavily on its reputation. I don’t see how you can argue that politicians issuing press releases and/or raising the issue in campaign materials isn’t forcing Costco to do something. From what I’ve read, Costco has indeed been forced to put in place a trial of accepting food stamps.

  13. 13 Clue // 2009.05.31 at 11:26 pm

    Hi Dave, Costco intentionally chose to place each of these 3 NY stores in neighborhoods where it fully knew there were an unusually high concentration of food stamp recipients. Make of that what you will, but it’s highly doubtful this food stamp acceptance trial in those stores was not something suddenly dreamed last week up by the politicians to make Costco’s life hard. Clearly, it seems to have been in the works for quite awhile now, and for the East Harlem store I might go so far as to guess that was the case essentially from its inception.

    Costco makes the vast majority of its profits from membership fees. From a business perspective, its really a no lose proposition for them to potentially gain more members (and fees!) from amongst food stamp recipients. How those members pay is irrelevant after that. Government money aka: food stamps, spends just as good….sometimes better…than the credit card or cash fomr your own pocket.

    The only way this costs Costco anything at all is if A) taking the food stamps physically causes checkout slow downs (which it really shouldn’t, given that the “stamps” are actually plastic cards which act just like a debit card); or B) if the state’s stamp/card-connected bank is substantially slower in settling accounts up than the average debit card-connected bank is. (which it shouldn’t because states typically contract out those card services to the same large banks many other consumers also use). While there is certainly some potential for issues, most grocery retailers have overcome them to successfully accept and profit from food stamp-using shoppers.

    Beyond those issues, it’s all raw profit for Costco. It has actually probably been fool hearty for them not to accept them up to now. In this current economic climate, they come out looking understanding and helpful to cash-strapped consumers as well. Moreover, taxpayer’s money via food stamps may well be better spent at Costco than at other grocers. So except for those who have political, racial or socio-economic axes to grind…and they will grind them ad nauseum given any opportunity to do so anyway…who loses in this deal? They’re going with it because it makes good business sense for them to take public money to build these stores and to take it on an ongoing basis from food stamp shoppers.

    sjdud, NO ONE is forcing Costco to do anything. Are they being pressured? Sure! And so what? Again, the location of these stores and the food stamp issues of those areas are not news to Costco. Frankly, I believe that they are seeing this as simply bad business NOT to take them in these particular stores, and as an opportunity to to test what could be a potent, potential profit-making opportunity on a larger scale too. If Costco had refused and was being sued in court over it or what not, you’d perhaps have a valid argument. But they aren’t. They are simply doing whatever they think might draw more profits, period.

  14. 14 sjdude // 2009.05.31 at 2:05 pm

    Dear Clue: When food stamps have the phrase “This note is legal tender for all debts public and private.” printed on them, then Costco should accept them (because they must). Food stamps are not money and merchants should not have to accept them.

    I once was accosted by a couple of kids in Hawaii who tried to sell me a $10 food stamp for $5 in cash. I replied to them, “No thanks, I already paid for that.”

  15. 15 Dave // 2009.05.31 at 9:16 am

    Hi Clue, I don’t agree with your correlation regarding economic incentives and food stamps. Economic incentives, usually in the form of lower tax payments, are often provided by cities in order to make locating in a certain area more attractive to a business. From the city’s viewpoint, this is most often done in order to bring jobs to a community (in the case of Costco we’re talking 100+ jobs, all well above minimum wage), or to establish a certain demographic draw to an area. Very rarely, if ever, is it done to provide a service that otherwise wouldn’t be economically viable from the business’s perspective (which is what Costco seems to think about accepting food stamps.) And then what happens when the incentives go away? The business is now losing money and closes or relocates.

    Anyway, because of the multi-year nature of economic incentive agreements, there are definitely contracts drawn up between the parties which put down in writing a very thorough description of what each party is required to provide. Thus if food stamps weren’t mentioned in the contract, and from the news stories it definitely seems like they weren’t, than it seems hard to relate to the economic incentive agreement.

  16. 16 Clue // 2009.05.31 at 7:22 am

    All right, folks, let’s put away the ignorance and the vitriol and start with this instead:

    Costco is not being singled out, nor are they being politically pressured for no reason. The whole story (for isn’t their always more to the story!) actually goes like this: Costco has taken “economic incentives” aka: taxpayer’s money, in NY to open at least one new store there (the East Harlem location, which is located in part of a culturally and politically sensitive major redevelopment zone) , and possibly other locations as well.

    Is it really all that surprisingly that NY would like to see some big benefits from that public investment? In this case, they are wanting Costco to help NY’s food stamp recipients to get more for the taxpayers’ money when shopping for groceries with food stamps.

    Bottom line: Costco made a deal with the devil and the devil will always get his due!

