
Costco gained a cult following by breaking every rule of retail - yarapavan
https://thehustle.co/costco-membership-economics/
======
niyazpk
The fact that I can trust Costco to have good quality products with low prices
and great return policy means that I never have to buy day-to-day items from
Amazon.

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.

~~~
projektfu
I disagree here. Costco is now often trading on its reputation for getting you
a bulk discount, but when you compare them to Aldi, or even to a larger
supermarket, you're often getting things in large quantity for the same price
or more than you'd pay in small quantity. This is especially true for things
like cheese. Meanwhile, you're giving up the opportunity to get a superior
product. In the cheese example, Costco stocks Belgioioso mozzarella, which to
me is about store-brand quality. Popular because it doesn't taste like cheese.
For a decent price, you can buy much better mozzarella which has some flavor.
And you don't have to buy 3 lbs at a time.

~~~
simonsarris
I was doing price comparison just yesterday and was pretty disappointed in
what I found for Costco prices. I thought they were better.

Kerrygold butter is cheaper at Walmart.

Organic chicken stock is cheaper at _Whole Foods_.

Organic diced tomatoes at Costco however are very well priced.

~~~
sureshv
Since this is an item I get regularly - it’s $9 for a 4-pack of Kerrygold
butter at the Mountain View Costco ($2.25/ 8oz bar). Same 8oz butter is almost
double at Safeway or Whole Foods. The local Walmart is $2.83 per bar.

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.

~~~
inferiorhuman
_I discount Trader Joe’s since they don’t carry branded items other than wine
and beer._

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.

~~~
fiter
It's funny that you mention Rouge et Noir; I think they've been re-branded to
"Marin French Cheese". I miss the old name.

------
nickjj
Cult following is a good choice of words.

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.

~~~
labster
Costco has better quality meat than the grocery stores -- although I don't
find their prime grade meats to be significantly better than the choice cuts.
The vegetables and fruits are high quality too, but I live with enough people
to make it worthwhile.

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.

~~~
wil421
I disagree about the meat. Publix has much better quality chicken and pork,
especially their Greenwise brand. Costco chicken is freakishly big, even
compared to Tyson or Purdue at Kroger. I used to find weird spots on the
chicken breast and thighs I haven’t seen elsewhere. The chicken is tougher as
well.

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.

~~~
kunai
Publix is a southeastern U.S. exclusive. I pity all the smug Bay Area folk who
will never get to experience how wonderful this little grocery chain is.

~~~
wil421
Publix is opening a Greenwise Market store next to me. Can’t wait to see all
the good stuff.

------
camhenlin
I love love love Costco. Just an anecdote, but I reinforced my love for Costco
yesterday in fact. Back in February, I bought new flooring for my entire house
at Costco. Since I was doing my entire house, I over purchased to ensure that
I wouldn’t run out. I work full time so it took my a long time to finish
installing the flooring, about 8 months. Yesterday I returned all the packages
of flooring I didn’t use to Costco. The person working at the return counter
didn’t even bat an eye at the fact I’d bought the flooring so long ago, she
just handed me a wad of cash back. Absolutely great return policy. It would
have been impossible to do something like that at Lowes or Home Depot, both of
those stores give you a hard time after 90 days. I try to do all of my
shopping at Costco and this is why. They just treat customers so, so well.

~~~
madengr
Bought a TV that died at 5 years. Costco had a 5 year warranty, so they gave
me cash back, which I promptly bought another.

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.

------
harryh
Fun fact about Costco. More than 100% of its profits come from membership
fees. The actual selling of goods loses a small amount of money.

See this super interesting twitter thread:

[https://twitter.com/investing_city/status/117997425777998233...](https://twitter.com/investing_city/status/1179974257779982336)

~~~
gbrown
No wonder I got such a pushy hard sell to upgrade. I was flat out promised
that the upgrade couldn't possibly cost me more, even if I didn't shop very
often and never took any special action. This was a lie, I lost around $100,
and I stopped shopping at Costco.

~~~
jib
The upgraded membership is 60usd more than the normal, gives you 2% back on
purchases, and they will refund it to you if you ask, so not sure how you
could lose 100 on that.

~~~
gbrown
Maybe it was 60. I literally asked the cashier: "I will not remember to
request a refund. Will it be automatically credited to me if I do not meet the
threshold?", and they told me yes.

------
lpolovets
For anyone interested in how Costco works as a business, there was an
interesting 150-slide deck circulated last year that had some good insights
and observations about Costco's model.
[https://www.dropbox.com/s/7hohqj3rl2uv43p/COSTCO%20Deck.pdf?...](https://www.dropbox.com/s/7hohqj3rl2uv43p/COSTCO%20Deck.pdf?dl=0)

~~~
jdsalaro
This deck is very interesting, assuming the data it's based on is legitimate.
I didn't expect that to be the extent to which they outperform their
competitors.

