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The big loss-leader for Costco is the Rotisserie Chicken 
(While this doesn't appeal to me as a vegetarian, I still salivate at the strategy). Costco has gone to great lengths breaking their beaks for this EGGcellent deal: $4.99 for a 3lb chicken https://www.cnn.com/2019/10/11/business/costco-5-dollar-chicken/index.html
(While this doesn't appeal to me as a vegetarian, I still salivate at the strategy). Costco has gone to great lengths breaking their beaks for this EGGcellent deal: $4.99 for a 3lb chicken https://www.cnn.com/2019/10/11/business/costco-5-dollar-chicken/index.html
To get most of your membership value, you must show up and go all the way to the back of the store-- good luck leaving with ONLY Foghorn Leghorn since you made the trip. Costco sold 101m chickens last year globally-- at their scale everything makes a difference.
Fun Fact: Costco built a 452acre chicken farm in Nebraska to better count their chickens before they hatch (2 million per week!) and vertically integrate their chicken supply chain to save 35 cents per chicken. Don't worry-- I'm done with the chicken puns. https://www.mashed.com/314771/how-costcos-enormous-chicken-farm-has-changed-nebraska/
I could go on and on covering Costco's insane pricing power (AMEX stock fell 6% and 1 of 10 cards in circulation when they lost their Costco cobrand in 2016, or just think about TP negotiation) but Costco's growth amidst the challenges of COVID was also quite impressive:
In 2020--
Opened 9 new warehouses during COVID
Net sales grew almost 10% from 2019
e-Commerce up 50%!!
Membership revenue grew 6%
Costco bought an equity share in a PBM to compete with CVS & Walgreens on drugs
Costco acquired a last-mile delivery provider
Opened 9 new warehouses during COVID Net sales grew almost 10% from 2019 e-Commerce up 50%!!Membership revenue grew 6%Costco bought an equity share in a PBM to compete with CVS & Walgreens on drugsCostco acquired a last-mile delivery provider
Is Costco perfect? Almost, but I cannot wish it true-- they've got a long way to go on melding their digital and in-store experiences with neither coming at the expense of the other. Offer too much online-- the cart-size and "one-more-item" effect in-store declines.
Reserve too much value for in-store and you'll lose during COVID when every other business is trying to deliver more online, incl bulk. I remain super bullish as with 59M households, they're super well positioned to move into any new market that plays on their strengths
And what's up with the Instacart partnership? You don't need a Costco membership to shop the warehouse with Instacart... in a reply to this the Costco CEO plays it cool, but I imagine this changing in the next 1-2 years given investments in delivery
What's 'in-store' for 2021? Costco acquired a last-mile provider from Sears bankruptcy that did all Sears' appliance and large-item deliveries. Big & Bulk is Costco's middle name.
If you're curious to read more from more eloquent Costco-stans than I, this deck written in 2018 is one of my favorites on the topic (23/23) https://issuu.com/slowappreciation/docs/costco_deck