    As a Costco shareholder (it’s the only individual stock I hold out outside of mutual funds) , I’ve personally not been happy with this whole NY “incentives” deal from the get-go. However, I have long trusted Costco Founder/CEO Jim Sinegal’s good judgment, both with regards to his general business sense and with the way that he chooses to act in a balanced humanitarian fashion, instead of simply always chasing the dollar signs. Ultimately, those qualities are what have made Costco what is today and have made it the place we love to shop….and frankly, those are also the very reasons why I hold stock in the company at all.

    If this truly doesn’t work and benefit the company and its customers, it won’t be expanded. But they’re on the hook to NY and that isn’t going to go away soon or easily. Let’s hope that Costco has learned an important lesson in civics and business with this public-private partnership deal.

  17. 17 Denise // 2009.05.29 at 9:16 pm

    I hope that Costco does NOT accept food stamps in other states as well. I teach in 2 inner city schools. I really makes me sick that people who CAN work are getting money from the government. THey start having babies at 12 and 13 and EXPECT the government to pay them. They get more $ than I do when it comes to buying groceries. You would be amazed at what amount they get for groceries. The thing is they buy everything the first of the month and don’t budget and then they don’t have any money after a couple of weeks. They are using MY TAX DOLLARS. Don’t even get me started! They are scamming OUR government and enjoying it! Their kids get 2 hot meals a day which I think is good but they don’t even eat half of it and then throw it away!!! They always want to know what they can get for free. If they can’t get it for free they STEAL it! They steal anything that is not locked and bolted down. If they allow food stamps into Costco; then Costco should have security because things WILL GET STOLEN!!! I wonder when I should send in my letter asking them NOT to accept food stamps!

  18. 18 Dave // 2009.05.29 at 6:31 pm

    While I don’t agree with @HotWasabiPeas comments, I do want to point out that nowhere did he/she mention race so it can’t really be called racism. The comments certainly were hateful to a certain group of people though!

    By the way, I think the cleanliness / “Nordstrom”-ness of the store is due to what the employees and business do, not so much to what the customers do. If the employees are motivated to work hard to keep the store clean and uncluttered, it will stay that way. I’ve certainly seen dirty, unkempt Nordstrom’s and super-clean, super-organized Walmarts — just to name two stores that have certain reputations.

  19. 19 Rickie M. // 2009.05.29 at 5:32 pm

    While I feel that many people using food stamps are defrauding the government (and therefore us as taxpayers), that is not true of all of them and to say what HotWasabiPeas said is just plain racist and hateful. It is sad that all of this arose most likely not out of concern for people on food stamps but more from some politician trying to get publicity and use it for their own gain. It seems to me that there should be no waiver of the membership fee for anyone, though. But anyway, I see this more as just being political games (we should direct our hatred to where it really belongs, the useless, selfish and greedy politicians we have in this country) rather than a sincere attempt at helping a category of people. Now if you think I am being too harsh on politicians, I apologize. You have to realize I am from California and we have the lowest of the low.

  20. 20 Enrique Ruiz // 2009.05.29 at 2:46 pm

    Calm down HotWasabiPeas!! Your post was not only Ignorant but showed that you have no class and no sense to rationalize things in a critically thoughtful way!

    Firstly I think that the food Stamp program at Costco will not work for two reasons:

    Firstly: People on Food stamps tend to shop closer to their homes in the corner market or their local grocery store, making a trek to Costco across town is just not gonna entice these people to shop at Costco no matter how good the prices are…
    Secondly: I know that when I go to Costco I tend to walk out of there with a cart full of items which I view as just the “basics” paper towels, milk, toiletries Etc. and end up spending 300.00 bucks! The difference is I can afford to spend all that money at once because I know I am buying in bulk and wont have to be back for another two weeks. However people on welfare REALLY have to scrimp and save and tend to spend a little each week because they feel better having some money in their pockets.

    Now these are just my observations and well only my opinion, but I honestly feel as does this blogs author that this was all politically motivated and Costco will soon end this program for lack of welfare customers.

  21. 21 Marco // 2009.05.29 at 11:57 am

    HotWasabiPeas my wife and I currently make well over 6 figures and we shop at Aldi’s all the time and I wouldnt consider myself nor my family “trash.” As a business owner, anything which will draw in more revenue while keeping the same efficiency is a no brainer.

  22. 22 Cynthia // 2009.05.29 at 11:50 am

    My 2 cents: I do not think that Costco is cheaper at all. It is easier for sure. If you are good at couponing and buying at sales, you can beat Costco’s price. There are very few things that are really cheap at Costco. I really wonder if the $50 membership is worth it, if you are using food stamps. It just does not make sense.

  23. 23 HotWasabiPeas // 2009.05.29 at 11:23 am

    OMG! The day my Costco starts accepting food stamps is the day I cancel my membership. Let the trash shop at Aldi’s! Costco is the “Nordstrom” of the wholesale club stores. I refuse to let crack-smoking, trailer park trash ruin my fabulous store. If you think the checkout lines are long now, imagine it when “Lawanda The Food Stamp Queen” shops with her 20 illegitimate children!

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