What Costco Has That Amazon Doesn’t
How the Well-Known Warehouse Has Made Itself the Winning Underdog
When retail experts discuss game-changers in 2020, the usual suspects come up—Amazon, Walmart, Target, Ulta, CVS and a few others. But one retail underdog has been quietly winning its members’ hearts from 1983 to now. And in 2020, it’s one of the very few retailers who can be described as “Amazon-proof.”
“Costco has done an amazing job of being very measured about how they move forward,” said Mina Fader, the managing director of the Baker Retailing Center of the Wharton School of the University of Pennsylvania, during an episode of the Retail Rundown. “They’ve been a real huge success for many years, and you can see it in terms of the value that they’re providing today. That will be another company that I think is doing fantastically well [in 2020].”
Costco Wholesale has curiously made itself one of the few retailers who appears to be “Amazon Proof.” But what exactly makes this members-only warehouse any different from the online marketplace? And why is it being called out as one of the brands that will make a great impact this year? It may be as simple as giving their members what they need and making it easier to get it.
Costco relates to the shopper who knows everything or nothing at all
Making online shopping simple to use and convenient is half the battle. For example, go to Amazon’s website to purchase tires. For a user who isn’t sure what he’s doing, knowing the brand, wheel rim size, tire aspect ratio, tire speed rating, section width, tire load index and tire height may be all too overwhelming to know off hand. Going in a physical store just may be easier to do than flipping through the car owner’s manual to find all these specifications.
But go on Costco’s website, and users can start with the basics that they will almost certainly know. Search under “Vehicle” and type in the year, make and model of the car. Or, search under “License Plate” for the state’s public vehicle records. Car-savvy users can skip the first two options, and choose the Size or Item # option to find their tires. Costco’s website is set up to work with people who know all about the product they want to buy and those who need far more assistance for their purchase.
And even though Amazon and Costco both offer tire installation options, Costco wins in transparency. The latter retailer provides a rundown of the cost for installation, tire disposal fees and state tire fees before you even have to buy anything. By the time they’ve done all that, members can choose to drive there and walk right outside. Get their repairs done next door to the regular store—with double-digit savings for in-house repairs. Amazon customers are forced to wait until their items get there before doing anything further, and they have to cross their fingers hoping they got the right parts in the first place.
Travel down the road of membership perks
Amazon Prime is very well-known for fast one- and two-day delivery; exclusive movies and TV shows; bargain deals at Whole Foods Market; and exclusive discounts on baby food and diapers, personal shoppers and fresh produce. And more than 101 million subscribers in the United States have the ability to enjoy these discounts. While Amazon Prime may be known more for lighter perks such as exclusive shows like “Jack Ryan” and “Bosch,” there is more to a members’ shopping experience. A deep-diving shoppers knows they can find good deals on gourmet foods like caviar and live lobster that battle brick-and-mortar store rates.
The thing is, Costco can give them a run for their money there, too. The warehouse is full of bulk groceries and everyday hygiene needs, beauty products and even luggage. But savvier shoppers understand how to make the most of that $60-$120 membership beyond the obvious. And sometimes the “obvious” part is them leaving the store. Unlike Amazon shoppers, Costco members get consistent discounts at the warehouses’ nearby gas stations. And if members are already in need of gas, they may as well go inside the store and stock up on groceries, too.
Amazon’s site may be the place to go for travel supplies like suitcases, portable garment steamers, toiletry bags and collapsible water bottles. But Costco Travel offers those kinds of supplies, plus members can book a flight, cruise, rental car and hotel to their destinations.
And if they’re in the mood for a road trip, members can skip the air and water travel arrangements altogether. Just buy a new car and drive themselves to their next destination via the Costco Auto Program. Brand new and pre-owned cars for purchase are included in the Costco-negotiated deals already, without the haggling most common in auto dealerships. And save 15 percent on parts, service and accessories for already-owned household vehicles, too. Plus Costco’s partnership with Ameriprise Auto & Home Insurance could save their members hundreds of money on auto insurance needs.
The Takeaway: Amazon has a track record of going after its competitors to try to match their pricing or the products they sell. The one weakness of Amazon is what works best for it: buying online. Just as pet-loving consumers don’t want to pay for massive shipping and handling for pet food, grocery consumers and auto consumers don’t want to pay online rates for buying in bulk. While brick-and-mortar retailers have had some highs and lows in profits, warehouse stores have both the size and the availability that matters for the kinds of customers who want to be able to drive up, pay up, fill up (the tank) and go home.