Costco gained a cult following by breaking every rule of retail
thehustle.co
thehustle.co
Amazon is where I go to buy books (and obscure one-off things that I can't buy from anywhere else). When buying from Amazon, I have to read the reviews, analyze them to figure out if the reviews are fake, read the return policy, research the seller, figure out the shipping dates etc. Given how broken the search is, I am not even sure if I am buying the best item in the category. Most of the time I end up reading wire-cutter reviews before buying from Amazon.
Amazon has billions of items at this point, and it is on me to figure out the right stuff that I should buy. I don't have that kind of time or patience to read hundreds of reviews before buying every single item.
Compared to this, Costco is a breeze. If they carry it, I just buy it assuming that it is going to be good quality. For me, the value they provide is curation of selection and filtering for quality. I am willing to pay the membership fee for this.
And this is anecdotally true for almost all of the families in my friends group in the Seattle area. I can see the perspective that if you don't have a family, the savings are probably not a big deal. And I also agree that there are people who don't want to drive to a store to buy stuff. But, I for one, am glad that Costco exists.
Costco usually have a descent selection of organic foods cheaper than you'll find almost anywhere else.
One area that I'm disappointed in is their computer selection. Although you may be getting additional support and a cheaper warranty, they simply don't refresh their hardware enough. Almost all their computers are lower end and still expensive compared to what you'll find on Amazon, especially if you price out the cost of building a desktop with much better and newer parts.
Right now I’ve only seen it in electronics but I don’t buy much food that way. Amazon fresh is a different thing (all sourced / sold by amazon) so probably not a problem. Likewise oddball stuff (a low volume brand of tea) is unlikely to be worth counterfeiting. But mass market goods definitely are and the baby food example, while not amazon, is an excellent cautionary tale.
I honestly miss being able to go to a unique store to buy things - that way you could look at what you were actually buying and (maybe!) find something better for what you're trying to do.
Maybe things with very distinctive tastes (Doritos, Coke, etc) you might have a point but outside that it's largely packaging.
More often than not you roll your eyes and use it anyway, because most of the time it works well enough, for a while at least.
Branded food is a lot less likely to get a pass on any of those. We have a strong sense of what it's supposed to look like, smell like, taste like, feel like; we might put up with less from a clearly marked store-brand copy, but a name brand that doesn't taste like it should sets off alarm bells. And exactly reproducing a commercial food product is hard.
Even then, until it doesn't work right, you wouldn't know.
There are some _very_ good looking counterfeits on amazon.
Right now, their policies may change in the future.
not exactly confidence inspiring ;-)
“Sold by Amazon.com” is not safe, because of potential commingling with stock identified as the same SKU from Fulfilled by Amazon sellers. If you know of a reliable non-FBA third-party seller, that's the safest thing
It's hard to beat the prices on bulk foods, though, which keeps me going back (and I like voting-with-dollars for well-run, customer-friendly stores). Perhaps it's just the bulk-commodities mindset from the food aisles leaking over into electronics that causes the above.
Here is link to the info I used:
https://gist.github.com/peteryates/b44b70d19ccd52f62d66cdd4b...
At some point I realized I did not even want to use the TV apps and did not care to maintain the PC with Kodi on it. I just switched to an AppleTV for everything and paid for MrMC (Kodi port for AppleTV that supports SMB/NFS mounting). So much simpler.
https://www.reddit.com/r/security/comments/bpjky4/worried_ab...
That's so the manufacturer doesn't upset other retailers that offer price-matching.
Costco doesn't sell the same Dyson vacuum as everywhere else -- instead of a "Total" they sell an "Absolute" or some other equally confusing nonsense.
The difference is they remove a single (non-motorized/cheap) attachment, and throw in two different ones and a couple other accoutrements. And sell it for $100 less.
The part that's not included in their package can be purchased retail from Dyson for less than $100.
Other retailers can't use this to put pressure on Dyson. Dyson doesn't look like they're overcharging everywhere else.
For example Ring security systems and cameras sold at Costco usually include additional sensors or things such as additional Ring chimes plus a free year of service.
Back in the day, I haven't bought one in years and can't speak to the current situation, printers sold at Costco almost always had unique model numbers because Costco insisted printer manufacturers include USB cables and full ink or toner cartridges instead of starter ones. So if HP sold a model 420 everywhere else they would sell a model 425 at Costco which included the cable and full ink cartridges but the printer itself was identical to the 420 sold elsewhere.
A couple of years ago I bought an electronic keyboard for my daughter. It had a different model number than the keyboard normally has but the keyboard itself is the same feature wise as sold other places but it came bundled with a stand and a couple of other accessories which would have been extra elsewhere.
https://news.ycombinator.com/item?id=21164014
You can get them on Ebay
https://www.ebay.com/sch/i.html?_nkw=sunbeam+radiant+control...
Whole Foods sells a lot of homeopathic garbage, though.
Multivitamins and probiotics are things that can help supplement nutrients and help with digestion for people that may not be getting enough in their daily meals. Some people choose to be Vegan, and it is nice when you can find options sold by Amazon that don't have a bunch of fillers in their supplements or meat products.
I recently had some issues and found that an organic garlic supplement and apple cider vinegar concentrate helped me feel better. Would I still go to the doctor in case of a medical emergency? Absolutely! However, there are a lot of great herbs and extracts out there that provide benefits to a persons health. As always, do your own research and know the risk.
