- Costco is known as one of the few retailers to successfully stave off the threat of Amazon, despite reportedly lagging behind from an e-commerce perspective.
- The warehouse club recently beat out Amazon in a survey about customer satisfaction released by the American Consumer Satisfaction Index.
- With this in mind, we decided to dig deeper into the aspects of shopping that Costco does best.
- Here are nine reasons shoppers choose to shop at Costco over Amazon, according to experts.
- Sign up for Business Insider’s retail newsletter, The Drive-Thru, to get more stories like this in your inbox.
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But experts say it’s the other benefits – cheap gas, vacations, and cars – that help keep customers loyal as well its bargain prices.
“Amazon is great for finding individual items in an efficient and convenient manner, but in most cases can’t match the value bulk pricing delivers, the full basket shopping experience, and the discovery component of going to a Costco warehouse club,” Jack O’Leary, senior analyst at Edge by Ascential, told Business Insider.
With this in mind, we decided to dig a little deeper into the aspects of shopping that Costco wins.
Here are nine reasons shoppers might choose to shop at Costco over Amazon:
It is known for having an excellent private-label collection
Costco’s low-cost private-label Kirkland brand is one of its most valuable offerings. It has been around since 1995 and accounts for about 25% of Costco’s $US118.7 billion in annual sales.
Kirkland is not only cheaper than other national brands but also has a reputation for being good-quality.
“I am not sure there is another [private-label] brand that has established this level of trust,” Timothy Campbell, a senior analyst at Kantar Consulting, told Business Insider.
Private-label brands have increasingly become a more popular choice as the stigma of “generic” goods has been lifted. These brands have better margins for retailers. Stores are buying goods directly from the supplier and cutting out the intermediaries, which can drive up costs in the supply chain.
Amazon is also looking to grow its private-label offerings across different categories. It has 146 private-label brands and 640 exclusive brands, according to TJI Research. However, it doesn’t have the history that Kirkland has just yet, Rachel Dalton, the director of e-commerce at Kantar, told Business Insider.
“They have had a lot of misses and some hits,” Melissa Burdick, president of Pacvue, told Business Insider.
She continued: “Amazon has taken its typical approach to things to private label – iterate, launch fast, fail fast – which sometimes comes at the risk of one of their coveted leadership principles of ‘earn trust.'”
It has a generous return policy
One of the biggest perks of a Costco membership is its generous return policy. The warehouse chain allows members to return almost any item at any time if they’re not satisfied with it.
“We guarantee your satisfaction on every product we sell and will refund your purchase price, with the following exceptions,” the company says on its website.
Some shoppers have taken this to the extreme – returning things such as a Christmas tree in January, an already eaten steak, and an empty bottle of wine – but despite this, it stands by the policy in almost all circumstances.
You can buy in bulk and save money
If you are buying in bulk, Costco and other warehouse stores are the best places to do so, given that bulk shopping is their main premise.
Cheapism recently did a price comparison of 100 Amazon and Costco items across the categories of household staples, baby and pet, beauty and toiletries, and health. The test revealed that Costco was cheaper on 79 of the 100 items. The greatest savings could be seen in the household-staples category, which was, on average, about 25% cheaper at Costco.
But while Costco wins on savings in bulk purchases, Amazon reigns supreme on convenience. With Amazon, shoppers can get nearly anything they want and get it quickly, Campbell said.
The deals are consistent
Costco is “consistently reliable” when it comes to deals, Campbell said, comparing it with other retailers where you might need to hunt to get the best deal.
Costco is able to be consistent on prices because it can afford to have low margins on what it sells. It makes most of its profits off membership fees, Campbell said. Meanwhile, you could see more fluctuation at Amazon.
“Costco members trust that they are going to get a good deal on whatever they buy,” Campbell said. “I think the fact that it has been doing that for decades has enabled to withstand the online onslaught.”
“You know you’ll always get a low price,” Burdick said. “And you might find a surprise such as something new, a one-time buy, or local to your market.”
It offers a treasure-hunt shopping experience
Costco prides itself in offering a treasure-hunt experience, which is hard to replicate online.
“Every time you go into a Costco, you are not sure what you are going to see,” Campbell said.
By swapping items in and out, it keeps inventory fresh and keeps the customer engaged and coming back for more.
It offers cheap gas
One of the biggest benefits of having a Costco membership is getting access to its perks, which include being able to fill up your car for a fraction of the price.
The store offers two types of gas that are exclusive to its members or anyone with a Costco gift card: premium gas and standard gas from its signature label, Kirkland. Diesel is also available at some locations.
Costco’s gas offerings benefit the store. As gas is a recurring purchase, it’s an effective way to drive foot traffic to stores. It is also a good way to attract members and keep them loyal.
Deals on vacations
Since 2000, Costco has been offering members deals on hotels, flights, cruises, and rental cars.
And customers can’t get enough of it – including Business Insider’s Kate Taylor, who booked a seven-day trip to Puerto Rico for just over $US800, including flights, transportation, and a hotel stay.
This business has high margins because of the few administrative costs associated with it.
Costco is well-known for its meat selection, including its famous $US4.99 rotisserie chicken, which hasn’t changed in price since 2009.
In 2017, consumers bought 625 million rotisserie chickens in US supermarkets, according to Costco and the market-research firm Nielsen. Costco sold 87 million rotisserie chickens in the fiscal year 2017, an increase of 36 million over the fiscal year 2010.
Despite the rising costs related to labour and preparation, Costco hasn’t budged on price.
“When others were raising their chicken prices from $US4.99 to $US5.99, we were willing to eat, if you will, $US30 [million] to $US40 million a year in gross margin by keeping it at $US4.99,” Costco CFO Richard Galanti said in a 2015 earnings call, according to The Seattle Times. “That’s what we do for a living.”
Costco fans wax lyrical about its free samples, which, if you’re crafty enough, can be combined to be an entire meal.
While some customers might think that Costco is just doing them a favour by offering them free snacks, there’s a solid business strategy behind it. By offering free samples, Costco makes the shopping experience in its stores more appealing, thereby making its customers more loyal.
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