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Costco Wholesale Corp.
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Headquarters
999 Lake Drive, Issaquah, 98027, Washington, United States -
Annual Global Sales
$226,954,000,000
Total Sales
$237.7 billion in fiscal 2023 (ended Sept. 3, 2023)
Total U.S. Stores
600 locations in the U.S. and Puerto Rico (as of Dec. 31, 2023)
Total Canada Stores
108 locations (as of Dec. 31, 2023)
Shopper Count
An estimated 2.5 million transactions daily
Key Facts
- Leading warehouse club chain in the U.S.
- Also operates warehouses outside of North America, in the United Kingdom, Japan, Korea, Taiwan, Australia, Spain, Iceland, France and China
- 127.9 million worldwide cardholders (or 56.9 million households), as of September 2023
- Ranked first in superstores and warehouse club stores in Newsweek’s 2022 list of America’s Best Retailers
- Ranked No. 3 in Dunnhumby's 2023 Retail Preference Index study, down from second the prior year
- Ranked No. 12 on the 2021 Fortune 500 list
- Ranked No. 26 on the 2022 Axios Harris Poll 100 reputation ranking
Key Executives
- President, Chief Executive Officer: Ron Vachris
- Senior EVP, COO - Warehouse Operations, U.S. and Mexico: Russ Miller
- EVP, Chief Financial Officer: Richard Galanti (until March 15, 2024)
- EVP, Chief Financial Officer: Gary Millerchip (effective March 15, 2024)
- EVP, Administration: Patrick Callans
- EVP, COO - Merchandising: Claudine Adamo
- EVP, COO - Northern Division: James Klauer
- EVP, COO - Southwest Division: Caton Frates
- EVP, COO - Eastern Division: Yoram Rubanenko
- EVP, COO - International Division: Pierre Riel
- EVP, General Counsel & Corporate Secretary: John Sullivan
- SVP, Depots & Traffic: Teresa Jones
- SVP, Costco Wholesale Industries and Business Development: Jeff Cole
- SVP, E-Commerce: Mike Parrott
- SVP, Membership, Marketing, Services, Credit Card, Member Service Centers & Publishing: Sandy Torrey
- SVP, Corporate Controller: Daniel Hines
- SVP, CIO, Information Systems: Terry Williams
- SVP, Real Estate Development: David Messner
- SVP, Construction & Purchasing: Ali Moayeri
- SVP, Merchandising, Fresh Foods: Sarah George
- SVP, General Manager - Lincoln Premium Poultry: Walt Shafer
- SVP, Merchandising, Non-Foods: Geoff Shavey
- SVP, Merchandising, Non-Foods: Yoon Kim
- SVP, Merchandising - Corporate Foods, Non-Foods and E-Commerce, Canada: Pietro Nenci
- SVP, Pharmacy: Richard Stephens
- SVP, General Manager, Northeast Region: Adam Self
- SVP, General Manager, Northwest Region: Mario Omoss
- SVP, General Manager, Southeast Region: Wendy Davis
- SVP, General Manager, Bay Area Region: Angelina Chaparro
- SVP, General Manager, Los Angeles Region: Greg Carter II
- SVP, General Manager, San Diego Region: W. Richard Wilcox
- SVP, General Manager, Texas Region: Darby Greek
- SVP, Operations, Eastern Canada: Marc-André Bally
- SVP, General Manager, Western Canada: Azmina Virani
- SVP, Country Manager, Canada: Gino Dorico
- SVP, General Manager, Asia: Richard Chang
- SVP, General Manager, Europe: Louie Silveira
- Market Position and Strategy Overview
- Must-Know Terms
- Promotional Strategy
- Merchandising
- Collaborative Alliances
- Displays and Signage
- Store Formats/Growth
- Special Departments/Services
- Customer Segments
- Internet Marketing
- Retail Media
- Mobile Marketing
- Social Media
- E-Commerce
- Loyalty Programs
- Private Label
- Cause/Community Programs
- Advertising Strategy
- Solution Providers
- Sponsorships
- Marketing Expenditures
Market Position and Strategy Overview
Market Position and Strategy Overview
Costco is the largest warehouse club chain in the U.S., despite having no public relations staff, virtually no advertising budget, charging a yearly membership fee and offering only a limited selection of products that typically can only be bought in multi-packs or bulk sizes.
The retailer operates membership warehouses and e-commerce websites based on the concept that offering its members low prices on a limited selection of nationally branded and private-label products in a wide range of categories will produce high sales volumes and rapid inventory turnover.
The chain's success is due in part to its operationally obsessed nature and unwavering mission to cut costs (but not skimp on salary, paying their employees an average of $24 an hour). As a result, the retailer sells merchandise right from the industrial pallets they are shipped in, carries no more than 4,000 SKUs and has a low-key approach to advertising, relying primarily on word of mouth.
The warehouse club’s financial and operational performance is highly dependent on its U.S. and Canadian operations, which comprised 87% and 85% of net sales and operating income in 2022, respectively. Within the U.S., California has a larger percentage of higher volume warehouses and operations comprising 28% of net sales in 2022.
Costco's marketing and operational philosophy has attracted a dedicated group of shoppers, with an average member renewal rate of 92.7% in the U.S. and Canada, and 90.4% worldwide for 2023. The chain's consumers also are among the most affluent. The top tier of the retailer’s customers shops often and spends liberally, with an average basket of about $130 to $140.
Those frequent trips and high tickets are driven by a dual merchandising strategy. On one hand, Costco emphasizes an ever-changing product mix, fostering a here-today-gone-tomorrow sense of urgency. At the same time, most products are permanent and reflect core grocery and general merchandise. Here, the retailer embraces simplicity, carrying only one or two brands in any given category in limited assortments of sizes. (See “Merchandising Strategy.”)
