What is the Role of the Membership Model and Warehouse Model inAttracting and Retaining Costco Customers

Abstract

While substantial research has been conducted on Costco’s unique business strategies and models, few researchers have taken an in-depth look into Costco customers. As one of the most famous retailers in North America, Costco’s mission is “to continually provide members with quality goods and services at the lowest possible prices (Costco.com).” This statement reflects Costco’s essential competitiveness in keeping its member pricing as low as possible. Costco chose a novel business model to achieve a low price and profit from membership fees instead of pricing the goods too high. Meanwhile, their warehouse model reduced labor costs and increased the quantity offered for a single product. Costco created a new business model integrating memberships and bulk sales, reducing product prices and attracting more customers. With the increasing development of the economy, especially in North America, various novel business models have been used; however, their essential working principle is rarely emphasized. This paper aims to find out what the roles of warehouse and membership are in gaining more customers and benefiting the company. This study surveyed 30 respondents living in Toronto with Costco stores to determine members’ attitudes toward these two business models. The study also used the quantitative method using secondary data sources such as Costco’s website, annual reports, and various financial websites. Results indicate that by uniquely positioning itself as a paid-membership and warehouse model, Costco’s strategies brought massive attention through the invisible advertisements implicitly found in that positioning.