By Cyndi Pyburn
I will tell you that I don’t like shopping at Costco. Don’t make me go on a Saturday or Sunday afternoon. UGH. Finding a parking spot is a feat. The people that block your cart awaiting their turn to ‘sample’ something is annoying. The lines to cash out are something else again! AND the most irritating Costco ritual is that you must show your receipt and get it checked off before you leave the store. You took my money and now you don’t trust me? UNBELIEVABLE!
Then I start talking about Costco. And I find that I am a ‘raving’ fan. Really? REALLY!
While the shopping experience leaves a lot to be desired, and some items are certainly over-priced, there are some real ‘gems’ to be had. These ‘gems’ tend to be out for sale pre-season, so you have to be on your toes. My ‘gems’ are a mix of great quality with great price. My faves over the years:
- Cotton Egyptian beach towels — $16.99 for a massive, colourful, gorgeous, long-lasting towel – I buy one every year to have one on hand for all pool guests.
- Homemade Christmas tags – 100 for $14.99 – unique, special, and makes your gift look like you’ve gone that extra wrapping mile.
- Kids Wetsuits – my kids needed these for freestyle ski training every summer – great suits for growing kids at $49.99.
- 3lb Rotisserie Chicken – twice the size than those at the grocery store and only for $7.99 – feeds the family and enough left over for lunches.
- Salad – we eat salad at every meal and we buy three large packages a week for $4.99 each (usually $6.99 at the grocery store) – and good choices available from kale, to spring mix, to baby spinach.
- Beets – let’s face it, cooking fresh beets is a hassle and turn my fingers purple. These are fresh beets vacuum-packed and are delicious.
- Goat Cheese – two- pack of large size for $6.99. Small one in grocery store is $6.99.
- Dentastix – for my dog are $17.99 large bag (60 stix); pet specialty they are $8.99 small bag (8-10 stix)
- Gas – if you can stomach the snake line-up of cars, it is .10ct/litre less in Toronto, a significant savings if you drive an SUV or require premium gasoline.
- Kirkland Signature Brand – on many products offering great quality and great value. To name a few: coffee beans, pasta sauce, dry dog food, supplements, frozen berries, whey protein powder, kitchen garbage and compost bags have all found their way into my cart.
So what’s the ‘magic’ formula? We’ve all heard that the thrill of the find, the treasure hunt is behind Costco’s success. I don’t disagree. But as a regular shopper, you get fairly familiar with what might be expected. Of course the Earn Back Membership fee ensures that shoppers have a vested interest in returning to earn the fee (and more!) back during the year in savings.
Demonstrating value through price, exclusivity, and rotation has been a big part of Costco’s promise, as has being agile when it comes to trying new things. If a new inclusion in the assortment doesn’t sell, it’s quickly dropped.
But the ‘real’ magic is in Costco’s productivity ‘mindset’. Consider the following:
- No advertising: no newspapers, radio, TV, billboards, digital or need for an agency.
- No weekly specials with labor-intensive changing prices, shelf tags, and displays.
- Narrow range of high velocity merchandise across a wide range of categories. For example, they offer 12 large-size Cereal SKUs vs 245 in a typical food retailer.
- High inventory turn: inventory is often sold before being paid for thereby increasing asset productivity.
- Simple functional checkout system; no bagging supplies or service.
- Everything possible is handled on pallets: delivered; stored; and sold from. Pallets are moved by forklift, meaning minimal labor handling per item sold.
In addition, the revenue generated from membership fees supports Costco’s ability to offer great value for money, particularly in terms of price per unit. Rather than achieve profit from margin, it demands low margin from suppliers to achieve super-fast-selling SKUs. While satisfying the customer is crucial, clearly supply chain management is magic for profit and success. The club experience coupled with strong member advocacy serves Costco well and differentiates it within the increasingly competitive and disruptive retail landscape.
Enough said, I admit that I love Costco!