Is Costco the happiest retail space on Earth? Friends, family, acquaintances suggest it is. I’ve rarely heard a bad word uttered toward or in Costco. The apparent euphoric shopping experience at Costco is unparalleled. Those running the Costco ship deserve high accolades for the experience they’ve built. Three main reasons make Costco what it is today: First and foremost is branding. Second is unique and quality products. Third is the membership model. It is hard to argue the success of Costco. They’ve perfected those three areas and because of it people pile into their stores nationwide each and every day.
I assure you the intent of my letter today is to share my experience and subjective opinions of the store. Those reading may interpret, concur, share thoughts, or violently disagree however they choose.
With that, in light of recognizing Costco’s success, I’m afraid I cannot be on the Costco love at all costs bandwagon. In fact, I’ve been a Cranky Costco Consumer (Club 3C) since 2012 when my oldest was about 4 years old.
The short reason is Costco’s uncanny ability to be a budget slayer and enemy to financial goals.
You see, we as a family have been on and off Costco membership three or four times since 2012. Each time we’ve been off Costco we’ve more easily met our grocery budget targets. We are currently on a Costco membership and our food spending is up 25% compared to when we weren’t.
I’ve thought a lot about this over the years wondering why. Costco is supposed to be a deal. Right? Great for finances because buying in bulk to bring the unit cost down is a slam dunk for success. Right? Well, wrong! Costco ultimately became the three strike store for me. We’d buy three things, spend $300, and three days later need more food. It only scaled worse as our family grew in number and age.
Listen. I’ll be the first guy in line to praise Costco for their product quality and selection. Their products are well received by many for good reason. The reality though, is what Costco doesn’t want you to understand, or more accurately realize, is something they know you know but don’t want you to know because it would end their perfectly formulated business model.
As humans we rely on sustenance, namely calories to keep us alive and full of energy to carry out whatever human related tasks we decide to embark on each day.
What also is required as part of our calorie consumption is variety. Variety in the nutrients we take in to maintain a proper balance. From here on I’ll refer to this as the variety complex.
Listen, I know you know this. You even subconsciously know this during a shopping trip. But, it’s not a driver in decision making during a shopping trip. Those drivers are typically cost per unit and taste. If, however, variety held even a tenth part weight as a third member of the shopping decision tree, I’m convinced Costco would be out of business.
I realize I’m likely on an island in my view of Costco and fewer people on earth will agree with me than the number of people who believe earth is flat. So maybe I’ll make a fool of myself just like the flat earthers, but for now I stand by my convictions.
Let me explain in more detail.
I really like avocados. However, as much as I love avocados there are only so many I can eat in one sitting and only so many I can eat in subsequent sittings. Why? Because of the variety complex. It’s human physiology. Avocados alone can only satisfy so much. I know this is obvious – probably even to the point of being offensively obvious. But, let me ask you. When you were at Costco and bought a bag of avocados what were your first two thoughts? Probably first was ooh i like avocados and don’t have any, should I get some? The second question was what is the price per avocado? Assuming a positive response to the first two questions, a third question might come which is: do I really need 20 avocados? You probably answered no, but because the taste and cost per unit criteria were met and you’d have to drive to another store to get fewer, you convinced yourself it was a good buy.
In general, such practice has recently been tagged among social media outlets as ‘Girl Math.’ Meant as a joke, ‘Girl Math’ is bad math used to justify purchases and spending habits. Costcoland creates an environment that unwittingly brings out the best ‘Girl Math’ in all of us, and in the end Costco walks away with our money.
When you gleefully return home from your glorious Costco trip, you quickly eat an avocado or two, maybe with some toast, and enjoy an evening watching reruns of Care Bears and He-Man totally satisfied with a successful day. However, after a week goes by and after only eating maybe one more avocado, the remaining seventeen avocados’ fate is quickly destined for the garbage.
Scoreboard: Costco 1, Consumer 0
Costco got what they wanted. A consumer getting a good quality product at a reasonable price per unit, and more money in their pockets because overall you spent more than you really needed even though your unit price may have been better than other stores. Overall, however, you lost money on your food wager.
When I say wager, does that sound familiar to another business model? Maybe one you might find in Vegas? The reality is odds are against you coming out ahead after visiting Costco. That’s why Costco’s business model is brilliant not even counting the membership fee. I shouldn’t be paying a retail space to grace them with my presence. But, again, more money to Costcoland.
When I go to a traditional supermarket, sure I may pay more per unit in many cases, but it’s a lot easier to only buy what you need and overall come out ahead. Overall, you will come home with more variety for the same amount spent and therefore in the long run feel more satisfied not only in the belly but the bank account.
You might say, well I can’t get what they have at Costco at other stores. Again their brilliance shines through. They pull you in with quality unique products, then make you buy a large quantity of them. Because they know you need variety in your diet, to get that variety you’re going to need to buy several different items. A need for variety plus buying in bulk means more money for Costco. In summary, the Costco success equation is: Human need for caloric variety plus unique product allurement plus a dash of advertised lower unit pricing by buying in bulk equals more money spent at Costcoland.
In the end, the score in Costco’s bank account is 100 and Consumers bank account needles somewhere between 0 and 1. Costco just wants you to forget about the first ingredient in that formula and focus on the last two – which is what we almost exclusively do when we shop for groceries and why Costco is undefeated.
Another stroke of Costco’s brilliance was rolled out recently when they began offering a weight loss subscription program. Oh the irony.
Costco: Let us sell you more quantity than you really needed then when you’ve become unhealthy because you either ate more than you needed or didn’t really have good variety in your diet we’ll be there to help by offering a weight loss subscription program. 
I believe variety complex is the main reason we rarely meet our food budget when including Costco in our shopping routine. If I have $300 to spend on groceries, I will come home from the grocery store with more variety and ultimately get more bang for my buck than if I spend $300 at Costco even if unit pricing was better at Costco. Penny Wise pound foolish shopping at Costco? You said it!
So, you might say Costco would be great for buying for large groups! Remember though Costco is the house and the unwavering concept of variety complex is on their side. Because of that, odds will always be in their favor – regardless of target party size. For two years I was part of planning high adventure activities for our church youth group. The first year another leader was in charge of the food. He went to Costco. We had enough and ate well. No complaints. The next year I was in charge of food. I did all the food shopping at the grocery store. Partway into the trip the leader who bought the food the previous year commented on how much food we had and how incredible the variety was. There were plenty and more! We came home with lots of extra in fact. He asked me where I shopped and how much I had spent thinking I had way overspent our budget. When I told him the answer to both he let out a quiet , “huh.” I had actually spent the same as the previous year. No complaints about quantity or quality. In fact, people were more satisfied versus the previous year. Why? I believe it was because their food variety needs were met more adequately. As much as I’d love to eat mash potatoes every meal, I know I will feel more satisfied if I eat a variety even if it means I spend a bit more per potato when I do eat potatoes.
I know I will convince exactly zero people to join my lonely island with this letter here today. I wouldn’t believe it either if we hadn’t lived on/off the Costco dream three or four times and tracked our food spending each time. So maybe I am the odd case. If someone else has tried something similar and found differently I’d be curious to hear your experience.
In the end, maybe I’m just jealous of all those who can comfortably shop at Costco without financial regret and get full variety satisfaction. I suppose Costco is a higher class of life than I can comfortably afford so maybe I am reaching out for justification of my biases and financial circumstances. Ah well, I guess all I can say is long live the Costcoland – the happiest retail space on earth.
