For many Costco shoppers, the retail giant has a lot to offer. Being able to buy in bulk and get members-only deals on hot items are some of the biggest advantages of being a Costco cardholder.
The average Costco shopper spends $114 a trip and goes every two weeks. That’s more than $2,700 a year spent at Costco. Even the pandemic didn’t slow down spending, with net sales reaching $163 billion in 2020. This might be due to some strategies Costco is employing to make shoppers spend more that even the most loyal customer won’t notice.
Memberships to Costco range from $60 each for the Gold Star and Business Membership to $120 for the Executive Membership. Forking over that kind of cash and not getting in return isn’t appealing to customers, so knowing they paid for a membership makes them want to visit the store to make sure they get their money’s worth. Every year, 90% of Costco shoppers renew their membership, garnering $2 billion in membership fees for the retailer.
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Costco is known for its incredible deals, most notably on its $4.99 rotisserie chicken. Pricing the chicken this low loses the store $40 million a year, but it more than makes up for it by giving customers the idea that since they’ve gotten a killer deal on one item, they’ll be comfortable spending more on another item. Buying something on sale makes shoppers think they have more money to play around with, so if something is fairly priced or even overpriced, they’ll justify the purchase because of the money saved on the sale item.
Costco is a vast store. The warehouse is 148,000 square feet of household items, groceries, home furnishings, gadgets and more. The layout is designed so that when you walk in, you can see where everything is located, but have to travel a little bit to get to where you need to go. Along the way, Costco has methodically placed items that are both household staples (i.e. toilet paper), or seem like they’ll only be available for a limited time.
Of 3,600 items Costco has for sale, about 1,000 of them might only be out on display for a set time, making you think that if you don’t buy the item now, it might not be available again. So, even though you came for a television, you had to pass so many alluring items on the way, that you ended up filling up your cart with much more. Not to mention, Costco moves their items around constantly, prompting you to do a “treasure hunt” for the items you came for every time you enter, stumbling upon limited time only items in the process. Even the industrial warehouse look is a tactic by the store’s designers. The lack of decor conveys an idea that customers are getting a better deal.
The Lack of Variety
Ever notice how Costco only offers one choice per item? Like, if you want to buy sour cream, there aren’t a ton of brands to choose from; there’s only one. This strategy will actually make you buy more than if you had all the choices of a typical grocery store. Making people decide between dozens of options can overwhelm them, and they won’t choose anything, whereas at Costco, there’s only one choice, and people are more likely to select it even if it comes in an amount they can’t imagine using all of in their lifetime.
The Return Policy
Costco boasts a “risk-free 100% satisfaction guaranteed” return policy. This means for most items (barring electronics, diamonds, batteries, cigarettes, alcohol, and some other exceptions), Costco will let you return them no matter what. This encourages you to make a purchase you might not normally make because you have the peace of mind that you can always return it, no questions asked.
The truth is, most people don’t return items. Only 9% of items bought in a brick and mortar store are ever returned. More likely than not, you’ll buy the item and never return it, putting more money in Costco’s pocket.
The Food Court
We all know the deal: hot dog and a soda for $1.50 right at the front of the store. This has been the deal since 1985, and it’s incredibly hard to pass up.
Costco sells 100 million hot dogs a year. Though this super low cost meal loses Costco money, there’s a method to the madness. Whether shoppers are grabbing a bite on the way in or rewarding themselves after a long shopping trip on the way out, the meal gives customers time to spot items that might not have been on their shopping list in other people’s carts. This might inspire them to buy more than they intended simply because they spent a few extra minutes eating the irresistible hot dog.
The Free Samples
You know you shouldn’t shop on an empty stomach, but many customers do just that when they go to Costco because they know they’re going to dine out on the free samples. Those free samples can taste so good (especially when you’re hungry) that you buy the food in bulk. There’s also the idea that if someone gives you something — like a free sample — you feel you have to give them something in return, like your money.
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