Costco Wholesale is a leader in the club channel and the third-largest retailer in the US. Its members have an almost fanatical level of loyalty to the company, leading to a 92.5% membership renewal rate in the US and Canada.
You may be wondering how Costco has earned this loyalty. For many members, it’s as simple as low prices (such as $5 for a rotisserie chicken) and free samples. Still, it must be asked, “what are the building blocks that make the Costco experience so appealing?”
In this article, the Legacy Retail team will answer this question by examining two large aspects that makeup Costco’s success. Please keep reading to learn more.
Quality vs. Price
Costco’s secret to success is in its mission statement: “To continually provide our members with quality goods and services at the lowest possible prices.” In short, high-quality goods at affordable prices.
That brings us to a key term: value. Costco is not looking for the cheapest items on the market, nor does it stock items that will burn a hole in customers’ wallets. It looks for and stocks items with an equilibrium of quality and affordability, providing a high level of value to members.
Providing value is knowing that you are offering your consumer a good deal. This looks like offering lower prices than those at the mall, bundle packs with savings on a per-item basis, or Costco-exclusive items from favored brands.
All of this means that a Costco member feels rewarded for being a member. As a supplier, keep this in mind when curating the items you will submit to Costco. Costco wants its members to feel that it has their best interests in mind. This makes Costco customers feel justified in spending money on their annual membership.
Generous Return Policy
In addition to value, Costco members expect that the company will stand behind the items it sells. This is where the infamous return policy comes into play. It’s risky because your merchandise may come back at any time for any reason.
However, members feel empowered knowing their purchases are protected as they place items in their carts. This safety net encourages them to shop more liberally. They are more willing to browse new items, and they are likely to purchase high-ticket items. They do these things because they are confident that if an item does not work out, they can always return it.
Costco has the most generous return policy among leading retailers, so before you pitch your first item, expect that the volume of returns will be higher than all other retailers. This will keep you from being blindsided.
As a supplier, implementing such a generous return policy will feel risky. However, fighting returns or avoiding them will likely sour the relationship with your buyers and your perception of Costco.
To conclude, here is the biggest takeaway: Costco succeeds because it meets its member’s expectations. If you’re a vendor looking to expand into the club channel or want to increase your effectiveness in this area, contact Legacy Retail today by clicking here.