With a limited number of SKUs in stores, Costco uses its e-commerce business as a platform to offer a wider selection of products and unique items. The chain typically touts Costco.com in member mailers, seasonal circulars and its catalog of office products for business members. Despite a previous reluctance to branch into grocery delivery, the retailer offers same-day delivery in most areas as a way to fend off the growing threat from Amazon and possibly convert younger, urban shoppers not near a brick-and-mortar store. It quietly introduced grocery delivery via third party platforms, such as Instacart and Shipt, and in 2017, launched its own two-day and same-day delivery options for grocery within its website.
The retailer has also boosted its overall e-commerce business, after lagging behind competitors for years, by improving the functionality of its site and simplifying the returns process for shoppers.
Must-Know Terms
Must-Know Terms
- The Costco Connection: With roughly 14.3 million subscribers, The Costco Connection is considered the largest circulation, free monthly magazine in the U.S.
- Member mailer: A monthly mailer distributed to Costco members, providing roughly $1,400 to $2,000 in coupons and $6,000 to $7,500 worth of “online-only offers” valid throughout the month.
- The fence: Merchandising space along the chain-link fence that separates the entrance of the building from the exit; considered prime real estate for products since every shopper must pass by the area on the way in.
- Kirkland Signature: The retailer's main, well-known private label.
Thought Starters
- Leverage Costco’s weekly email newsletter to promote products to the retailer’s 13 million email subscribers. About 2.4% of the emails result in a purchase.
- Since Costco has strict limitations on vendor-supplied P-O-P materials, be creative in developing product packaging that still delivers a brand presence.
- Consider promoting products in The Costco Connection and/or member mailer; brands earning prominent pallet space in stores often have concurrent ads.
Promotional Strategy
Promotional Strategy
Costco’s main promotional activity consists of "road shows" through which vendors set up booths in stores to hawk their products for a limited time. These events often serve as the launching pad for new product launches at the chain.
Another promotional tool the retailer uses is extensive sampling, with increased safety protocols due to the COVID-19 pandemic. Sampling is conducted daily to highlight new products and featured items.
Merchandising
Merchandising Strategy
A strict focus on everyday low pricing is an important part of Costco's merchandising strategy. No branded item is marked up more than 14%, while the margin for private-label products is set at 15%. (The chain more than makes up for this low margin with its membership fees, which, at more than $4.58 billion in fiscal 2023, account for a bulk of company profits.)
Costco stores carry categories including (See graph below.):
- Foods and Sundries: sundries, dry grocery, candy, cooler, freezer, deli, liquor and tobacco
- Non-Foods (previously hardlines and softlines): major appliances electronics, health and beauty aids, hardware, garden and patio, sporting goods, tires, toys and seasonal, office supplies, automotive care, postage, tickets, apparel, small appliances, furniture, domestics, housewares, special order kiosk and jewelry
- Fresh Foods: meat, produce, service deli and bakery
- Ancillary: gasoline, pharmacy, optical, food court, hearing aids and tire installation
- Other Businesses: e-commerce, business centers, travel and other
Capping its SKU count at 4,000, Costco places no interest in category depth, but rather on large club packs of quality products, making a substantial inventory investment in order to negotiate a better unit cost for its members. As a result, every merchandising department at Costco has a strict cap on how many products it can carry. Pharmacy, for example, has a limit of 268 SKUs (and about 280 on costco.com). The warehouse club averages from 9,000 to 11,000 SKUs online, some of which also are available in its warehouses.
The retailer typically doesn't stock variations of the same product and limits available SKUs to fast-selling models, colors and sizes, and many consumable products are offered for sale in case, carton or multiple-pack quantities only. For example, Pfizer Inc.'s Advil only comes in a 360-count bottle and is the only national-brand ibuprofen the retailer carries. Costco has found nine in 10 customers will buy a product despite its large size.
Since the retailer can't raise prices or increase SKU count to grow sales, Costco is constantly replacing underperforming products with better-selling items. The retailer uses this strategy to its advantage, emphasizing an ever-changing product mix to create a sense of urgency to keep shoppers coming back to find the next great bargain. The retailer also sprinkles in high-end brands, such as Coach and Moet & Chandon’s Dom Perignon, to add to this "treasure hunt" approach.
Floor plans encourage impulse shopping, with grocery items in the rear of the store and big-ticket items, such as electronics and jewelry up front. Merchandise generally is stored on racks above the sales floor and displayed on pallets containing large quantities. Since every customer must pass by the "fence" area near the entrance, products merchandised there generate the biggest lift. Competition to have a product placed in this area is stiff, but vendors, such as Clorox Co. and Procter & Gamble, commonly secure the coveted space for their brands.
The wholesaler also continues to see steady annual growth in wine, liquor and beer even from a huge base.
Additionally, Costco publicly has advocated for increased production of organic fresh produce items as its shoppers continue to drive organic sales growth. The wholesaler initially concentrated on core organic items, but it has expanded the organic SKUs available to shoppers. For example, during the COVID-19 pandemic both organic ginger root and organic long-English cucumbers have recorded sales gains.
Collaborative Alliances
Collaborative Alliances
Collaborative efforts with vendors are relatively rare at Costco. Procter & Gamble and Clorox Co. are among the handful of key manufacturer partners earning a good portion of the coveted “fence” merchandising area and representation in member mailers.
P&G specifically receives special attention in both member mailers and stores during what has been an annual collaborative program taking place throughout winter.
