It costs $60 per year for a Costco membership. $120 per year if you have an “executive” membership.
I remember several decades ago talking to a Kmart executive shortly after Walmart had eclipsed Kmart as the largest retailer. He mentioned a decision the beancounters had made to eliminate the in store lunch counters because they were losing money.
Apparently during the day non-working female shoppers were meeting at the lunch counters for lunch. These in-store restaurants were losing money. After K-mart eliminate the lunch counters as a cost savings, store traffic and sales dropped. The bean counters, only looking at the losses didn’t understand they were social centers that attracting shoppers to congregate, socialize, and most importantly spend money in the store.
Likewise Kmart eliminated its signature “blue light special” which featured heavily discounted products. This in-store promotional program created excitement and sales in the store. Again the bean counters could see only the lose on the featured item, not the full price merchandise begin checked out with the blue light special.
James Sinegal, the founder of Costco, was a visionary who understood the mindset of Costco customers. The CFO, sitting in his/her office staring at a spreadsheet on a PC knows little about the psychology of the customer roaming the store. Sinegal understood the hot dog brought customers to the store who spend hundreds of dollars on other very profitable items each time they visit a Costco store and savor the $1.50 hot dog.
Many of America’s once great retailers have disappeared over the past 50 years (Sears, Kmart, Woolworth) after narrow minded beancounters and private equity owners put cost cutting over the customer experience.
Long live the $1.50 hot dog. The day the price increases to $2.00, $2.50 or whatever, you will know Costco has started down the slippery cost reduction slope to extinction.
Good post. You’re absolutely right.
"The CFO, sitting in his/her office staring at a spreadsheet on a PC knows little about the psychology of the customer roaming the store."
Bingo. When Kmart's business started suffering, it was taken over by a billionaire who knew how to get rich but maybe not how to run a business. I worked a P/T job at one of the stores for a year until it was shut down. The store had a nice collection of clothing and shoes (much better quality than Walmart's) that brought in customers. But, as management explained, headquarters had this policy: When a store started doing poorly, headquarters would punish it by investing less into it. With less and less money, the store did worse and worse. Our store couldn't even afford heat or A/C, so it was cold in the winter and hot in the summer. Customers can see a store going downhill. As fewer people were hired to work there, more merchandise walked out the door, if you know what I mean. Many people blamed Walmart, but Kmart did itself in.