if you've ever shopped at costco you may
have noticed
that it's a little different costco is
not
engineered for a quick shopping trip it
is exactly the opposite
this is the economics of costco
it's not a grocery store it's not a
small corner store
it's huge it's cavernous the ceiling is
high
goods are literally stacked on pallets
up to this almost the ceiling
that's all part of the model and the
experience
i got a costco haul first thing we got
is a five dozen of eggs then we got
salmon
unlike most stores there are no aisle
signs or
in-store maps to help direct shoppers
instead
aisles are simply numbered what's more
costco constantly moves some of its
products and cycles in
new products so what gives
why are costco stores designed this way
and how has it helped the company grow
into the retail behemoth that it is
today
costco is a big fan of using treasure
hunt
retail psychology to draw you in which
is basically
having items on the shelf that are at a
like wow price
because they're such a good discount or
they're just really interesting
and they're not going to be there
forever the big idea
behind costco's treasure hunt strategy
is that by encouraging customers to
explore
and ensuring that there's always a new
batch of interesting deals
customers end up shopping longer and
buying more products
today i went to costco thinking i was
just going to get a few items but i
ended up with the whole entire cart
when you go into the store it doesn't
feel the same as the last time you were
there
so you have a sense of urgency about
purchasing and also just a sense of
wanting to come back right and check out
what's going on if it was the same every
time you might not
come as often today costco is one of the
world's largest retailers
boasting over 803 locations and 275
000 employees costco was part of sort of
this early
warehouse club concept which was really
about
instead of like go to the store buy a
single item
come to the store pay membership and
maybe your small business and we'll
offer
you wholesale prices basically lower
prices
most members pay an annual fee of 60
dollars for the basic plan
the customers can upgrade to the
executive membership
which is more perks for 120 a year
membership dues are also how costco
makes most of its money
i think costco's management's main goal
is always this ethos of
can we offer more exciting items at a
better price
to keep memberships growing the model is
make money on the membership sell things
as cheaply as possible they can't just
raise the price on something to increase
the profit that's against the internal
code
and so that also includes things like
let's save money
in how much time we spend putting
products on shelves so that's part of
the reason why you see these pallets of
goods stacked up to the ceiling is
there's not a lot of time spent taking
apart those pellets putting each
individual product on the shelf
if they eliminate that there's a little
bit of labor savings there's some time
savings because they're just putting all
that stuff out on a pallet and you take
it
costco says that an average item in the
store is only marked up 11
compared to the 25 to 50 percent often
seen in retail
this commitment to low prices hasn't
just kept customers loyal
it has also helped spread the brand
there's a psychology to finding a deal
that's very satisfying for people
and people enjoy the product selection
at costco they have very
skilled merchants that usually have been
employed there for a very long time and
really
know what a costco customer likely would
want
and they're good at getting good prices
on those products i got premier protein
flavored vanilla
and that sort of creates a certain
frenzy around finding those things
i got the kirkland brand microwave
popcorn i got two packs
of bottled water most retailers might
assume
that shoppers want more choices not less
they sell a limited number of items so
that means they have to be pretty
precise
they think about like giving space to a
product in their store
differently than a walmart would and
if that product doesn't sell like it's
out of there it's very cutthroat if
you're a product on the shelf you have
to earn your place
the average costco warehouse stocks
about 3 700
products at any given time less than
one-tenth of most supermarkets
forty to fifty thousand items but even
though costco stocks fewer items
the items they do stock have a
reputation
i see you've noticed me rolling up the
sleeves on my new
kirkland signature quarters that my
mother got me for the holidays
kirkland is costco's you know private
label brand it's their store brand it's
a brand that
when they want to offer something at a
certain price they don't feel a
manufacturer a supplier can do it they
build it themselves since it was
launched in 1995
the in-house brand has built a
reputation for quality and low prices
on everyday items today kirkland
products make up a quarter
of costco's 166 billion dollars in
annual sales
but when you talk to customers i think
they generally feel that
it doesn't necessarily need to be fancy
because they've already bought into this
costco pitch which is this is high
quality and it's a lower price
and you don't need to be afraid of it
that customer loyalty
helped costco remain strong during the
pandemic
costco is certainly a model that has not
only survived the pandemic but has
really thrived in the pandemic
despite the increased popularity of
online shopping
costco has leaned into its strategy of
driving members to its stores
it's really interesting to me because
for years people have
questioned costco you know amazon's
going to get you you got to get bigger
online
and that really hasn't played out yet
they've said explicitly we prefer people
to come into the store and shop
we want impulse buys we want people to
come and see what we have and buy more
we work better that way and it's cheaper
you