Costco also has repeatedly partnered with General Mills to support the manufacturer’s evergreen “Box Tops for Education” program. Mills has in turn contributed to the retailer's annual fundraising campaign to benefit Children's Miracle Network.
For seasonal efforts, Costco has been known to tie in to a manufacturers’ national promotions.
Costco maintains a help center for suppliers on https://costco.com/vendor-inquiries.html where it offers contact information for prospective vendors among other information.
Displays and Signage
Displays & Signage
Costco accepts a limited number of vendor-supplied P-O-P materials that include shelf trays, pallets, demonstration/sampling kits, digital signage ads, and wall banners.
Pallets are the staple merchandiser and help Costco reduce overhead. Rather than having employees open boxes and unload and stack items on shelves, the company sells merchandise right from the industrial pallets they are shipped in, which saves the retailer millions in labor costs. As a result, Costco has little need for additional P-O-P materials. Aside from black-and-white price cards, in-store signage is virtually non-existent and branded messages are rare.
Costco also seldom gives vendors secondary display space outside of the "fence" area in the front of the store. Items stocked on an end-aisle pallet will not be stocked anywhere else in the store.
Considering the limitations, vendors have become creative in developing product and shipper packaging that can provide a brand presence. Many even configure shippers on pallets to give maximum brand exposure in the aisle.
The standard pallet size is 40 inches wide by 48 inches long by 52 inches high, with the 48-inch side facing the customer.
In the electronics and home appliance aisles, products typically are promoted via demonstration units placed on a shelf above the pallet.
See Costco’s Retailer Receptivity chart below for a complete rundown of its tactical P-O-P preferences.
Costco Best Bets |
|
The "Fence" requires a full portfolio, so aisle-end placement for one brand's pallet display is more attainable. | |
Merchandisers |
|
Endcap Displays | Rarely Used |
Shelf Trays/PDQs | Often Used |
Pallets | Often Used |
Floorstands/Shippers | Rarely Used |
Dump Bins | Sometimes Used |
Power Wings/Sidekicks | Rarely Used |
Category Management Systems | Rarely Used |
Spectaculars/Lobby Displays | Rarely Used |
Racks | Sometimes Used |
Secondary Refrigerated Displays | Rarely Used |
Signage/Media |
|
A-Boards | Rarely Used |
Balloons | Rarely Used |
Base Wrap | Sometimes Used |
Ceiling Signs | Sometimes Used |
Checkout Ads | Rarely Used |
Checkout Dividers | Rarely Used |
Circular Rack Ads | Rarely Used |
Cooler Clings | Rarely Used |
Counter Cards | Sometimes Used |
Demonstration/Sampling Kits | Often Used |
Digital Signage Ads | Often Used |
Endcap Signage Kits | Rarely Used |
Floor Clings | Rarely Used |
Header Cards | Rarely Used |
At-shelf Product Demo/Sample | Often Used |
In-line/Category Headers | Rarely Used |
In-Store Radio | Rarely Used |
Inflatables | Sometimes Used |
Outdoor Signage | Rarely Used |
Neckhangers | Rarely Used |
New Item Showcases | Rarely Used |
Pole Toppers | Rarely Used |
Printed Handouts | Sometimes Used |
Placeholders, On-shelf | Rarely Used |
Price-label Messaging | Rarely Used |
Security Pedestal Ads | Rarely Used |
Shelf Blockers | Rarely Used |
Shelf Strips | Rarely Used |
Shelf Talkers | Rarely Used |
Shelf Danglers/Wobblers | Rarely Used |
Shopping Cart Ads | Rarely Used |
Side Panels | Rarely Used |
Standees | Sometimes Used |
Take-one Dispensers | Rarely Used |
Tearpads | Rarely Used |
Stanchion Signs | Sometimes Used |
Wall Banners | Sometimes Used |
Window/Door Signs | Rarely Used |
Violators | Rarely Used |
Third-Party Media Operator |
|
See article. |
Store Formats/Growth
![Costco](https://assets1.p2pi.com/styles/hero/s3/2022-07/costco5.jpg)
Store Formats/Growth
The retailer currently operates 861 warehouses, including 591 in the U.S. and Puerto Rico, 107 in Canada, 40 in Mexico, 33 in Japan, 29 in the United Kingdom, 18 in Korea, 15 in Australia, 14 in Taiwan, five in China, four in Spain, two in France and one each in Iceland, New Zealand and Sweden (as of Sept. 3, 2023).
In fiscal 2023, Costco opened 13 net new warehouses and business centers in the U.S., two net new in Canada, and seven new in its Other International segment. (One each in Mexico, Korea, Japan, Spain, France, Australia and China.) In total, the retailer opened 26 new warehouse, including three that were relocations.
For fiscal 2024, Costco plans to open up to 28 new warehouses globally.
Costco stores range from 73,000 to 205,000 square feet, averaging approximately 146,000 square feet, with newer units being slightly larger. The retailer uses metal building systems to construct 90% of its warehouse stores, and newer buildings achieve 60-ft. spans between rafters with fewer bays, joists and columns to allow for increased flexibility for merchandising. The metal warehouse store from foundation to opening is 110 days, much faster than a traditional construction process of 160 to 180 days, which helps Costco meet its rigorous construction schedule. New building exteriors are constructed of interlocking metal panels that look like stucco and the color can be varied by location. For new building interiors, a white vinyl facing is used on walls and ceiling, and all joists and columns are white, or close to it.
Floor plans are designed for economy and efficiency of handling merchandise and the control of inventory. The setup encourages impulse shopping, with grocery items in the rear of the store and big-ticket items, such as electronics and jewelry up front.
