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Costco (COST+0.02%) is best known for its no-frills, bulk-buying experience, but the warehouse giant also moves a surprising amount of luxury goods.
From Rolex watches to gold bars, high-end items have become an integral part of the business, and according to Hamilton “Tony” James, chairman of Costco, wealthier shoppers are hooked.
“We’ve known we could move anything in volume if the quality was good and the price was great,” James said in an interview with Chief Executive magazine. That’s partly why the retail giant sells everything from Dom Perignon to 10-karat diamonds.
According to James, Costco’s members are not just average-income households – they also include wealthier shoppers who recognize a good deal when they see one, like a Porsche on the sales floor of a Costco in Seattle.
Costco, known for its “treasure hunt” shopping experience, won’t sell just anything. Unlike rivals Amazon (AMZN-0.81%) and Walmart (WMT-0.83%), Costco is selective about what it sells. While big-box retailers like Walmart stock over 120,000 different items, Costco limits its selection to about 3,400 stock-keeping units (SKUs).
“We’re not interested in selling just anything at a low price,” James said. Instead of offering a $500 TV for $250, Costco would rather sell a $1,000 TV for $500.
This formula has been a massive profit boost, further buoyed by the recent surge in gold bar sales. Wells Fargo (WFC+0.23%) noted last year in a research report that the company moved between $100 million and $200 million worth of gold bars each month.
James told the magazine he wasn’t sure whether affluent shoppers or those wary of the economy were driving gold bar demand, but either way, the strategy has set Costco apart. He expressed confidence in the company’s position against Amazon and Walmart, noting that Costco focuses on its own approach rather than its competitors’ moves. Walmart-owned Sam’s Club, however, dethroned Costco to claim the top spot in the American Customer Satisfaction Index (ACSI) 2024 rankings for general merchandise retailers.
Another area where Costco continues to be an outlier is in its commitment to diversity, equity, and inclusion (DEI). While many corporations, such as Walmart, McDonald’s (MCD+0.80%), and Target (TGT+1.61%), have scaled back on their DEI plans, Costco has held firm.