------
bane
One thing not mentioned in many of the comments is that Costco also rotates
inventory based on season. A huge percentage of the inventory will change
depending on what time of year it is and that can lead to both a kind of
scarcity buying ("who knows when they'll have these pants again?") and novelty
("I wonder what they have this week?").

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.

------
nobody_nowhere
I love Costco as a customer and a shareholder.

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.

~~~
Pfhreak
They treat their workers well. Or at least they did when I worked there 15
years ago. I was paid like $13/hr, time and a half on Sundays, 401k, health
benefits, and regular raises. Which is pretty fantastic for someone making
pizzas and slinging hotdogs.

~~~
xenihn
They still do. Trader Joes does too. I love both stores, and do most of my
shopping between the two. It's nice to know that 99% of the retail people I
interact with are being treated well by their employers.

------
creddit
FTA:

> 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.

------
andrei_says_
Well-paid workers, a limit on markup and careful curation of quality products
get my dollar-vote every time. Thank you, Costco!

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.

------
ohazi
Costco's average selling price is also quite high. Very few items sell for
less than ~$10, and anything that would normally go for significantly less
gets sold in Costco-sized bundles to keep the unit price up.

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.

------
jasode
I don't remember where I read the following analysis (maybe from someone here
on HN?) but it goes something like this...

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.

~~~
lotsofpulp
Sounds like an erroneous analysis to me. The cost of a $60 membership pales in
comparison to the cost of the space needed to store bulk items, especially
refrigerated, and the cost of travel to and from a Costco, which are not
located in the poorest areas.

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?

~~~
jasode
_> Is selling bulk items a way to keep "riff-raff" out?_

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.

~~~
sunstone
Slight clarification, I'm pretty sure you can eat at the hotdog bar without a
membership.

~~~
Scoundreller
In a lot of places, their pharmacy isn't allowed to require a membership, so
just say that and they'll let you in the store.

~~~
jnellis
It's a federal law, so its all places (in America.)

------
mpalczewski
I find going to Costco in an urban area really painful. Lines just for parking
3 blocks away. Crowds of pushy unpleasant people and lines. If you value your
time and well being, it ends up not so much of a bargain. Now using Instacart
to get Costco delivered, love it.

~~~
tyoma
The Costco shopping experience is atrocious. Huge lines, people running over
you with giant carts, completely unmarked aisles and you have to run around
trying to find an employee to ask where something is. And then there is the
checkout gauntlet where a funnel of grumpy people has receipts checked by just
one or two checkers.

The low prices and in some cases availability of certain products is the only
reason I go.

~~~
projektfu
I've never seen marked aisles aside from the number. I always assumed it's
because Costco wants you to visit every aisle.

~~~
rficcaglia
Agree. They also move items around. So you can’t just zoom to the one item you
need, you have to go hunt.

------
Mathnerd314
The story seems to be more about the mythos of Costco than its actual business
practices. Sure they work with suppliers to reduce costs but so do all their
competitors like Walmart and Trader Joe's. And they pay better wages but they
also have fewer employees per store. And at this point most stores have worked
around the membership issue by using loyalty cards and digital discounts.

~~~
doctorpangloss
Most stores didn’t really work around anything.

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.

~~~
IAmGraydon
I’m not sure what you’re talking about. A Costco membership is $60 and you can
pay in cash. There’s no credit card needed. You don’t have to sign up for
their credit card either, and it’s not really even pushed when you sign up for
membership. What gave you the impression that you have to qualify for a credit
card to shop there?

~~~
karthikb
Until 2016, Costco and Amex had an exclusive partnership. You could pay either
in cash or with Amex, usually the Costco Amex tied to your membership card.

Now they take any Visa card, and have converted Costco Amex cards to Costco
Citi VISA cards.

~~~
lotsofpulp
The AmEx agreement was exclusive to credit cards, you could also pay with any
debit card.

~~~
karthikb
Oops you’re right - Amex, cash, or debit.

------
ineedasername
I quit Costco after I realized most items I needed from them were generally
about the same or only pennies cheaper per unit, sometimes actually more
expensive, and almost always cheaper when on sale at a normal supermarket. For
example ground beef was usually about $3/lb, the same as my local supermarket
has on sale every other week for the same quality/lean level.

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.