Business Centers
Costco operates 27 specialty formats (included in the total warehouse count) in California, Washington, Nevada, Georgia and Arizona. In 2024 it opened its first Business Center in Anchorage, Alaska. These Business Centers are tailored to food services, convenience stores and offices, and offer walk-in shopping and deliveries. The centers offer items that a typical Costco store may not carry, such as bulk office supplies and a wide variety of cooking utensils for small restaurants and delis. The centers do not carry any of Costco’s purely consumer categories, such as apparel, jewelry, toys, sporting goods or housewares.
According to reports, the retailer has also made opening stores in close proximity to urban areas a priority, in hopes of attracting more millennial customers. (See "Customer Segments".)
Special Departments/Services
Special Departments/Services
Costco operates a variety of specialty departments, including a food cout, tire center, car wash, optical department, pharmacy (550 in U.S.), gourmet deli and hearing aid center. During 2021, its sales mix began returning to pre-pandemic levels, including sales increases in many of its warehouse ancillary and other businesses, certain of which experienced closures or restrictions in 2020. Warehouse ancillary and other businesses generated $31.6 billion in 2021, up from $26.6 billion in 2020. Net sales of its gasoline business alone represented approximately 9% of total net sales in 2021. Costco currently operates 636 gas stations globally.
In 2021, the retailer closed all its in-store photo departments due to lack of demand for prints. Members have to transfer their CostcoPhotoCenter.com images to Shutterfly by January 27, 2024; the online photo company gives Costco members a discount on their orders and free shipping on orders of $49 and higher.
The warehouse also offers more than 30 services under the categories of:
- Home: bottled water delivery, check ordering, mortgage purchase and refinancing, auto program, auto and home insurance, parts and service discount, RVs, travel, truck rental, and identity protection;
- Business: payment processing, health insurance, check ordering, bottled water delivery, phone services, and vision insurance;
- Life: home and auto insurance, life insurance, identity protection, business health insurance, dental insurance, pet insurance, prescription program and vision insurance:
- Installed Products: heating and air systems, window treatments, carpet and hardwood, garage doors, cabinet refacing, home organization, water treatment, generators and solar systems.
According to Costco, more than 1.6 million members use these services. The retailer puts out a quarterly Costco Services publication that informs members about the offerings and any updates.
The wholesaler also offers other services online in certain countries, such as business delivery, travel, same-day grocery, and various other services. (These services are not included in Costco’s net sales for e-commerce.)
Costco Travel offers vacation packages, hotels, cruises and other travel products exclusively for Costco members (offered in the U.S., Canada and the U.K.)
Virtual Primary Care
Costo teamed with Sesame to offer club members discounted outpatient medical care services. The healthcare provider employs primary care doctors and nurse practitioners to offer virtual and in-person care in more than 40 health specialties as well as lab work and imaging services.
Through the partnership, virtual primary care costs $29, health checkups are $72 and mental health therapy is $79. Members get a 10% discount on all other Sesame services, including in-person treatment.
Customer Segments
Customer Segments
Traditionally, Costco's customers are among the most affluent in retail, with an average household income of $100,000. The retailer's core customer base tends to also be older, with families and homes that can accommodate storing bulk-size purchases. Across its entire membership base, members spend an average of $2,500 each year at the retailer.
In recent years, Costco reported higher sign-up rates from younger generations and a more diverse membership base, which the retailer attributed to its buyers’ increased focus on products that have an appeal that transcends generations as well as globally sourcing products to expand its cultural and ethnic offerings.
The retailer also has adopted new e-commerce tactics to attract this demographic, (See "E-Commerce Strategy") particularly because Costco and Amazon Prime membership rates have the highest overlap, with nearly half of all Costco members also possessing a Prime membership.
Also important to the retailer are its approximately 25.6 million Executive members, who pay twice as much for annual membership, but also receive 2% cash back on purchases. These shoppers, who made up 55% of paid members (excluding affiliates) in the U.S. and Canada at the end of 2021, tend to shop more frequently and spend more than other members. Members,who fit the criteria that the retailer calls "the trifecta," are those who are executive members using a co-branded card for purchases.
The retailer was ranked ninth overall by YouGov BrandIndex, a consumer perception research service of brands by my market-research firm YouGov, in its 2021 Retail Rankings which indexed the overall brand health calculated by taking the average of impression, quality, value, satisfaction, recommend and reputation over a period of 12 months.
Internet Marketing
Internet Marketing Strategy
Costco.com has about 15 million unique visitors weekly. The retailer's website focuses mainly on e-commerce, grouping products by category and price. Online-only offers are presented in the retailer’s monthly mailers and prominently displayed on the website's homepage via carousel ads and a “Featured Products” section.
Among other components of the website:
- Display advertising for national brands is available within each department’s pullout, vertical category menu.
- Category-specific banner and display ads are found throughout the website and typically coincide with offers presented in the mailer.
Enhanced with video and audio, a digital edition of The Costco Connection is available on the website. Much like the rest of Costco’s website, the digital edition of the magazine encourages e-commerce, linking advertisements for national brands and Costco’s private-label products to the corresponding sale page on Costco.com.
The retailer’s wholly owned subsidiary Costco Travel has a dedicated website. Available exclusively to Costco members, Costco Travel lets cardholders book vacation packages, rental cars, cruises and guided vacations through costcotravel.com.
Costco sends a weekly email to about 13 million subscribers to promote offers on national-brand and private-label products. About 2.4% of the e-mails result in a purchase.
On rare occasions, the retailer promotes store openings through digital ads on the websites of local news organizations. The retailer also has recently begun selling memberships via daily deal and flash-sales websites such as LivingSocial and Zulily.
