The Anti-Store: How Price Club and Costco Made Shopping Harder [audio]
npr.org
npr.org
This is fascinating for me because I just shopped at Costco for the first time yesterday.
It was completely overwhelming. I was lost in a huge store with no signage. The large packages of merchandise meant my usual heuristics for whether something was a good price went out the window. Everything was utilitarian, streamlined, and huge.
Now I understand that it was deliberately designed this way.
Those heuristics aren't suitable for Costco.
Costco is structured differently. Most everything there is marked up to a very limited extent, no more than about 15%. It's a much lower markup than found in typical retail stores. Costco's profit actually comes mostly from the yearly membership fees, not from the markup on individual items.
The low markup means you need different heuristics rather than price.
E.g. mayonnaise. Costco stocks Hellman's (or I think it's Best Foods out west) brand. But they only stock the gallon size (or some large size, I don't do the mayo buying in our house). So what they're telling you is: "we're giving you a very competitive price on this brand of mayonnaise, provided that you need a gallon of it." So your heuristic should not be "is this a good price?" but rather "can I use 1 gallon of mayo before I get sick of looking at that jar in the fridge?".
I use mayo as an example because many years ago a co-worker was telling us the story of how she went to Costco and bought a gallon and then when she went home found that her husband also went there and bought a gallon. So now she had two gallons in the fridge, and that's a lot of mayo for someone without children!
I use Costco primarily for things that are expensive or difficult to find elsewhere.
For an example of expensive, the transcript mentions Ziploc bags. I buy those at Costco because at the normal supermarkets around me they cost about 2x or 3x as much. Yes the price difference is that large, and we use a lot of them.
For an example of difficult to find, Costco stocks a product called "Talking Rain". This is just carbonated water in 0.5 liter plastic bottles, with a trace amount of flavoring. No sugar, no artificial sweetener, no calories. IMO they are a great alternative to drinking plain bottled water on car trips, etc. But this product is hard to find in normal supermarkets. Costco sells it in cases of 30 bottles or so, for about $10.
Then the story goes into how Jet.com and Costco are cheaper than Amazon, gets a couple other types of digs in on Amazon, and proceeds to expound on the wonders of how Jet.com gives you 24¢ off for each box you buy that ships from the same warehouse.
It really made the whole thing come off like a native advertisement, to my ears.
I go to Costco because I know I will get something good for a decent price. At the grocery store, it will (probably) cost more and very likely be mediocre if not strikingly bad.
For example, the lowest grade of steak Costco stocks is Choice. Until recently, Costco was the only place in my town you could get choice ribeye for under $17/lb (Costco was $8 or 9 at the time.) Recently, the groceries have started stocking that grade - according to the packaging, but the meat is visibly inferior and it's still more expensive.
I'm not saying everything there is great, but I can buy a product off the shelf because it looks tasty and it will almost invariably be good.
Perspective