While most Americans know what the inside of a Costco looks like, the company still holds a bit of mystique. With no media relations office and execs who tend to avoid press, the inner workings of the superstore are tucked firmly behind the curtain as it sails on its reputation for great deals and member loyalty. "They have amazing discipline," Zeynep Ton, a professor at MIT's School of Management, tells the New York Times. "If you go on LinkedIn, you won't find much information about their executives." The Times takes a look at how Costco shaped America's shopping habits while dropping interesting context (did you know they are the biggest vendor of fine Bordeaux wines? We didn't, either!). Here are some insights:
- Stockpile USA: The pandemic and general economic anxiety have helped shape the US cupboard—in the sense that it's gotten much bigger. About a quarter of Americans stockpiled nonperishable items in 2020, and that number has ballooned to more than half of Americans today. The superstore's cheap bulk buys help fill those emergency stashes.
- Members drive revenue: Costco's members are loyal, maintaining a 93% renewal rate. And that's what largely drives the business' profits—membership fees account for two-thirds of the brand's $1.68 billion net income, amounting for $1.12 billion annually. Customers have grown from a quarter of the US population to almost a third, making it the third biggest retailer behind Walmart and Amazon.
- The Costco effect: "You've heard the phrase," CEO Ron Vachris said on an earnings call. "People come in to spend $100 and walk out with $300." Former CEO Jim Sinegal likened shopping there to a treasure hunt, with unexpected items slipping easily into one's cart before the deal slips away. This is why items from Nike, televisions, and literal gold bars (which sell out immediately) stack the shelves next to household staples.
- The secret sauce: A few ways the brand sets itself apart are in its presentation to members—down to the barebones, warehouse shopping experience. They don't sell customer data or shelf space (only curated items), giving them an air of authenticity. The deals come from a true markdown of products, some of which Costco may even lose money on, like the $1.50 hotdog and soda combo deal that's been the same price since 1985. This culture, which the Times jokingly likens to a cult, earns them the top slot among trusted brands, according to market research.
Read the full story
here. (Costco's
doomsday bucket includes food that lasts 25 years.)
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