Retail Media
Retail Media
In-Store Media
Costco has almost no third-party advertising opportunities in stores. However, the retailer does feature ads on display televisions found within the electronic section at the front of each store. Costco's HDTV Network is operated by San Francisco-based Premier Retail Networks (PRN), a subsidiary of Stratacache. According to PRN, the networks are deployed at over 490 U.S. locations and reach more than 38 million viewers per week, broadcasting a mix of retailer messaging and national advertising in a 30-minute program loop.
Trends Report
For the past five years, brand marketers asked to rate various retail media platforms for the Path to Purchase Institute’s annual Trends Report have generally given the platforms good scores. In the 2024 Trends Report, Costco scored lowest for data sharing, with 75% of respondents deeming their efforts "fair/poor." The retailer ranked better for ROI, with 55% of those surveyed giving it a “good” or higher rating. (See chart below.)
![costco 2024 retail media trends](https://assets1.p2pi.com/s3fs-public/styles/hero/public/2024-01/costco.png)
Mobile Marketing
Mobile Marketing Strategy
Available for both Apple and Android devices, Costco’s mobile application, which has been downloaded 10 million times, features much of the same functionality as the retailer’s website, letting users:
- check the status of and refill prescriptions
- shop online
- become a member or renew an existing membership
- view online and in-store coupons featured in the member mailers
- clip and redeem store coupons from monthly mailers by presenting the app in stores
- locate stores
The mobile-optimized version of Costco.com has many of the same features as the app, but differs aesthetically with a rotating carousel at the top.
A digital version of The Costco Connection is available on newsstands for Apple and Android mobile phones and tablets, enhancing select articles and advertisements with videos and additional content. Advertisements for national and private-label products link to the corresponding sale page on Costco.com for easy online purchase.
The chain also works with third-party mobile application Ibotta.
Costco began accepting Apple Pay, Google Wallet and Samsung Pay at contactless terminals in its U.S. stores in 2018.
Social Media
Social Media Strategy
Costco has a limited presence on social media networks. However, it made moves to boost its social media footprint by creating and maintaining Instagram and Pinterest accounts. National brands have also begun to gain a greater presence on the retailer's social media accounts.
Facebook: 2.7 million likes (as ofApril 2023)
The most active of the platforms it uses, Costco posts almost daily updates to its Facebook page to spotlight Kirkland Signature products, deliver chainwide news and seasonal messages, share store photos and engage customers. National brands are occasionally spotlighted through updates (such as weekly "Friday Find") and short videos, and also find their way into in-store images. A "New Offers" applet directing users to a page on Costco.com highlights online-only discounts on brand-name and private-label products.
Twitter: 64.2K followers (as of April 2023)
The chain has not tweeted from its Twitter account since joining in 2013, noting the account is "currently inactive." The account suggests followers stay in touch via Facebook, Instagram and Pinterest.
A separate @Costco_Travel account has 14.8K followers and was used sporadically to promote vacation packages and deals along with information about service. The retailer has not tweeted from this account since 2020 dealing with pandemic challenges.
Instagram: 1.2 million followers (as of April 2023)
Costco posts several times a week to its Instagram page to highlight various products available in stores, share images of shoppers, dangle offers and encourage engagement. National brands and private label products are periodically spotlighted and often make their way into images. Many posts are identical to the retailer's Facebook updates.
Youtube: 19.2K subscribers (as of April 2023)
The retailer uses this platform to post short “Quick & Easy” videos of products sold in their stores being used in meals, snacks and drinks.
Pinterest: 146.7K followers (as of April 2023)
Costco has a robust presence on the platform, and receives more than 10 million monthly views. The account has almost 60 boards organized around gift ideas, promotions, recipes, seasonal entertaining, holidays and other themes. Many of the pins direct to the retailer's Costco Connection member publication, while others come from third-party sites. Certain boards serve as shopping guides and link to e-commerce pages for national brands and private label products.
E-Commerce
E-Commerce Strategy
Costco operates eight e-commerce sites globally, including in the U.S. Canada, the United Kingdom, Mexico, Korea, Taiwan, Japan and Australia. Globally e-commerce comparable sales grew by 44% in 2021 over the previous fiscal year. Net sales for e-commerce represented approximately 6% of Costco’s total net sales in 2023.
The retailer continues to focus on complementing its core warehouse business with online offerings. Its acquisition of what it now calls Costco Logistics has helped improve its delivery times and often lower delivery prices of big and bulky items. Carrying between 9,000-11,000 SKUs online, the retailer’s U.S. website tends to offer more high-end items than its brick-and-mortar counterparts with about 60% of its products not available in stores. Many consumable products are offered for sale in case, carton or multiple-pack quantities only. Among the items for sale on the website are specialty items, such as coffins and engagement rings as well as apparel, home furniture and decor, appliances, electronics, health and beauty, toys and other products. During 2024's first quarter, it sold $100 million worth of 1 oz. gold bars online.
Non-members are able to shop online, but pay a 5% surcharge at checkout and do not have access to select items and discounts.
In 2021, Costco.com, with 83 million monthly visits, ranked tenth of American e-commerce platforms by monthly traffic, according to digital intelligence platform Similarweb, New York.
Costco boosted its e-commerce business in 2017 by improving the functionality of its e-commerce site and simplifying the returns process for shoppers. The retailer launched its own CostcoGrocery delivery option within its website, offering two-day and same-day delivery.
Costo Next
Costco Next is an online marketplace offering additional products directly from vendors at a discounted cost. Members can click on various shops and explore special offers on a variety of brands and products ranging from luxury Japanese skincare to custom printed pop-up shelters to caskets. By the end of 2023, Costco Next had more than 60 suppliers, with the retailer steadily adding more vendors.