Parent is not busting the chops of Whole Foods for carrying vitamins and supplements that arguably have some minor benefit for a subset of the population. No, parent is busting their chops for carrying magic water that, AFAICT, has zero supporting evidence.
In the worst case, at least your garlic supplement has garlic in it.
Kerrygold butter is cheaper at Walmart.
Organic chicken stock is cheaper at Whole Foods.
Organic diced tomatoes at Costco however are very well priced.
I have rarely found Costco items more expensive than other local stores, at least for my regular items.
I discount Trader Joe’s since they don’t carry branded items other than wine and beer.
And 2.50/bar at Walmart here
(What I actually buy now is the French cultured butter from trader Joe's though, which is v good)
They carry a variety of branded items including Kerrygold, Tilamook, Rouge et Noir (Bay Area cheese maker), those kringles, Spindrift, Columbus (lunchmeat), those organic herbs, and Tom's of Maine (hygiene). There's probably a few more.
On the bright side, the no-name brand butter is almost as good here, so it's not a total wash.
If you buy Better than Bouillon at Costco, you can get a pound of the stuff for about $6, which is double the quantity that you find at most other grocery stores.
I stopped buying liquid stock after I found that stuff, because it's so much cheaper.
I believe this is a general phenomenon and I read years ago about someone studying it in grocery stores. I'm not sure to what extent it is emergent vs. rationally thought out, but direct competitors tend to evolve to give you just enough good options to get you in the store, and as many bad deals as you are likely to go with just because you are in the store. Being uniformly better is not necessary to compete and therefore suboptimal.
In LA, Costco isn't always the cheapest on a per-unit basis, but they're always the cheapest on a per weight/per ounce basis.
For example, Kerrygold butter is $5 at the Ralphs, and the same size container is $8 at the nearest Whole Foods. It's $16 at Costco...but for 4x the amount of butter, making it cheaper than both Ralphs and Whole Foods if you can actually use all that butter. (There are no nearby Walmarts, and neither of the local Targets or Food4Less' sell Kerrygold.)
It’s not that bulk. Chips come in bigger bags - use a clip. Bread comes two loaves, freeze one. It’s very rare I see something but it’s an unusable quantity for a family of four.
Now that said, when I lived in a tiny apartment getting 36 rolls of toilet paper at once was annoying, but I made it work.
Also, frozen bread is an indignity that no one should have to suffer. Unless you are very very poor just pay the extra dollar and eat fresh bread.
Large families (4+ people) can easily get through Costco sized bread, milk, cereal, snacks, fruit, meat and veggies before it goes bad.
For a single or 2 person household, pretty much the only things from Costco that it doesn't make sense to buy are fresh produce, meat, and seafood, and bread.
Costco often as Prime beef that's ~$18/Lb. Whole Foods for USDA Prime is often $30+.
If you enjoy shopping around and comparing pricing, it's not the best option. But if you just want to buy a product and know you won't be ripped off, you can shop there and never have to think about it. That allows people who don't enjoy shopping to save a lot of time and mental energy.
I've run into plenty of counterexamples to the last claim.
Good example:
I bought two collapsible milk crates. They loaded all my groceries into them in the store.
When I got home and lifted the first crate out of the car, it had too much weight inside, the bottom fell out and two bottles of wine shattered.
I told them the story when returning the crate two weeks later, they waved me off when I said I had a pic, told me it wasn’t necessary, and refunded the wine without being prompted.
Trying to get wine refunded with most other retailer would probably require talking to a manager and making a scene.
Mostly there are aren't too many Global items, but in clothing particularly they can crowd out the rest, and seem to intentionally block the exact same item if it's not directly from Amazon UK. It can be quite frustrating, particularly as many are stuff UK used to carry. Though it's not among the main contributors to why I rarely use Amazon much at all any more.
Amazon without the Prime filter is just Ebay with much worse prices and UX.
The most annoying thing however is when the search contains an item, then the description on the item's dedicated page has text that specifically says that the item will ship to my address, but then during checkout I get an error message saying that the specific item can't be shipped after all. Feels like the description page text is determined willy-nilly and it's not until the checkout that they take into account the package size and weight.
However I sometimes do want to see what's available even without direct shipping to me, because if the item is cheap enough or rare enough, it will be worth using a reshipping service in whatever country Amazon does ship to.
Everything you mention is a hugely broken piece. Seems like they have lost their "customer is the queen" mentality a while ago...
https://www.fermier.co.jp/products/list.php?&mode=search&sea...
Of course, if our family ever gets another kid, doing the Costco thing might be unavoidable.
I knew what I wanted, so I didn't care about search. In fact, the item was only available on Amazon.
But the seller looked sketchy, so I had to convince myself to buy it from them on Amazon. After looking some more to see if there was anywhere else to buy, including on the manufacturer website, I resigned myself to buy it.
But then the total price started increasing while I was trying to check out, so I went away mad.
As far as reviews, I believe I have a reasonably foolproof system. I simply look at the worst reviews and see what kind of theme they have. If that is a clear pattern that is a design flaw, then I expect that is a warning I should pay attention to. Good reviews are basically irrelevant except if they describe the product to some extent. Unfortunately, with many consumer product categories on Amazon, I give up because all of the items have dealbreakers in the bad reviews, and sometimes it seems the products may not really be meaningfully different.
