Nov 21, 2022Liked by The Rational Walk

I go there at least once a week at lunch to fill up the gas tank. The savings on the gas more than pays for the 1.65 hotdog plus drink.  I then get cash out of the cash machine because even though it is not my bank, they do not charge a fee so I save three dollars right there. So far I have spent no money at all (after the money I saved on gas), I’m actually walking out with more money that I walked in with. One of the favorite things I love is the moleskin notebooks. The letter sized ones sell for $19 for six of them. I’m basically paying the price of one notebook and getting five for free. I could go on like this with a dozen other regular items but you get the picture 

Expand full comment

Do Costco’s lower margin really translate to lower prices? I switched to Sam’s years ago because they were cheaper. And now Sam’s has better tech: scan and go app or order in app and pick up. I hate shopping and I hate wandering in big warehouses. I just want to save money.

Expand full comment

I think it would depend on the customer's basket of items -- Costco is not necessarily always the cheapest on every item since they don't do loss leaders. Sam's Club is a reportable segment in Wal-Mart's financials but doesn't have the level of detail provided by Costco and there are some shared corporate expenses between Wal-Mart's super centers and Sam's.

Expand full comment
Oct 18, 2022Liked by The Rational Walk

Seriously, build an excel spreadsheet with the items you want and what aisle they are on. I mark the boxes of what I want and then only go through each aisle once. Otherwise it's a wandering labyrinth.

Also, kirkland brand alcohol is another brand relabled. It's worth the price.

Expand full comment

I’ve read that they move things around quite a bit but hopefully not for the core grocery items.

Expand full comment
Oct 18, 2022Liked by The Rational Walk

For food items it rarely moves around. You'll start to notice a logic to their locations.

Yes. I'm an analytical person... :)

15 AA batteries

17 light bulb LED

20 engine oil 5w20 for 2009 SUV

22 downy softener

22 Tide Pods

24 dishwashing pods

25 ziplock large

25 ziplock small

25 tinfoil

25 kitchen can bags

26 Toilet paper

26 paper towels

26 Napkins

26 Dog and cat food

26 cat litter

31 chips, pita chips, potato, etc


50.1 ground beef

50 chicken tenders, frozen

50 frozen salmon

49 Wontons

49 burrito

48 bacon

48 Pulp free OJ

47.1 sausage Chicken and apple

47.1 street taco

47 string cheese, low fat

46 bread

45 cheese

44.1 humus / pretzel kit snacks

44 Milk

44 coffee

44 Eggs

43 Peanut Butter

42 cereal honey nut cheerios

42 cereal Special K

40 extra virgin olive oil

39 chicken broth

38 Soy Sauce

38 mayonaisse

38 pace picante sauce

38 A1 steak sauce

37 spaghetti noodles

37 diced tomatoes

37 spaghetti sauce

36 Tuna Fish

35 corn, canned

35 peaches in jars

35 canned green beans

35 Apple sauce individual

33.9 toothpaste

33.2 berries blue, ras,

33.2 red grapes

33.2 asparagus

33.2 brocolli

33.1 bananas

33 Dove Soap

32.9 liquid soap

31.1 peanut butter pretzels

31 dental floss

30.1 pistachios

Expand full comment
Oct 18, 2022Liked by The Rational Walk

Ravi, nice introduction to Costco! The counter-intuitive notion of Costco is that it can not only keep margins way below the competition, but the low margins have the effect of cultivating trust that is reflected in the 90+% renewal rate. Costco operates on creating positive-sum member experience. The normal retail experience is more negative sum: watch out. With Costco you don’t have the nagging thought that someone is trying to pull a fast one on you: trying to sell you junk for something.

Now you should sign up for a Costco-Citi credit card. Your annual cash back will be multiples of the membership fee.

Expand full comment

I've read that the maximum gross margin is around 14%. This makes it very interesting to observe what is likely to be the rock bottom wholesale price of branded consumer products (due to Costco's buying power). From that information, we can infer the markups of traditional retailers. I could probably spend an entire day walking around the store and looking at specific products in detail, but I'm not planning to take it to that level of detail. I was very impressed overall.

Expand full comment
Oct 18, 2022Liked by The Rational Walk

With the trust Costco aims to nurture, you will find price comparison is unnecessary, although l liked your examples—they confirmed my expectation. I did recently happen to check the price of a bag of granola we buy at Costco. We were out, so I went to Amazon. They had the item for the same price—but half the volume.

If Costco can purchase an item for an unusually low price, it passes the low price—with the standard markup— on to the member.

Expand full comment
Oct 18, 2022Liked by The Rational Walk

You will want to address the criticism that many Costco items-not Kirkland-are last year , overruns,

or in general, not top of the line merchandise. Hear this about eyewear in particular.

Expand full comment
Oct 18, 2022Liked by The Rational Walk

the clothing can be random and intermittent once you get beyond socks and such.

I rarely buy clothes there. I'm restocking the pantry for 2 teenagers. Can't afford to buy anything else ... :)

Expand full comment

That's interesting. Haven't read much about overruns. They do over 12 inventory turns per year and seem quite good at inventory management.

I actually might go to their optical department soon. I need new glasses and was thinking that they might have good prices.

Expand full comment

Can’t wait to read the full analysis

Expand full comment