Same-Day Delivery
Only members in qualifying ZIP codes can order perishable groceries online, choosing from approximately 2,000 products, and items are personally shopped and delivered via Instacart during a selected delivery window so the member is present for delivery, but contactless delivery is available. Costco items are priced higher to include a service and delivery fee. Prescription and alcohol delivery is available, and the recipient's ID must be verified. Instacart Express membership is honored and Express members receive additional savings through lower item prices as compared to non-Instacart Express members. Instacart shoppers text or call members to discuss out-of-stock items, substitutions and refunds as well. The order minimum is $35.
2-Day Delivery
Available nationwide, excluding Alaska, Hawaii and Puerto Rico, 2-Day Delivery of approximately 500 nonperishable food items and other packaged goods is delivered similar to other Costco packages except for a $3 delivery fee. Items may be available in-warehouse at a lower non-delivered price. Shipping is waived for orders of $75 or more, and no minimum order is required. This service is available only for members, and does not include weekend deliveries.
Cold and Frozen Delivery
Costco ships cold and frozen delivery items nationwide for members only, but perishable food items totaling less than $100 (before tax) are subject to a separate $10 additional delivery fee. Items may be available in-warehouse at a lower non-delivered price. Cold and frozen products are not delivered to Alaska, Hawaii or Puerto Rico or on weekends. Due to the perishable nature of the items, orders only ship on Monday, Tuesday, Wednesday for Wednesday, Thursday, Friday delivery. Orders placed after noon on Wednesday will ship the following Monday.
Business Delivery
Costco Business Center offers its business members next-business-day delivery to commercial addresses only, and item selection may vary by location.
Shipt
Costco uses third-party platform Shipt to allow members and nonmembers alike to order grocery and perishable items from select warehouse locations. Shipt delivers in as soon as 1 hour.
Amazon
Select SKUs from the retailer's Kirkland Signature private label (See "Private Label" section) are also available for purchase online via Amazon.
EBT-SNAP
Costco now accepts SNAP online payments on Instacart's marketplace and through Costco's white-label website that was built and is run by Instacart.
Loyalty Programs
Loyalty Programs
Costco offers two types of memberships: Business and Gold Star (individual). Overall, the retailer has 127.9 million cardholders (including secondary cardholders, such as spouses and employees). The number of Costco cardholders has been on a steady upward trajectory since 2014. At the end of 2023, the warehouse club giant's member renewal rate was 92.7% in the U.S. and Canada, and 90.4% worldwide.
Business and Gold Star members pay an annual $60 fee. Both member tiers can upgrade to an Executive membership, which has an annual fee of $120 and offers a variety of discount services, including auto and homeowners insurance, auto buying, personal check printing, online investing and identity protection. Members also receive a 2% annual reward (up to $1,000) on most Costco purchases. At the end of 2023, Executive members totaled 32.3 million and represented 45.4% of paid members (excluding affiliates) in the U.S. and Canada. Executive members generally shop more frequently and spend more than other members.
Costco raised its fees to the current prices in 2017, the first rate hike in six years.
Costco joined with Citigroup bank in 2016 to offer a co-branded Costco Visa Anywhere card. Cardholders earn cash back rewards of 4% on gas, 3% on restaurant and travel purchases, 2% on warehouse and Costo.com purchases and 1% on all other purchases. The annual total is presented annually in the form of a certificate redeemable for cash or at Costco.
Private Label
Private Label
In 1995, Costco consolidated all of its private labels under one: Kirkland Signature, which has become one of the most recognizable brands as it aims to deliver high-quality at a low cost. The brand saw strong global sales growth with sales exceeding $59 billion in fiscal year 2021, compared to $52 billion in the prior year. Costco focused on driving down costs, improving quality, expanding in-country sourcing options, reducing environmental impact of transportation and introducing new products for the brand. In turn, Kirkland Signature beef and bathroom tissue earned “most trusted” honors from Canadian shoppers according to BrandSpark’s 9th annual Most Trusted Consumer Product Brands for 2022.
Spanning apparel, grocery, household items, health and beauty, furniture, alcohol and more, Kirkland products are generally priced at 10% to 20% less than national brands, which often pressures those brands to lower prices. In 2018, Costco launched Kirkland razors after selling Gillette razors at a higher price for years. However, Costco has long partnered with manufacturer-owned brands to offer new products under its Kirkland Signature private brand.
Making up about a quarter of merchandise, Kirkland products are typically stocked next to their national-brand rivals. The products are scattered throughout stores and sometimes highlighted through display ads on Costco.com and on the covers of monthly member mailers. They represent a growing portion of the retailer's overall sales and are sold at the warehouse club, Costco.com and Amazon.com. According to The Wall Street Journal, about 25% of Costco's $118.7 billion in annual sales comes from Kirkland Signature products.
Cause/Community Programs
Cause and Community Programs
Costco's commitment is to be active in its local communities. It has a Charitable Contributions Committee that meets quarterly to determine which programs to support and how to best meet the needs within its communities. Costco budgets 1% of pretax profits for selected charitable contributions focused on children, education, and health and human services.
In fiscal year 2021, it contributed more than $58 million to disaster relief and to hundreds of organizations through a variety of charitable programs and grants, including $1 million to the Vaccine Equity Initiative, which expanded vaccine access to hardest hit, underserved communities. The retailer’s other chainwide, philanthropic initiatives are:
- Children’s Miracle Network: During the annual “Miracle Balloon” campaign, Costco solicits donations for the nonprofit at checkout and on Costco.com. Paper balloons bearing the names of donors are showcased in stores during the month-long campaign in May.