Yes, this is huge. They have pretty good buyers in many of their product categories. And while Costco does not always have the lowest price, they often do for many items. And, as you said, you have the benefit of usually being able to rely on them for having picked a set of products that more than "good enough" (and sometimes the best in their categories, too) so you don't have waste tons of time shopping around, reading reviews, and so forth.
It's one of the few businesses where I feel like they get most things right. It's always a good experience going in there and walking out with a cart full of things. I'm happy to see them be successful.
I usually buy frozen meats and things that don't expire quickly in bulk and then they last for months. I reserve vegetables and fruits for a local grocery store since their quality is good and those things tend to go fast.
But at Costco sometimes you get lucky with clothes too. They were overstocked on Puma sneakers in my exact size. Each pair was $10 and they are exactly the style I like (low cut / not flashy) so I bought 2 pairs of them. I legit walk 3-5 miles a day with one of the pairs and over a year later of walking on concrete they are still fully in tact (no holes, good looking enough to wear them out to dinner, etc.). It's mind boggling. I've never had a pair of sneakers last this long while still looking presentable after that much usage. The 2nd pair I bought is still brand new.
Those sneakers alone cover the cost of like 2-3 years worth of membership fees.
I live across the street from a grocery store. Over the last 30 years, I've seen it transformed from a slightly upscale supermarket to a glorified mini-market. After every remodeling or floor space expansion, the selection and service would get a little worse. Now that Albertsons bought all of the supermarkets in the area they've significantly cut the quality in the last bastions of why I would shop there at all -- produce and bakery. They do have a large enough alcohol section that I get to see shoplifters running out of the store all the time.
So now I'm driving ten miles to Costco to get quality ingredients when I live across the street from a supermarket. The clerks read their script, "Did you find everything you need?" and I respond, "Well, I didn't find X and Y." Their response: "Oh." And people wonder why they're all losing ground to big box stores.
In retail you can compete on service, selection, and/or prices. Fry's Electronics chose the last two, but were undercut on both by Amazon. Local supermarkets seem to have yielded on all three to Costco which is freaking crazy.
I can go buy produce from Safeway on a Sunday, and have it be molding by Wednesday. And not even stuff that goes bad quickly (like, peaches mid summer are amazing but they're very fresh/ripe and will go bad in a few days). Apples. Potatoes. Onions. Things that, when fresh, last for months if kept in a cool dark place.
Organic used to be things with more damage from insects and such, and have a shorter shelf life. Now it's food that costs more, so it has higher quality.
* QFC/Fred Meyer are owned by Kroger * Safeway/Albertsons are owned by a capital management company (Cerberus) * PCC, Red Apple, Town and Country, and Metro Market are local. * UNFI owns SuperValu, which is the main distributor for Whole Foods / IGA / possibly some others in the 'local' list.
The depressing part of this: most of grocery stores in the area are owned by 3 companies. And they've all turned into a complete garbage race to the bottom "what's the minimum quality we can sell and still consider food".
The wild seafood is great. Choice Beef is the same as anywhere and I have no complaints. Prime beef is a great option but I rarely buy it.
According to this article published last week, it’s opening a $450M poultry complex in Nebraska because suppliers aren’t providing enough small chickens.
https://www.cnn.com/2019/10/11/business/costco-5-dollar-chic...
Oh my gosh, I was in my local Fry's last week, and the store was in such bad shape.
It was mid-afternoon on a Saturday, and there were only a dozen cars in the parking lot. So I thought that was strange right off the bat.
We go in, and so many shelves were empty. I wanted to get a new PC power supply, and they had hardly any stock.
We went to a Microcenter later, and it was still a going concern. Chatted with a sales guy who actually seemed to know the products. I think it is the last decent computer store in the area.
I've been trying to limit how much I buy on Amazon because I don't want to worry about getting something different than I ordered (among other reasons), or have to worry about getting counterfeit stuff. So I'm basically down to Newegg, and while they're fairly prompt, I don't buy enough to make Premier worth it, so I don't have 2-day shipping, which makes it even less convenient.
I'm really quite sad that these stores seem to be going away.
No, no you don't. I noticed the same thing a few months ago and did a search then. I found this thread which I bookmarked. So this isn't a new phenomenon any more:
https://www.thelayoff.com/t/YbiPZw8
My experience with the store in Wilsonville Oregon matches those comments. QFT here:
The Wilsonville, Oregon store hasn't had stock for over 6 months. Even longer for desktops and laptops. Last month I visited and there were whole aisles empty. ENTIRE AISLES. This is no "remodel" or "change in inventory system". They're on their last legs.
Very sad. End of an era.
The one in Las Vegas has been going downhill for a while, but the last six months were really staggering. Last August I got a good deal on a Garmin dash cam there. Saturday I was in looking for some other stuff and passed by that section and they didn't have one dash cam anywhere. Not even one! In one isle of car stereo components I guess one enterprising employee had spread out single bags of the same components up and down the isle to fill it in, but the general state of the store was beyond pathetic. There were only Samsung TV's and monitors in the store - no other brand (probably because Samsung is paying them).
