Most people consider Costco the place to buy bulk boxes of toilet paper or industrial amounts of Raisin Bran. But two interesting statistics I saw this week point to the fact that Costco is a player in both the automotive and organic food aisles:
A growing number of Costco members are also turning to the company to score a ride. Costco has become a major player in the world of car sales. The retailer says it helped move about 400,000 cars last year.“Costco is essentially acting as a middle man,” says Jeff Schuster, senior vice president of forecasting at LMC Automotive. “They are working with the manufacturers to bring in vehicles and essentially set a price for the vehicle.” Costco negotiates price discounts that can save members $1,000 on average.
Costco has become the biggest purveyor of organic foods, selling some $4 billion worth in the last year, compared with an estimated $3.6 billion in organic sales at Whole Foods, according to Kelly Bania, an investment analyst at BMO Capital Markets.
It’s fascinating that, in nearly whatever growing market Costco enters, it uses its sheer size – and the tempting promise of 70 million members – to bring down prices from suppliers, and make products that were once niche, or pricy, more accessible.
It’s also equally interesting that Costco almost doesn’t bother playing with varying markups on items. It’s purely focused on offering dependable values to its enormous customer base, and winning their loyalty through its generous return policy and consistent pricing. Costco is likely one of the few firms that could raise its subscription fee – $55 and $110 for its two tiers – by 10% and see demand for membership continue unabated. Imagine if Netflix tried that with its plans. It’s no wonder then that Jet, the more-you-buy-the-cheaper-it-is competitor to Amazon, is also playing the Price Club card.