- Feeding America: In fiscal year 2021, Costco contributed $3.5 million in cash grants and more than 70 million pounds of food and other products from U.S. warehouses and depots to Feeding America. All of its international locations also donate to local food banks.
- Costco Scholarship Fund: Administered by the College Success Foundation, the Fund provides financial assistance to highly qualified minority students looking to attend Seattle University or the University of Washington. In the past 21 years, Costco raised more than $65 million through the Costco Scholarship Fund and more than 2,000 scholarships have been awarded.
- Education: Costco has donated more than $65.8 million to other schools and organizations for scholarships and educational opportunities for underrepresented minorities. In 2021, it donated more than $5.8 million in this area.
- College Success Foundation: The retailer donated $10 to the College Success Foundation, which is dedicated to supporting underserved, low-income students beginning in middle school and continuing through college.
- World Vision: Costco has grown its program with World Vision to donate first-quality items that used to be destroyed, recycled or returned to the supplier. In fiscal year 2021, the retailer donated to people in need in 32 countries.
The retailer also has supported local events, such as the “Santa to the Sea Half Marathon and 5K,” in Oxnard, California, which collects Christmas gifts and toys for low-income children.
Sustainability
Costco is committed to efforts around social and environmental issues. Regarding the environment, the retailer’s initiatives align with the Global Climate Action Plan, the Global Forest Conservation Commitment and UN Sustainable Development Goals.
As part of its ongoing sustainability efforts, the wholesaler in 2021 progressed its packaging strategies which include:
- Reducing the amount of packaging overall. For instance, the wholesaler has reduced the amount of plastic used in several products packaging, including dishwasher and detergent pacs, meat tray and meat roll bags along with paperboard and corrugated boxes where applicable.
- Increasing the recycled content and certified fiber in packaging. Costco has been an active user of recycled content in plastic packaging for many years.
- Increasing the recyclability and compostability of packaging. For example, in 2021 the wholesaler moved away from plastic clamshells for apples to recyclable cardboard. Costco also recycles a great deal of packaging in our daily operations and diverts over a half million tons of packaging annually. This was an increase of 13.3% in 2021 from 2020.
- Educating and learning from employees, suppliers and members the importance of sustainable packaging and recycling.
Costco’s current goal is to divert 80% of waste generated within its global operations. In fiscal year 2021, Costco reported a diversion rate of 78.3%, with 12 regions reporting. In fiscal year 2021, 179 U.S. Costco warehouses also sent 13.7 million pounds of organic materials to feed cattle and hogs.
As of January 2022, the retailers emission reduction commitments are as follows:
- Scope 1: accelerate the phase-out of HFCs and increase its investment in refrigeration retrofits to reduce refrigerant emission Global Warming Potential (GWP) by 30% by 2030 as compared to its 2020 baseline.
- Scope 2: increase purchased renewable electricity in its global operations from 15.8% in 2021 to 30% by 2025; 60% by 2030; and 100% in global operations by 2035.
Between these two actions Costco is committing to an annual 2% per year reduction target for global Scope 1 and 2 CO2e emissions. Should the retailer achieve this target it estimates it can reduce cumulative Scope 1 and 2 CO2e emission 20% by 2030 and 45% by 2035 from a 2020 base year.
Advertising Strategy
Advertising Strategy
Costco almost never advertises. Marketing and promotional spending is limited to:
- new store openings (via ROP newspaper ads, FSIs and display ads in local media outlets),
- occasional direct mailings to prospective members,
- regular publications and member mailers,
- seasonal handouts (see "Circulars and Publications") and
- weekly emails.
The warehouse club chain mainly uses periodic publications and weekly email newsletters to promote store products, offers and services. Otherwise, the retailer relies on word of mouth. However, it recently began making an investment in paid search advertising following the launch of its own online grocery delivery service (See "E-Commerce" section).
Circulars and Publications
While Costco does not distribute traditional circulars, it does send out monthly member mailers promising roughly $1,400 to $2,000 in instant savings and $6,000 to $7,500 worth of online-only offers. The mailers are typically sent at the beginning of each month, but distribution windows vary. Averaging about 20 pages in length, Costco’s mailers highlight a variety of national-brand and private-label products on the outer cover. The address side is generally reserved for promoting a single brand or manufacturer. (See “Collaborative Alliances.”)
Costco also has produced special circulars for the holiday season. Distributed in stores, the circulars usually tout the club’s greeting card service and present instant savings on a variety of electronics, apparel, home appliances and gift baskets.
The Costco Connection, a monthly magazine mailed to 12 million Executive and Business members, averages 117 pages and runs articles on topics, such as food, health, travel and business. The U.S. warehouse distribution of the publication spans 250,000 copies. Eight regional versions of the magazine are available in the U.S. as well. Countries, such as Canada, the U.K. and Korea, also have their own versions.
The monthly magazine is considered a great way to herald the entrance of a new item in stores and create awareness among Costco members. About 53% of members that see a product advertised in the magazine say they then buy the item.
Other Costco publications include:
- The Costco Way: The cookbook is distributed in stores annually on a first-come, first-served basis the weekend after Thanksgiving. Each edition includes roughly 250 pages of recipes using national-brand and private-label products available in stores. Manufacturers' logos are used to indicate when their brands are in a recipe.
- My Costco: A guide to the full roster of services available to Costco members. Published periodically, the publication rarely features advertisements or brands.
- Healthy Living: The quarterly health magazine is available at the pharmacy counter at all U.S. Costco stores. A digital version of the magazine is available on Costco.com. Ads for national and private-label products found in stores are scattered throughout the magazine.
- Office Products: A catalog periodically mailed to business members that details the office products available on Costco.com. National brands such as 3M's Post-it, Kimberly-Clark's Kleenex and Nestlé’s Coffee-Mate are typically highlighted throughout the magazine.