Oh how the mighty have fallen. Sadly Vegas doesn't have a Microcenter. There are a few local stores like outletpc.com - but those guys aren't open on the weekend.
As someone who worked retail for several years...
The cash register is literally the worst time and place to get help finding something. I often end up having to wait and hold up the line while waiting for someone on the floor to bring a product up, and god help us all if they grabbed the wrong thing and need to go back, holding up my line even more.
The cash register had the ability to suspend a transaction so I could start ringing up someone else while we waited, but doing so required a manager override, which involved a manager putting their key into the register and typing in their PIN code.
If you need help finding something, find someone on the floor. If you can't find someone on the floor, ask a cashier to find someone. But starting to check out and then asking for help finding something makes your cashier want to cry.
Yes, shoe companies generally want people to wear out their shoes quickly to sell more shoes, and they also change up the models offered so that when a serious runner sees their shoe is no longer going to be offered, they buy up as many as possible.
I understand what you’re saying about changing lines/models now and I do agree this happens. I experienced this recently when attempting to replace some 2017 Merells. Even Walmart does it with their cheap yard shoes, I suspect.
seriously now, the gas is at least 30 cents cheaper than anything around, I love the prime beef, organic chicken, cheese, eggs, mushrooms, macadamia nuts, vitamins and paper towels - it's top quality. on top of that stack the food court and the rotisserie chicken, travel + tires and the insane credit card benefits and you've got yourself a customer for life.
The new one has a seven year warranty, which is a combination of manufacture, Costco, Costco credit card, and Square Trade. Just can’t beat that anywhere else.
See this super interesting twitter thread:
https://twitter.com/investing_city/status/117997425777998233...
Furthermore, they offer a full guarantee. Don't like it and they will refund you.
How about I rephrase: "I felt lied to and taken advantage of, and I decided not to bother being a customer any longer, given that I shopped there very infrequently and despise high pressure sales tactics."
In the end, this is about my personal customer experience, which I've subjectively decided sucked enough to outweigh the utility I got from Costco membership. I can't stand pushy salespeople, and I basically argued with the cashier for several minutes telling him that I didn't want to upgrade. I said no at least five or six times.
I should have just stuck to my position, but after I was told that there was literally no way to lose money even if I never took any action to get a refund, I caved because I wanted to go home.
Membership fees also aren’t pure profit - there’s some overhead with them and other member services at a net negative that lower it below 100%.
It's on Twitter, what did you expect.
Anyone mind explaining how more than 100% is possible?
The backing analysis for this claim has none of Costco’s costs associated with membership, such that membership fees were pure profit. Yes, it's membership fees acocunt for revenue that is more than 100% of it's profit. It's merchandise sales account for revenue that is more than 100% of it's profit by a vastly wider margin, though.
The actual share of profits due to membership fees is a much more complicated question, but it's certainly not the full amount that treating it's membership fees as pure profit would suggest.
People get the Costco membership but barely go to it because Walmart or Kroger is closer.
Plus some companies buy loads of Costco membership for employee benefit.
That, plus the bulk savings, plus the membership benefits (an almost absurd return policy), plus a well curated inventory of mid-to-high quality items (plus savings of own-brand "Kirkland signature") means Costco shoppers buy a lot, they buy often, and they keep doing so for years and years and years.
It's highly fragile in the sense that it's so simple, but other competitors haven't made a huge dent in the same segment (Sam's Club, BJ's, etc.). Costco is doing some magic combination right and they'll be the study stuff of b-school grads for decades.
edit one other thing. Model #s for Costco are often unique to Costco. It also makes comparison shopping difficult. Try comparing a printer or TV model # at Costco to others on-line. Chances are it only exists at Costco, which means both exclusivity as well as an assumption of quality + price due to other in-store contextual buying. People think they're buying something that's both special and a good buy, which further validates their yearly membership dues.
High quality products. Less frequent shopping. Ethical practices.
Protip: for perishable items like produce, we have a "Costco buddy system" -- a few nearby friends who we can split bags of limes or onions with. Huge savings on produce this way.
Juice the limes; mince the onions in a cuisinart. Freeze in 1-4 cup restaurant style containers you can get at any restaurant supply store.
We also bbq 3 racks of ribs, 4 whole chickens, 2 3-pack chicken breasts (about a dozen breasts), 3 packs of chicken legs, and 12 pork chops at once one day every 3-4 months. Use a big spice mix from Costco. Everything is usually organic (pork is often not organic though...butcher told us there simply are not enough organic pork producers in the US.)
We sometimes invite friends and split the finished goods. Drink Costco craft beers and premium wine during prep and bbqing. (It helps to have 2 large grills).
Wrap dinner sized portions for your family size in foil (also sold at Costco of course) label with a sharpie and freeze. Dinners ready for months!
> Costco has found immense success by prioritizing the interests of its customers and employees over those of its shareholders.
I always hate articles that are premised on the above because the article always ends up contradicting this point. The truth is, Costco has been great for all of the above over the last 5yrs. I wish people would stop making it seem like the core of any successful business and what is taught in B Schools is screwing over everyone except yourself. It's just not how the world works and that's proven over and over again.
