COSTCO'S SECRET SAUCE
Legions of consumers happily pay the (minimum) $55 annual fee for the privilege of shopping at Costco. The discount warehouse operator closed out fiscal 2015 with 686 outlets, an increase of 23 over the prior year, according to the company's annual report. During that same period, shopping frequency grew by 4 percent, memberships jumped more than 6 percent, and more than nine out of 10 members in North America renewed their status. Aside from the savings that come with low prices and bulk buying, what keeps shoppers coming back for more? Here's what members say in online reviews and a Cheapism.com Facebook poll.
Related: 11 Types of People Who Shouldn't Set Foot in Costco
One factor that consistently showed up in Cheapism's poll was the quality of the merchandise. Consumer Reports has concluded that some products sold under Costco's in-house Kirkland Signature brand, such as car batteries, ice cream, and laundry detergent, are top-notch. Several poll respondents single out the paper towels and toilet paper for their excellent quality. Shopper Christina Hardy from Dublin, Ohio, says she rarely buys store-brand products but makes an exception for Kirkland paper products and baby wipes because the value is unbeatable.
Related: Is Costco the Best Place to Buy a Car?
With $4 billion in sales from organic items, Costco recently surpassed Whole Foods as the largest purveyor of organic foods in the United States. "They have more to offer in organics and natural foods," notes Tanisha Bledsoe of Dublin, Ohio, a mother of three boys. With demand for organics continuing to grow, Costco is embarking on a plan to help organic farmers buy more land and equipment to boost production.
Related: 21 Surprisingly Expensive Products From Costco
Costco has a reputation for treating its employees well. A quick look at Glassdoor, a website devoted to employee reviews of workplace benefits, shows Costco earning 4.4 stars out of 5 from more than 300 reviewers. By contrast, Sam's Club, a competing warehouse club, garners only 3 stars from slightly less than 250 reviewers. One post about Costco describes the benefits as "amazing," another says the health care coverage is "simply the best," and a third highlights the paid sick days and personal days after just six months of employment.
STRONG CUSTOMER SERVICE
Treating employees well seems to pay off in their demeanor toward customers. Costco shoppers who responded to our poll said employees are nice, cheerful, and helpful. One mother from Dublin, Ohio, reported receiving excellent service when inquiring about the availability of gluten-free options.
Anyone who has ever walked into a Costco store on a weekend surely encountered the veritable smorgasbord of free food. The samples handed out are tasty and abundant, and it's possible to enjoy what amounts to a full meal just by ambling through the aisles.
Costco offers refunds on almost any purchase just because the consumer isn't happy with it. There is no time limit for most items, exceptions being electronics (such as TVs, cameras, and tablets), diamonds of 1 carat or larger, tires and car batteries, and custom products or installations; the return window for appliances is 90 days.
Without having to pay extra, Costco offers members an extended manufacturer's warranty, for a total of two years, on TVs and computers (but not tablets) and large appliances, such as freezers, dishwashers, and clothes dryers.
Costco works to broaden its supply chain through a diversity program for businesses owned by minorities and women. It also encourages vendors to set up a "roadshow" at a few Costco stores to display and sell their merchandise for a designated period.
Costco offers members good deals on travel, including discounts on hotels, flights, rental cars, and entire vacation packages. Reviewers posting on TripAdvisor rave about Costco Travel, saying it's cheaper to book through the service than with outside sources. Many posts also comment on the superior customer service, the ease of booking, and the help they received when flights were canceled or delayed or travel plans went awry.
Prices for pharmaceuticals at Costco are generally cheap -- really cheap. A 2013 study by Consumer Reports named Costco the cheapest pharmacy out of 200 surveyed. In addition to savings on prescribed medications, respondents to the Cheapism poll said they like the selection of personal care options, such as organic sunscreen and baby cream, especially because the bulk sizes sell at lower unit cost.
Costco stocks tables of nondescript clothes but also some brand names. Want a pair of Hunter boots, for example? They've appeared at Costco for about one-third less than the usual $140 retail price. Members have also seen discounts on children's clothing bearing the Carter's label and items such as brand-name socks, work shirts, and women's pants and leggings.
Although some customers may disagree, poll respondents say Costco employees keep the checkout lines moving at a rapid clip. They may get backed up on occasion, but the stores generally maintain enough open lanes for the time of day and the number of shoppers, according to respondents -- and cashiers have an efficient process for ringing up items in a timely fashion.
Pastries in all their various sugary splendor only sweeten the deal for Costco members. White sheet cakes garner close to reverence in some quarters. One customer who responded to the Facebook poll says the cake melts in your mouth and fits any party budget, at less than $20 for 48 pieces.