Here’s an amusing squib from SFGate, ruminating on a recent report that some analyst has dubbed Costco an “Amazon-proof” entity. Deutsche Bank upgraded Costco’s ratings from “hold” to “buy” and raised its target price from $152 to $200.
SFGate’s Business Insider ruminates on the possible reasons for this, and concludes that “Costco has been able to hold its own because of its membership model and ability to incentivize visits to brick-and-mortar locations.” A vague comparison is made with Target and Walmart, which lag far behind the warehouse giant.
How does one “incentivize” visits to a real-world store when convenience and selection are so much greater at the virtual “store” that is Amazon? Besides the fact that Costco is often (but not always) cheaper than Amazon, Costco has one policy that in fact makes it more convenient than ordering items from the comfort of your keyboard: it lets you return anything without an argument. No wrapping stuff up and returning it to UPS, no deadline (except for some electronic gear), no written explanation of the problem: if you don’t want it, you don’t have to keep it.
And in our parts, Costco underprices just about every other gasoline seller in the city. Often as I’m driving away from Costco’s gas pumps, I’ll see prices at neighboring stations that range from 8 cents to 20 cents(!!) a gallon higher than what I just paid. Where they sell propane, they underprice everybody, too. Obviously, if you have to schlep to Costco to get a good price on fuel, you might as well pop into the store to buy whatever you need — or think you’re about to need.
Costco does not impose arbitrary rules that make it difficult or annoying for customers to shop there (“free shipping” if you buy enough junk you don’t need to rack up a $35 bill, or if you pay an exorbitant annual fee) and difficult for vendors to sell their products through the company’s stores.
However, I think the corporation’s greatest strength over its competition is that Costco has human beings. Ask them, and you’ll find most of them actually LIKE working at Costco. Then consider the recent NY Times article about the miseries of working at Amazon. Look around inside a Walmart and ask yourself if you’d really want to work there: in our parts, 99 percent of the stores are dingy, depressing, and inhabited by real-world “Walmart People,” who are less funny when you’re elbow-to-elbow with them than they are when you’re watching them on YouTube. Walmart employees, if you can find one, act like they don’t care whether you live or die; Amazon employees, if you can find one, behave like rule-bound automatons. Costco’s employees are always pleasant and usually helpful.
Is Amazon hard to beat? Sure. But is it invulnerable? I doubt it.
No matter what people will try to argue, you’re always going to have a need for brick & mortar stores. It may be that only the best of the best survive and prosper, and I would certainly make a case that Costco falls into that category with their operational strategy.
Here on the east coast, we have a store called BJ’s that’s like Costco but has more variety of food items than Costco does. Their prices aren’t always better, but often times the prices are close enough and BJ’s is better about being located closer to blue collar/working class neighborhoods than Costco chooses (so the gas and time savings evens out price differences). As such, I live by a BJ’s and shop there more than Costco. But where Costco still makes their membership worthwhile is with big-ticket items either our household needs, or my immediate family members nearby need (and can order online). You still have to check elsewhere, but often their printers (especially laser) are cheaper than most places, and they come with the great warranty. Same thing for TVs (for brand name at least). Infant/Kids car seats are another area, at least online, where their prices (when on sale), are far cheaper than any one I’ve researched. It’s Costco’s sale prices that really make them cheaper than anyone out there it seems (not their regular prices). However, because Costco caters more to a white-collar crowd, sometimes their selection of big ticket items is limited to more costly versions, like higher-end appliances, $3,000 furniture sets (i’d never spend that much), and $5,000 outdoor furniture sets (lol). We make the Costco membership worth keeping by having the 2% cash back membership and sharing it with family members (so it pays for itself).
That’s interesting. In our parts, the Costco chain started in a working-class area. As a matter o’fact, its predecessor, Fedmart, opened near Indian School and Grand Avenue, a grungy part of town, indeed. Later there was a Costco in that building, and still is: today it’s one of the Costco business outlets. The shopping center that houses the Costco closest to me has one of the highest rates of car break-ins & thefts, of robberies, and of assaults in the city. It caters to a downscale demographic, which is reflected in the choice of merchandise it carries (or doesn’t carry…).
Over time, they did build Costco outlets in more affluent areas. I now restrict my Costco shopping to days when I have to drive up to the credit union, which takes me about halfway to a Costco whose parking lot is reasonably safe and that carries the full range of products.
LOL! Those out door furniture sets… WHO buys that stuff???????
I don’t shop at Costco – I can’t justify the membership fee. I do shop at amazon though.
I have had several interactions with amazon “chat” support over this past year – and been pleasantly surprised at each one – the person on the other end was competent, friendly, wrote and read English well, and – most importantly – had the power to solve my problem.
I read the article about amazon employees – and I’m taking it with a grain of salt. I’ve read several articles written by journalists who took seasonal work in the fulfillment centers and THOSE are the new sweatshops. But working in the call centers and in the IT departments and white collar jobs at amazon – I doubt it’s the hellhole that article claimed. Certainly there are going to be managers who make bad calls and treat their employees poorly – but I doubt it’s a corporate-wide problem to the extent that article made it sound.
That being said – there will always be a need for brick and mortar stores – but it’s certainly getting easier to avoid them 🙂
I wouldn’t make that too large a grain of salt. Old friend of mine has a daughter — brilliant young woman– who went to work at Amazon. She was there for several years. The job pretty much crushed her. Before that NYT story came out, Friend remarked that her daughter has PTSD as a reault of working there.
This was a Harvard graduate with and advanced degree.
Having worked in Silicon Valley now for over 15 years – there are a lot of companies who have really … intense…environments and will try to work their employees to the bone. The benefits, if you are young, energetic and willing to devote a few years to living and breathing your work is that you get a ton of experience, make a bunch of money, and can have a really big, recognizable name on your resume.
Not everyone wants to do that, or can handle it. They shouldn’t work for those companies. But it’s all about what your goals are. But if you want amazon or google or microsoft on your resume – that’s the environment you will be in.