On the other hand, maximizing exploitation (treating workers with no respect and no humanity, paying them as little as possible and having my taxes cover the difference), maximizing profit (manipulating me and anyone using the platform as much as possible as to extract more) and peddling an avalanche of crappy and fake products... do not take my dollar-vote, Amazon.
One of their limiting factors for revenue per store is how quickly they can scan products at checkout. Higher ASP means more revenue for the same number of scans.
Costco's membership fee (minimum is $60) has several benefits that the media don't like to talk about -- because it's unpleasant to mention it. The membership fee charged by Costco helps keep the riff-raff out. Although the cheapest Costco membership at $60/year looks like a trivial amount to middle-income people, even that tiny cost is enough to be an unreachable Mt Everest for the poorest segments of society. Therefore, the membership fee acts as a socially acceptable way to keep out the undesirables.
Often, you'll see a thread on reddit showing photos of "Walmart shoppers" with tube tops and loose pants with butt cracks showing. That's not the type of clientele that shops at Costco. Walmart also has a huge problem with shoplifting and employee theft (what the retail industry calls "shrinkage") and therefore, there's often a police car outside to arrest somebody. Costco's membership requirement is the hurdle that helps them avoid all that.
Costco makes money on the membership fees itself, but they also save money by not having to deal with shrinkage because their higher-income clientele has less problems.
The above advantages only adds to the other positives such as simpler logistics of ~4000 SKUs at Costco vs 40000 SKUs at Walmart.
I remember when I joined a real cult. It cost $5k just to join, and another $5k to advance a level. So when you are down $20k and someone asks you to move to the Brazilian rainforest to live in a mud hut...well, you can't really say no. Remember: you can fly to Brazil, just don't enter the cave.
Most importantly, $60 cash upfront for a membership fee is nothing compared to all the cash you need to buy bulk items upfront. Is selling bulk items a way to keep "riff-raff" out?
It depends, but in many areas with extreme poverty and drug use there are businesses that break apart packages and sell single items, even when it is a violation of the law, such as single cigarettes
Costco in Ventura County has two stores: the one in the rich area in Simi Valley, and the one in a (relatively speaking) poor area in Oxnard. The Simi store is half empty, while the Oxnard store has one of the highest sales in the entire chain.
I actually don't know if the $60 keeps anyone out. I think it's just pure profit, and an inducement for customers to return so they "get what they pay for." People are terrible at thinking about sunk costs, you know.
I don’t know what this means. I assume that’s a regional difference.
I live in an area where there are a lot of people who have to walk or rely on an incredibly unreliable and slow bus system. They’re not going to make a trip 5+ miles to the nearest Costco, especially since they’d have to walk half a mile to/from the bus stop and try to manage those bulk goods along the way.
Not to mention the fact that our bus system is mostly hub and spoke, so the bus trip would take 2-3 hours each way.
(Please don’t argue exceptions, I’m being reductionist on purpose)
The rest of your post describes a region where I would expect that statement to be particularly true. Does everyone live conveniently near their work, or are your low-income jobs forgiving of your incredibly unreliable and slow bus system? Either of those would stand out more as a regional difference.
I did a cursory google on this and of the 5 random sources I looked at, they said the majority of shrinkage is customer shoplifting. Did you come across something reputable that concluded differently?
Left unchecked employee theft can scale. Think of a cashier skimming cash, or customer service person colluding with a friend to return junk. Both customer and employee theft require stoppage, but employees are tough because they are trusted by default.
Yes, bulk size prices can act as a secondary filter but an interesting mechanism is the membership cards are checked at the door and physically keep people out whereas bulk prices (even if low-income people don't buy them) don't accomplish the exact same effect. Membership gatekeeping at the entrance keeps the undesired shoppers away from the loss leaders of cheap $2 hotdogs & pizza, and taking advantage of the various free samples of food demonstrated at the aisles without buying anything. The door-based gatekeeping (as opposed to bulk prices gatekeeping) also minimizes customer shoplifting, etc.
There are also multiple levels of what "bulk" supply is. Is it restaurant-sized bulk (e.g. a gargantuan 4-gallon tub of mayonnaise) -- or a more modest family-sized type of bulk (e.g. 35-cans of Costco brand Kirkland soda for $7.99). Walmart sells 20-can pack of Coke for $16.00.
There's a lot of stuff that Costco sells that poor families could buy. Their bread is very cheap and one can buy 1 loaf for $5.00 instead of buying in bulk. Another person mentioned Costco gasoline is often the cheapest in town and poor people could save money refilling their car there. Their Kirkland clothes are really inexpensive. I just bought a 6-pack of Kirkland tshirts for $12.97. Walmart sells 6-pack FruitLoom for $16.00. (I think you'll agree 6 count of tshirts is not a bulk supply.) However, to save $3.00 on tshirts in that one transaction and similar subsequent ones, one has to plan ahead and spend $60 upfront. If you look at businesses for poor people like cash checking services, payday loans, and "Buy Here Pay Here" used-car lots, a lot of low-income people really can't scrape together $60 and pay it now for the purpose of saving more than $60 in the future. Their budgeting is so day-to-day (literally "paycheck-to-paycheck") that they have to shop at Walmart which is often more expensive than Costco.