~~~
skookum
I'm sure it varies from area to area but here in the Seattle area I've found
that as compared to the standard supermarkets (meaning Safeway, QFC, Fred
Meyer), Costco sells prime grade beef at the same price as supermarkets sell
choice grade and organic chicken at the same price as supermarkets sell
conventional. But what really gives Costco's meat department the edge is that
their meat looks so much better/fresher than the supermarkets.

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.

~~~
Scoundreller
> But if you live near enough to a Costco and own a car, the real killer-app
> is their gasoline. From this alone my membership

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.

~~~
evil-olive
> What I don't understand is why no gas station other than Costco has hoses
> that can reach around a vehicle.

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).

~~~
Scoundreller
> Regular gas stations rarely have a line of people waiting for a pump.

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.

------
peter_d_sherman
Excerpt:

"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!

------
IAmGraydon
Costco really has an interesting business model, but the part that really
hooks me is the quality/price ratio you get there. If you buy an item at
Costco, you can absolutely bet it’s going to be the highest quality item in
whatever category you’re shopping. You can also bet it’s significantly more
inexpensive than anywhere else you can get it. I spend around $10,000 at
Costco every year and every time I walk out I feel like I got a great deal.

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.

~~~
hunterloftis
> If you buy an item at Costco, you can absolutely bet it’s going to be the
> highest quality item in whatever category you’re shopping.

> 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.

------
dev_dull
Both Costco and Trader Joe’s have a winning recipe: keep a limited amount of
any one item, and do tests to see what that best item is. I trust that the
tortilla chips at Costco are going to be pretty good even if I haven’t had
them yet. Same with TJ.

Contrast to the traditional supermarket: throw spaghetti at the consumer and
see what sticks.

------
tdburn
For our honeymoon we booked through Costco travel to Cancun and it was a great
value, and one of the benefits was knowing they had our back if there were any
flight cancellation/delays. My wife had used them a year previous to Hawaii
which had a flight cancellation. The airline wouldn’t make her whole on the
hotels/excursions. But Costco went to bat and got all of her money back and
some.

------
sunstone
One of Costco's biggest innovations was figuring out how to manage channel
conflict for its everyday products.

~~~
neonate
What's channel conflict?

~~~
_jal
I make widgets, and contract with you to sell my widgets exclusively in some
geographic region. Then I start selling my widgets on my website, and people
from your region start buying things via my site.

We have a channel conflict.

They happen in other ways as well.

~~~
Drdrdrq
Thx. So how does Costco manage this?

~~~
phamilton
Often by selling Costco specific versions of things. For example, Google Wifi
is normally available in 1 packs and 3 packs, but Costco offers a 4 pack. It's
literally just a 1 pack and 3 pack put into a bigger box, but it sells for
$299 vs the 3 pack at $259.

~~~
foogazi
Yes this specifically I bought the 4 pack and it was weird that it was
packaged 3 & 1

------
isignal
It appears the origin of the idea was in a non-profit consumer organization
called FedCo -
[https://en.wikipedia.org/wiki/Fedco](https://en.wikipedia.org/wiki/Fedco).
This company then inspired Sol Price to found the modern day bulk retail
model.

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"

------
nilkn
The one notable experience I have with Costco is with buying a Samsung TV. The
Samsung warranty only lasted a year. Costco extended it free of charge to two
years. They offered in-home delivery for a great price, and on the eve of the
two year mark when the TV developed vertical banding they picked it up from
inside our home for no charge and gave me a full refund -- which I then
invested in a new TV from Costco.

------
acl777
Great documentary I saw on CNBC about Costco:

The Costco Craze - Inside the Warehouse Giant

[https://www.cnbc.com/the-costco-craze-inside-the-
warehouse-g...](https://www.cnbc.com/the-costco-craze-inside-the-warehouse-
giant/)

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! :-) )

~~~
rantwasp
you used to be able to return electronics (even after years). people abused it

------
planteen
I don't understand all the love for Costco here. I recently rejoined and now
remember why I canceled in the first place. I recently had a baby, so I joined
for the diapers. Well, on my first trip, I learned they don't carry P or N
sizes. Now that my baby is big enough for size 1, of course they are out of
Huggies in size 1. But they have the Kirkland brand, which is a crapshoot in
general.

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.

~~~
thedailymail
Receipt checks are an instakill on any affinity I might have for a business.
Once the items are paid for and past the register, I find it despicable that
anyone feels the right to inspect my belongings. (I realize it's in the
membership contract, and it is the reason I quit using Costco.)

~~~
1123581321
I feel the same way; I know it’s a bit irrational but it’s really annoying and
leads me to minimize trips. I especially don’t like that they will insist it
has nothing to do with LP and is only to make sure shoppers saved as much as
they were supposed to; I resent being lied to so blatantly. Sadly, this
practice will continue to push the transition to online ordering.