From time to time, Costco sends out mailers to encourage people to join, most recently with a special offer of a $30 digital gift card for those who become members and enroll in auto renewal.
Solution Providers
Solution Providers
- Sales and Marketing Services: ADW, a division of Acosta Sales & Marketing, Issaquah, Washington
- Retail Marketing: Omnicom Group's Creative Channel Services, New York City
- POP Displays: TPH Global Solutions, Chicago
- Sampling: Club Demonstration Services (CDS), Irvine, California (a subsidiary of Advantage Solutions)
- Architecture Firm: MG2, Seattle
- Builder: Span Construction & Engineering Inc., Modera, California
- Omnichannel retail service agency: Bluebird Group, Minneapolis
- Coverings for Conveyor Belts: Handstand Innovations LLC, Grand Rapids, Michigan
Sponsorships
Sponsorships
Costco has signed on as the official sponsor of various local festivals, including the Blue Ridge BBQ & Music Festival, in Tryon, North Carolina, and Coconut Grove Festival in Miami.
The retailer does not sponsor any major sports team.
Marketing Expenditures
Marketing Expenditures
Pre-opening expenses, which include advertising for new store openings, totaled $76 million in fiscal 2021, $55 million in fiscal 2020, $86 million in fiscal 2019 and $68 million in fiscal 2018. The company’s total ad spending is so low that Costco is not obligated to publicly disclose the figure. Costco saves about two percent of its budget every year with this strategy.
![Costco logo](https://assets1.p2pi.com/s3fs-public/styles/hero/s3/2022-07/costco_logo.png)
Costco Promotional Calendar
A roundup of seasonal promotions.
January
- New Year: Fitness machines and equipment as well as resolution-friendly products are promoted digitally and in stores.
- Lunar New Year: Food, jewelry and floral arrangements are promoted on costco.com and via email for the Chinese New Year.
- Super Bowl: A general “Gear Up For Game Day” theme spotlights televisions and home sound systems on costco.com and via email. "Super Bowl snacks" are highlighted in the January mailer with coupons.
- International Food Event: Costco locations offer samplings of international food items.
- Valentine’s Day: Chocolates, flowers, heart-shaped necklaces and other jewelry are highlighted in stores, on costco.com and via email.
February
- Presidents' Day: Runs an annual Presidents' Day sale on appliances and mattresses lasting nearly the entire month.
- Tech Days: Savings on appliances, computers and electronics.
- Lunar New Year (depending on day observance falls on).
- Super Bowl: Newsletters tout game day savings on TVs, speakers and more.
- Spring Deals: Seven days of deals on a multitiude of items.
- In-Warehouse Hot Buys: Warehouse pricing on select items. Some deals are in-store only while others are also available online.
- International Food Event
March
- Easter: An assortment of candy and pre-filled baskets are merchandised along store aisles and promoted on costco.com and via email.
- Lawn & Garden: Outdoor living and other relevant products and discounts are emphasized.
- Allergy: A spotlight on relevant products via email ads, member mailers and costco.com display ads.
April
- Spring Cleaning: Household brands from manufacturers such as Reckitt Benckiser are highlighted on costco.com and in member mailers.
- Mother’s Day: High-end cameras, jewelry, flowers and other products are emphasized.
- Spring Audio Savings Event: Audio technology including speakers and headphones receive the spotlight via costco.com and email blasts.
- Lawn & Garden
- Allergy
May
- Memorial Day: Runs annual “Memorial Day Appliance Savings” event often spanning deals from manufacturers LG, Whirlpool, Samsung, KitchenAid and GE Appliances. Usually kicks off mid-May and through June 3. Digital support is heavy. Also runs a themed mattress savings event.
- Father's Day: Highlights gift ideas including watches, luggage, gift baskets, grooming essentials and other items in categories in a dedicated digital hub within costco.com. Significant email and digital activity supports.
- Children's Miracle Network: The retailer collects donations to benefit the nonprofit. Paper balloons bearing the names of donors are displayed in stores.
- Month of Miracles: An annual campaign that collects donations for nonprofit Children’s Miracle Network Hospitals across North America. Throughout May, $1, $5, $10 or $100 paper "miracle balloons" bearing the names of donors are displayed in stores.
- Allergy
June
- July 4: Savings on appliances including Whirlpool, Samsung, LG, GE and Bosch.
- Dads & Grads
July
- Back to School: Backpacks, computers and bulk school supplies are spotlighted in stores and on costco.com.
August
- Back to School
September
- Halloween: Confectionery and snacks are promoted in stores while costco.com and emails highlights halloween-themed cookies and other products.
- Holiday: The retailer has stocked aisles with traditional holiday needs as early as mid-September.
October
- Halloween
- Breast Cancer Awareness: Costco has tied into Procter & Gamble’s “Give Hope” program in past years.
November
- Thanksgiving: Deploys a Black Friday ad (or "Holiday Savings" book) containing in-store and online deals on holiday food items, tires and electronics throughout the month. Runs Cyber Monday deals online. Digital activity supports.
- Holiday: Spotlights custom greeting card services as well as gift ideas in annual seasonal circulars and member mailers. Electronics, gift baskets and holiday decor are highlighted on costco.com and via email.
December
- Super Bowl: Deals on Super Bowl tickets and hotel packages well ahead of the game.
- Holiday: A December holiday gift handout in stores showcases gift ideas like laptops, toys and snacks just before Christmas. A December mailer for the whole month also emphasizes gift ideas and holiday necessities. Also, runs an annual "12 Days of Deals" Christmas sale at the beginning of the month, with extra savings that are online only.