The Costco Love Affair Continues, And It Is Making Walmart Blush

Even with our staggering inflation rate that has caused intense consumer belt tightening, Costco’s numbers remain stellar. April’s net sales reported on Wednesday, rose 13.9% to $17.33 billion from $15.21 billion in April 2021. Meanwhile same-store sales were up 12.6% while e-commerce sales increased 5.7%. Even as families are being stretched, and maybe because of it, the Costco lovefest continues.

The Price of Love

But love does not come cheap, and those that “love their warehouse” will likely be faced with a twice-per-decade membership increase. As I suggested in my last Costco piece, the rumored membership fee increase which has occurred about every 5.5 years continues to be expected later this year.

The last increase was in June of 2017 and the anticipated membership hike is predicted to match the current inflation number of between 8 and 8.5%. It is estimated that the $60 Gold Star Every Day membership will jump about $5 to $65, and the $120 Gold Star Executive membership will be bumped by $10 to $130.

One thing we can be certain of is that the subsidized and immensely popular rotisserie chicken will remain $4.99, as will the hot dog and soda combo for $1.50.

Loyalty In Spades

Traditionally this increase has been a non-issue for Costco customers. Membership retention has remained about 90% for years, and in the most recent reporting for the U.S. and Canada combined placed it at 91.6%. Statistica tallied 111.6 million Costco members internationally in 2021, and Costco reported an additional 800,000 Costco members were added in the first quarter of 2022.

People simply love Costco, and that love is measurable. According to an American Consumer Satisfaction Index (ACSI
ACSI
) which surveyed 36,517 customers, chosen at random between Jan. 11, 2021, and Dec. 20, 2021, Costco had the top score for general merchandise retailers at 81. When comparing Costco with behemoth Walmart
WMT
, with ten times the number of stores, Walmart finished at the bottom of the pile in all categories including retail, drugstores, supermarkets, and online retailers.

And while Costco trailed favorite Trader Joe in the supermarket ratings, their score of 81 put them ahead of Target’s
TGT
77, and well ahead of Walmart’s 70. Customers love Costco and Target more than Walmart, which is a problem for the industry sales leader, and one that will be tough to solve.

Keeping Them Coming Back

The Costco formula for success has always been both “heart and mind,” emotional and intellectual. But has always been executed with surgical-like precision. I did a deep dive into the Costco ethos in my book, some years back, and found that Costco’s founder Jim Sinegal was able to distill the secret sauce down to a simple formula. He describes their magic of combining “triggers and treasures,” the 75/25 mix of needs and wants that keep customers coming back.

Also, with less than ten percent of the SKUs of today’s leading retailers, along with their massive volumes, people know they are spending less and getting more. Meanwhile by turning its inventory 12 or more times a year Costco is able to lower its product cost to beneath even its biggest rivals.