EDIT add for clarity: when you say ", $60 cash upfront for a membership fee is nothing compared to all the cash you need to buy bulk items upfront", you're using a middle-class income lens. E.g. I'm also middle class and I spend $7000/year at Costco which dwarfs the $60 membership fee. Yes, poor people can't spend that same way. Instead, I'm saying that poor people can spend much less (say ~$500/year) and still get more than $60 savings back without tying up lots of cash in bulk purchases like you and I would do.
[0] https://old.reddit.com/r/Costco/comments/9bvjea/can_i_get_a_...
I've known people to go there as an after practice group activity to talk and eat incredibly cheap food. I wonder if they actually do lose money, their selection is so limited and the amount sold so high. I bet they make a small profit.
1. Poor people can group up to split both the membership fee and bulk items. Especially things like soap or razors with big discounts.
2. Costco also makes healthier stuff available at low cost that you might not match per ounce or whatever elsewhere. The Grow Right Orange Juice (2-pack), mix of rice/amaranyh/eyc (5-pack), and Go Organic Detergent are examples in our household. This will appeal to working-class and up mostly but some poor people still get some healthy stuff. Esp for kids or folks that are sick. Aldi is first choice, though, since remodel added tons of healthier stuff.
But this is untrue. Costco doesn't check membership at the door. That would block you from purchasing things that don't require membership.
They check membership at the cash register. Anyone and everyone is free to walk inside.
The 3 Costcos in my area all have staff checking for membership cards right at the door.
Yes, if one knows the "life hacks" such as the pharmacy hack, the liquor law hack, the "I'm picking up contact lenses at the eye center for my friend" hack, and lastly, the "I want to browse the store before I buy a membership" hack, the staff will let you through.
Apparently, all the above hacks are enough psychological friction and/or are not well-known that Costco has much less volume of problem shoppers than Walmart.
It's terrible evidence that the membership requirement provides any such value. Those checks are independent of the requirement -- as you acknowledge, the guards at the door are not even empowered to turn you away if you want to go in. (That said, I'll repeat that at my Costco, there is no check at the door.)
In a better world, Costco could admit that the "membership checks" are actually there to keep the tone of the store at a certain level, not to check membership. It'd be more convenient for everyone, and also more honest.
Every Costco I've been to does. at least 7+ locations across Oregon and Washington
Costco saves people hundreds to thousands of dollars a year both in time and price. Shopping there isn't exactly a luxury experience.
I'd guess the fact you need to enter with a photo ID and they keep records on everyone entering/leaving with their names and addresses attached is a much bigger factor at loss prevention.
The linked article says this isn't true.
"Unlike other discount chain customers, the majority of these cardholders are largely affluent ($100k+ income) and college-educated"
I skimmed some investor documents/earnings call transcripts and couldn't find much discussion of what members are like from Costco themselves, just third parties.
I'm just a bit skeptical of that factoid. It smells funny.
In 2017, the most recent year Costco has data for, the average household income of the Costco member was $92,236.
https://www.cnbc.com/2019/05/22/hooked-how-costco-turns-cust...
Regardless of your threshold for reliability, I would be much more interested in anything that demonstrates your claim that Costco is "a cross section of society from all income levels".
I don't know about you, but dropping 11% of my paycheck on a membership card would certainly be a barrier for me.
“The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money.
Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles.
But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that'd still be keeping his feet dry in ten years' time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.
This was the Captain Samuel Vimes 'Boots' theory of socioeconomic unfairness.”
I usually split some purchases with friends, like the Kirkland microwave popcorn. It will go bad before I can eat it all, but split it 3 or 4 ways, and it's not wasted.
Not impossible (just signup for a membership), but that's a barrier carders wouldn't want to bother with.
Especially since carders don't care about price, just time and risk.
And the Costco parking lot is the last place I would want to include in a getaway.
Also, never on a weekend. Monday tends to be the slowest day in retail.
Or when you go to leave the store after paying $200 and you have to wait in a long line for them to check the receipt.
They need a fast lane for people that just want to get stuff and go, and store clerks that fine people for blocking traffic.
The low prices and in some cases availability of certain products is the only reason I go.
MONSTROMART
"Where shopping is a baffling ordeal"
I wonder how immune it is to economic downturns/upturns?
Upturns: People shop there because they have more $$$ to spend.
I've heard that before, but I can't see how it could be. My back-of-an-envelope calculation: Let's say I spend $1000 per year (I'm estimating low). According to the article, Costco's average markup is 11%. So they make $99.10 profit on my $1000 of spending. Let's assume that the $60 membership is 100% profit. The total profit from me is $159.10. My membership fees would be only 37% profit (60/159.10 = .37). Do vast numbers of people pay for $60 or $120 memberships and spend much less than $1000?
Are you saying that the way they account for memberships doesn't make much accounting sense?
(they break it out, page 37 http://investor.costco.com/static-files/05c62fe6-6c09-4e16-8... )
In other words, you can say that any given vertical worth $Xbn of their revenue was their profit, if you are convinced that Costco actually models their pricing around that vertical section of their revenue. But in reality, everyone knows that the section they model around is membership fees - everything else is break even and the fees are profit.
No, they are selling to you for $1000 something that they bought for $900. But they still have to pay all their operating costs.
Their revenue in FY 2019 was $149.4bn (+ $3.4bn in membership fees) and the cost of merchandise was $132.bn. Their gross margin is 11% but then you have $15bn in "Selling, General and Administrative" expenses.
