The annual fee for my Costco membership came due recently. With a swipe of my credit card at the checkout counter, $110 was added to my grocery bill.
During the first few years of my Costco membership, when I was only on the basic $55 tier, that add-on stung. But 15 years later, I no longer wince when I sign off on the annual fee.
Between fish and meat, coffee beans and organic bananas, and beer and wine, a substantial portion of what’s in my kitchen today was purchased at Costco. And why do I pay for the privilege of entering Costco’s warehouses? Because the savings on these and other products over the course of a typical year easily exceeds that $110 fee, for my household of two.
“People ask, why do I have to pay $55 to walk in your doors?” said Robin Ross, Costco’s senior director of corporate marketing. “Where do you get off charging me to enter the store?”
As I’ve come to understand over time, Costco’s core business isn’t about selling merchandise—it’s about selling memberships. The only way the store can do that is to offer a value and selection proposition that’s so winning, so unbeatable, that consumers will literally pay to get inside.
With 79 million card-carrying members and steady growth by anyone’s measure, Costco is surely doing something right.
Bulking Up on Bargains
Now, I know what you’re thinking—I must live in a mansion or a rural compound to be able to store the bulk-size goods Costco is famous for. But actually, I know that Costco is not the place for me to buy something like, say, mayonnaise. At the rate mayo gets used in my house, Costco’s one-gallon jar would survive until the next ice age.
While the perception that Costco is all about bulk buying isn’t entirely off the mark, much of the store is made up of conventionally sized items. Yes, toilet paper is sold 30 rolls at a time, but Calvin Klein jeans and Greg Norman polo shirts are offered in sizes other than XXL. New York Times best sellers are packaged the same way that Amazon sells them.
Source: Reviewed.com | Dave Swanson