From a $1.50 hot dog combo to a $4.99 rotisserie chicken, Costco is known for its large quantities of offering its customers. But the value-focused wholesale chains is appealing to more than just budget-conscious shoppers.
In an interview with the Chief Executive Officer magazine last week, Costco Chairman Hamilton “Tony” James said that while most of the chain’s members are average income nationally, “some are wealthy members who earn twice their average income.”
He said that some members have deeper pockets, giving Costco the ability to do “amazing things.”
“From the start, when the quality was good and the price was big, we knew that we could always get everything to work with volume,” James said.
In fact, Costco sells big ticket items ranging from Rolex watches to luxury cars. The Costco website currently features a $320,000 diamond engagement ring and a $2,500 espresso machine.
“A Seattle Porsche dealer put his car on the floor of a Costco and sold out in a week,” he told the magazine. “Wealthy people love quite a lot.”
Last year, Wells Fargo estimated that Costco sells 24 carat gold bars worth between $100 million and $200 million a month. James said Costco is more interested in providing better value to its customers than cheap prices.
Clark Hodzin | Bloomberg | Getty Images
Employees remove the silver bars sold from the shelves at Costco.
“If someone wants to buy a $500 TV at Costco for $250, they want to sell a $1,000 TV for $500 instead,” he said. “We are always trying to find better items to sell to our members.
This strategy of not making its products too cheap will help Costco attract customers with more expensive preferences.
“I think Costco’s reputation, which helps with a slightly higher income demographic, is more attractive and creates a self-fulfilling cycle for brands that target their chains to those shoppers,” Morningstar analyst Zayn Akbari told CNBC in 2023.
The ability to make Costco customers feel they are getting good value for their $65 annual membership makes the chain’s renewal rate above 90%.
For James, who has served on Costco’s board for 36 years, going to the board meeting and observing how well the chain can predict customer desires is still “attractive.”
“I learn from Costco management in everything they’re doing again,” he said. “The company is a great window into what’s going on in the consumer world, whether they’re buying or not.”
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