Costco performs a credit check when you sign up for a membership. It requires a state ID to sign up for a membership. Like voter ID requirements, this has impacts on the people who shop there. Previously, they also tied the membership to qualifying for their partnered credit card. It is true that you can pay with cash. Ultimately, I'm trying to explain why Costco shoppers look the way they do. It may affect the bottom line to put up these obstacles, because people who meet these criteria can and do spend more.
Walmart only relies ownership of a car to target a richer shopper. Whole Foods and Trader Joe’s, often used for single people or non car owners, locates its stores nonetheless in certain wealthier urban locations. Loyalty cards do not achieve these ends.
The knock on effects are immense. Grocery stores, for normal people, are as much about the discounts as seeing your own kind there. That’s not just economic stratification, it’s also the ethnic groceries, some of them really big, expensive item enterprises (like H Mart).
These are experiences Amazon cannot provide. You don’t get to see the other Amazon shoppers, and you don’t get a sense of whether Amazon is a “cheap” or “expensive” store. And yet this is precisely an experience people want, just as psychologically important as 1 day shipping. Costco, like Amazon, occupies a valuable psychological niche. The question is if there exist any viable retail that does not.
I don't follow this logic at all. They take Amex and debit cards in the UK - so no Mastercard/Visa credit cards but debits are fine. They also take cash.
So, why do you need to be able to qualify for an Amex (the only CC they accept) to shop there? Everyone has a debit card. They're not doing a credit check when you sign up as a member - they don't extend you a line of credit when you shop in their stores as a consumer.
This is not true.
Until a few years ago, Costco didn't even take credit cards. They had an in-store ATM if you needed cash.
https://www.techradar.com/news/what-credit-cards-does-costco...
Now they take any Visa card, and have converted Costco Amex cards to Costco Citi VISA cards.
The membership counter/food court and exit are all next to each other at most Costco’s.
Couple that with the inconvenience of having to go to a second location for normal shopping needs, and one that is usually a jam packed on parking and checkout lines... It just wasn't worth it for the small handful of things that were a good deal.
Same for salmon and halibut in Anchorage, Alaska.
Regardless, it's popularity in this way makes it a negative UX for me. It can be jam packed at the local supermarket but I can scan items as I shop and do self-checkout and skip the 20 minute lines.
It's a similar story for organic produce, eggs, and so on. Items like cheese, dried fruit and nuts are about half the price of comparable quality elsewhere. And then there's items like olive oil where Costco sells at a great price with the added bonus that you get actual olive oil and not some blend of unknown origin.
But if you live near enough to a Costco and own a car, the real killer-app is their gasoline. In my area, it is 50-60 cents a gallon cheaper than gas stations. From this alone my membership would more than pay for itself even if I never stepped inside the store.
Just clone the magstripe on a friend's Costco card for the gas ;)
What I don't understand is why no gas station other than Costco has hoses that can reach around a vehicle.
(My next-best card in terms of rebate on gas is 1.5%, so assuming an additional 2.5% from Costco, I need to buy $2400 in gas to have the full membership covered by just the gas rebate - not even counting the additional savings from the lower price of gas).
Regular gas stations rarely have a line of people waiting for a pump. Costco often does. Managing that queue becomes much easier if any car in line can take any open gas pump, without worrying about which side the tank door is on (or messing with the flow of traffic by trying to back into a spot).
I can understand the rareness part, but some gas stations are known for being discounters, but I still haven't seen them use it, despite their traffic jams.
I guess it's somewhat expensive if you're buying it for this purpose alone, I'm sure you could find a cheaper used one on ebay.
For the digital card to work for gas, Costco would have to install QR code scanners on gas pumps.
are these exactly the same products or are you comparing equivalents ?
Costco is in a league of their own in Canada (and probably Iceland where they have a location). ex-USA, you just don't have deep-discounters.
With such massive turnover, is that everything is fresh at Costco, and it's not because they're throwing anything away. Their stock probably sells out daily.
And if you're not happy with them, you know you can return it a month later with a smile.
They sell cheese at almost-US prices! It's insane!
In Hawaii (cost) and Puerto Rico (cost and quality) it is pretty amazing, too. In Puerto Rico there is basically no other good supermarket; the next best alternatives are a couple horrible local chains and Walmart/Sams Club/CVS/Walgreens.
Autoslash will do it automatically for you when a lower price is found. I’ve had it save me quite.
I have no affiliation with Autoslash, just found it useful.
Yes you do have to be very careful with costco, because you end up just buying way too much. I have specific lists that I go in, and try not to veer from it at all.
But saying most are "barely cheaper" I don't agree with at all. Almost every item I buy at costco is SIGNIFICANTLY cheaper. Sometimes half the price. Cheerios, bread, chocolate chips, some fruits, most vegetables, cheeses..
Shopping exclusively at costco will just get you into trouble yes- but there are significant savings if you are careful about it. And the quality is generally very high and reliable.
"When Costco comes across a product it likes, it often spends months working closely with the vendor and its factories to both reduce the price of an item and amp up its quality. In the 2012 CNBC doc “Costco Craze,” a Costco buyer related one tale about a toy he found that retailed for $100. The company had the option of buying the unit for $50 wholesale and selling it for around $60 — but this wasn’t good enough. Over a period of months, Costco ended up working with the vendor and its factory to redesign the toy from the ground up, analyzing every part of the process for ways to cut costs. In the end, Costco got the vendor to reduce the price by 50%, and sold it for $30."
