Committee Corner: Costco Shoppers Get a Desired Early Dose of Holiday Fever

There is no official start date for the retailer holiday season. But retailers are starting holiday sales earlier and earlier and working hard to win your business.

A big key is increasing foot traffic. I went to a Los Angeles-area Costco store in late August and was surprised to see Christmas products prominently displayed. At the time, Halloween still seemed far away — let alone Christmas.

The store was crowded, and it is very obvious Costco retail is thriving. How can this be with all the doom and gloom on the current state of affairs for retail stores? A big reason is that — for many — it is more enjoyable to shop earlier for special gifts at a location like Costco. This creates more memorable buying experiences. Costco is very smart to contribute to customer satisfaction and loyalty with the simple magic of timing.


A couple of weeks later, I returned to the same Costco to find out more and took the initiative to survey 50 customers with some questions. The graphic at right shares the responses I received.

I was surprised to see 20 percent of consumers start shopping for the holidays in August and September. But the survey result that really caught my attention is the importance of the membership card benefits to Costco members. Costco has 85 million members worldwide and the membership renewal rate is better than 90% in the United States and Canada.

According to the American Customer Satisfaction Index, Costco ranks first in customer satisfaction among specialty retailers. A major reason for the high ranking is money earned toward future purchases. The Executive Member annual 2-percent maximum reward increased to $1,000 from $750 — providing further incentive to spend. Costco recently increased the Executive Membership fee to $120 (from $110) and the Gold Star Membership fee to $60 (from $55).

On another front, Amazon’s Whole Foods acquisition will provide major benefits to Amazon Prime members, including improved grocery delivery and online order pickup in stores. Costco will be the least affected by the acquisition among major grocery retailers because Costco’s model works on small margins and large volumes. It is fascinating Costco has been growing revenue without a strong focus on e-commerce.

Consumerist notes, “Costco is beating the odds by offering things that are impossible or annoying to order online. Most of what people go to the warehouse club for is food, and the top sellers in food are alcohol, deli items, and candy. While other physical stores (except Walmart) complain that foot traffic is down, Costco knows that its members are visiting 4-percent more often than they were last year. Gasoline is an important thing that brings customers back to the physical store, getting customers into the parking lot. While they’re there, they might as well walk around the store and see what special items are around that day. Costco CFO Richard Galanti cited: the ‘treasure hunt,’ or finding special one-off items that won’t be there next week or even tomorrow. Costco is very slowly expanding its online presence, running fulfillment out of 19 distribution centers. It comprises 3.5 percent of the company’s sales and increases modestly.”

Beyond Costco’s doors, expectations remain strong for all retailers for the coming holiday season. Online sales are expected to — again — grow powerfully, but in-store sales will also rise. eMarketer details some key holiday statistics:

  • U.S. retail e-commerce sales jumped 17.8 percent during the 2016 holiday season, which helped push total retail sales up 4.8 percent.
  • For the 2017 holiday season, e-commerce is expected to climb 15.8 percent, with total retail growth slowing to 2 percent.
  • E-commerce accounted for a record 10.6 percent of total retail sales in the U.S. during the 2016 holiday season.

Maybe next year we will be talking about Christmas in Spring?