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macintux
When I regularly printed my favorite photos in large sizes, there was a Costco
in my area well-known in the photography community for having a well-
calibrated printer and knowledgeable staff, and their large sizes were crazy
cheap (I think perhaps $3 for a quality 12x18 photo).

Much easier than keeping my personal printer running properly.

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Noos
No, costco does well because warehouse clubs target B2B markets as well as
consumers. I used to work at a warehouse club, and generally people would come
in to stock food banks, buy for restaurants, supply their vending machine
routes and halfway houses, and more.

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.

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myrandomcomment
My wife will not allow me to go to Costco unsupervised. :)

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ww520
Costco's return policy is amazing. I bought a bidet once and after three years
the thing stopped working. The warranty had long passed. On a whim I took it
back to Costco and they accepted the return. I kind of felt ashamed to return
a used toilet item.

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.

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freeflight
As a German, the way Costco operates is really interesting.

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?

~~~
pjlegato
Costco was started as a business supplies wholesaler. They shifted to a
consumer orientation and not requiring a business license as they realized
that most customers were buying significant amounts for their own personal
use, and not just for business use.

There are still many other strictly business-serving wholesalers, too, of
course, often specialized by vertical - e.g. Sysco is specialized in
foodservice.

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dottrap
I want to know, how do Costco's sale prices (coupon book) affect the
markup/margins on a product? If the normal markup is less than 11%, is the
sale price markup less than say 5%?

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?

~~~
TheSoftwareGuy
Costco doesn’t make a profit on most items it sells, and some times it even
loses money. They get money almost entirely from memberships

~~~
LanceH
I you apply membership revenue to operating costs, then all the profit comes
from margins on sales.

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tmaly
I really like the Costco locations with gas. That alone pays for the cost of
the membership.

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 )

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dboreham
They also pay their employees reasonably well, which makes for an efficient
and pleasant shopping experience.

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jrjarrett
I'm wondering how Costco has managed to hold out against the stockholders
demanding more.

Bravo to them for doing it!

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bobzankz
My family has had mixed feelings about Costco. While it does sell bulk
products, it makes local business struggle for clientele and sometimes runs
them our of business. As someone from a family who has a locally run business
it is difficult to support.

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saboot
I like costco, very much, however the contracts they have with home-services
(water heater replacement, flooring install, solar install, blinds, etc.) are
marked up 2x-3x what you can get elsewhere.

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JoeAltmaier
A bit of hyperbole. Dark aisles? Stack of wooden pallets? Not in my Costco.
Its almost too bright in there, and stuff is racked on custom high-volume
plastic pallets?

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gao8a
Costco is the saviour of small islands like Iceland, and Vancouver island.

Good video:

[https://youtu.be/4xOxXmyPD0I](https://youtu.be/4xOxXmyPD0I)

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novok
I always thought of costco as the suburban lifestyle store. Where everything
is costco sized for american sized suburban houses for american sized
families.

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ctdonath
"Just what I wanted! A 4-pack of grand pianos!"

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EricE
If Costco doesn't have it, I don't need it.

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novok
I always thought of costco as the suburban lifestyle store. Where everything
is costco sized for american sized suburban houses.

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pnathan
the only reason I don't shop at Costco anymore is because we could almost
_never_ buy goods in quantities small enough to be feasible for our living
space and rate of consumption.

Great store, otherwise.

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lonelappde
No one goes to Costco anymore, because it's too crowded, as the saying goes.
It's become a victim of its own success.

~~~
rficcaglia
from what I see, and do, people just go there early AM 5 min before it opens.

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.

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tus88
It is pretty amazing. A shop where I can roll up with a bag full of cash and
ready to spend, and they say sorry, you're not a member, go spend that money
elsewhere.

~~~
foogazi
or become a member

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Simulacra
Costco is the buffet model turned into a grocery store. Why buy 8 ounces of
mayonnaise when you can buy 5 pounds. It caters to the American lust/love of
bigger = better, when in practice it might just be better to buy less, and
thus buy more often.

~~~
Pfhreak
Except, for many things buying less frequently results in less packaging,
fewer trips to the store, more economical purchases, etc. Lots of upsides to
buy once, store for a while.

~~~
whoopdedo
But it requires you to allocate personal space to store those purchases. A
second freezer, or larger cupboard. So greater pressure on real estate. If I'm
economizing my living space I won't be shopping at Costco.

~~~
rficcaglia
I agree here. Second freezer and lots of space for storage is a must. Not for
tiny apartments. A suburban phenomenon mostly.