You'd never think that a retailer could or would do that, but Costco apparently does!
BTW, if you’re a member and haven’t tried the Kirkland (Costco’s house brand) wines, prepare to taste an $8 bottle of wine that puts every $100 bottle you’ve ever tasted to shame.
That is not true atleast in Melbourne (Australia), comparing the prices with other super market chains, Costco is a bit more expensive.
The Kirkland Sangria is however awful.
> prepare to taste an $8 bottle of wine that puts every $100 bottle you’ve ever tasted to shame.
Are you sure that Costco is in the "absolutely highest quality" category? Rather, I'd suggest they're in the "a little nicer than average, and definitely not garbage" category that most regular folks are looking for.
For example, our largest Costco purchase (besides our mortgage - btw, Costco has great mortgage rates!) has been our washer and dryer. The units are certainly not "highest quality in category" but they are pretty nice. Similarly, Costco wine is good, but I have had $100 bottles that were better.
Contrast to the traditional supermarket: throw spaghetti at the consumer and see what sticks.
We have a channel conflict.
They happen in other ways as well.
From wikipedia:
"It was founded by 800 U.S. Post Office employees who wanted to leverage their buying power by purchasing goods directly from wholesalers, and eliminate the additional markup of a retail store"
The Costco Craze - Inside the Warehouse Giant
https://www.cnbc.com/the-costco-craze-inside-the-warehouse-g...
My key takeaways: - Costco orders at scale - any suppliers they work with has to be able to supply millions of items per week - Costco procurement works with suppliers to optimize the suppliers' process for Costco (it's a conversation, not an order) - Costco really thinks about their members' preferences. When they procure at such quantity, they don't want to be stuck with it!
Another thing I did not know: Costco has EVERY purchase each member has made since 2009!
The fact that they will honor (almost) any return of their item since then is mind-blowing. If you want to return something before 2009, just show them the receipt. The only thing they won't let you return is electronics past 90 days (dammit! :-) )
I used to love some canned mushrooms they had, then they just stopped carrying them. I loved calzones they stopped carrying 5 years ago. Sometimes you can get Tide or kombucha there, sometimes not. Kirkland products can be great, then they suddenly change them. And nothing makes my blood boil like a line to leave the store for the receipt check while you have to fight off the Lennox, phone, and solar sales people.
At least my neighborhood King Soopers is consistent with stocking products and keeping their store brands the same.
Much easier than keeping my personal printer running properly.
Thats why all the giant size packages. They lock in the small business market or nonprofits, because its far easier to buy in bulk there than navigate a grocery store.
For large ticket items, I now buy from Costco with their Citi credit card, which has 2 extra years for extended warranty on top of the manufacturer warranty.
I guess the closest comparable thing to Costco in Germany would be something like Metro or Selgros.
Tho access to those isn't "gated" with a membership fee, but with a business license, as their target audience are actually other businesses and not individual customers.
Where do US American businesses go to buy their wholesale supplies?
There are still many other strictly business-serving wholesalers, too, of course, often specialized by vertical - e.g. Sysco is specialized in foodservice.
Edit: Or alternatively, are Costco sales negotiated ahead of time with the product makers so the makers are taking the cut and Costco's margins remain?
Diapers, paper towels, ziplock bags, dish soap are some of the other things I buy there.
The organic chicken, pork tenderloin, and baby back ribs are solid deals compared to other places I visit.
For smaller stuff like fruit, garlic, onions I stick with Trader Joes ( Aldi )
Bravo to them for doing it!
Good video:
Great store, otherwise.
Avoids the folks who flock around the free handouts at lunchtime. Parking is easy. But you can’t wait even 1/2 hour past opening. Get in right as it opens.
But you have to consider the packaging that you don't see at other retailers: it might come to them in the same packaging, but it's discarded before you see it.
While bigger packages could have thicker packaging, that's not always true: packaging that protects from the outside world won't be any different. A foil layer is a foil layer.
- Buy a ton of small items, each with their own wasteful packaging? I buy 10lb bags of frozen chicken at Costco, and it has far less packaging than buying individual units. Same with peanut butter. Vegetables. Oil.
- Spend two hours a week hopping back and forth to grocery stores? What if I want to make 1-2 runs to Costco per month so I can cook food in bulk?
- Carefully hunt for which items at the grocery store are on sale, and which are heavily marked up? At Costco I am guaranteed that the price is at least competitive. I don't have to figure out whether the grocery-store vanilla bottle is competitive, or 3x wholesale price.
I mean, if you have time to spend, feel free to hop around speciality grocery stores 3 times a week, but I personally have no interest in that. I have better things to do. So maybe tone down the snobbery and acknowledge that other people have other priorities.
Right, you know that Costco is taking making a 10% margin across the board. You'll never be able to exploit a loss-leader and fill your cart with below-cost X, but you're never getting overly hosed either.
If you're a well-to-do immigrant that hasn't built up a mind-map of "Buy A at X, buy B at Y, and only buy C when on-sale at Z", Costco is a low-cognitive load solution.
why is that?