The Untold Truth Of Costco

You may know Costco as a convenient place to shop; the retailer offers discounted prices on bulk items, which is a huge plus for many customers across the United States. But did you know that Costco is also ranked as one of the best large companies in the U.S. to work for? Did you realize that Costco has some of the highest minimum wage rates in the country? Maybe not. 

Behind all of that success is a carefully planned business model that has an emphasis on keeping both employees and customers happy. In fact, the retailer is known for doing everything it can possibly do to keep prices as low as it can — Costco knows that its success lies in the satisfaction of the people who frequent the stores. There's a lot more to uncover about Costco, and all of the facts are pretty interesting, from where the company began to how it's grown into what it is today. Take a look at the untold truth of this favorite warehouse retailer. 

Costco is known for many things: amazingly discounted prices, delicious free samples, and, surprisingly enough, its food court options. It's hard to say which menu item is more popular, the hot dogs or the pizza, but pizza is a serious contender. In fact, the company sells so much of it that it is considered to be one of the most popular pizza chains in America ... which is confusing, considering you'd never call Costco a pizza chain. But in 2015, Business Insider reported that the retailer was the 14th largest pizza chain in the country. 

There are a few reasons why they sell so much pizza, and it doesn't only have to do with the taste — although Costco pizza is delicious. According to Business Insider, much of the success comes from the very low price point, which is only about $1.99 for a massive slice of pizza. There's also the accessibility: Costco sells pizza by the slice or by the pie, while many chains only sell full pies. 

If you shop at Costco fairly often, you've probably noticed that some items seem to float around the store — one time, you find toilet paper in aisle three, the next time, it's in aisle nine. In case you were wondering, yes, that happens all the time. It's actually a business strategy, and a successful one at that. Costco warehouse designer Stan Laegreid wrote in Fast Company that Costco goes through a "constant, storewide rotation of target staples" which it refers to as "triggers." The idea? The customer has to search for these staples since they don't know where they are, and they're exposed to lots of other items along the way. As Laegreid noted, it has helped make Costco one of the largest retailers in the country.

So how can you shop efficiently? As Laegreid pointed out, most "luxe" items (like TVs and computers) will be in the front, fresh food is towards the back, and the "outside of the track" has practical staples, like toilet paper. 

This treasure hunt is also the reason you won't see signs indicating what's in each aisle — if Costco tells you, you won't have a reason to take a look. 

Wine might not be the first thing you think you need to grab when you run to Costco, but maybe it should be. According to Market Watch, Costco did $1.69 billion worth of wine sales in 2015. The publication spoke to Costco's assistant general merchandise manager, Annette Alvarez-Peters, who said that "wine comprises nearly 50 percent" of the store's total alcohol sales. Alvarez-Peters also said that their wine sales are "outpacing the industry" and that they are "ranked at the top for wine sales."

One of the reasons for this is probably the prices. The Daily Meal has reported that Costco wine is usually about 10-20% less than wine at other wine stores, and sometimes even less than that. It's hard to beat wine that is that cheap. On top of that, the wine doesn't taste inexpensive — the store sells some great values that taste great too. On top of that, you don't have to be a member to buy alcohol at some Costco locations, so anyone can enjoy the low prices of a bottle of wine, which opens Costco up to more sales and customers. 

Costco sells so many different popular items: there are some of your favorite snacks, really great desserts that are made in the bakery, the famous rotisserie chickens, clothing, accessories, tech items, and of course, the hot dogs it also sells in bulk. It's interesting to think about what might be the top-selling item at Costco, but the answer to that is actually completely unexpected.

According to a 2012 report from CNBC, Costco's number one selling item is toilet paper. Yes, toilet paper! Apparently, it sells more than one billion rolls every year, which comes out to more than $400 million worth of toilet paper annually. The rates are something that can be attributed to both the high quality and the low price. When you think about it, it does make sense: everyone needs toilet paper, everyone has to purchase it regularly, and it's best purchased in bulk, at a great price point. 

CNBC also says that technicians intensely test out the toilet paper for whiteness and the right measurements to make sure it's exactly right for customers. That's the kind of care you want to go into your toilet paper.

By now, you've probably figured out that one of the secrets to Costco's success is its low prices. That goes for the food court items too, especially when it comes to the iconic Costco hot dogs. The retailer charges only $1.50 for a hot dog and soda combo, which has been the price for more than three decades. CNN reported that in 2017, the retailer sold 135 million hot dog combos, which is proof that the price is a huge draw. 

And that will likely never change. In an interview with the Seattle Times, Costco co-founder Jim Sinegal said that you won't see an increase in the price while he's alive. He explained that Costco has managed to keep the price down by changing the brand to Kirkland Signature, which is its in-house brand. He added, "It's the same quality hot dog, all-beef, the best ingredients that you can imagine. I know it sounds crazy making a big deal about a hot dog, but we spend a lot of time on it." In the end, he knows that changing the price would be a huge deal, saying, "We're known for that hot dog. That's something you don't mess with." 

Costco runs on a subscription business model, meaning that customers have to pay an annual membership fee in order to get a membership card so that they can enjoy shopping there. At one point in time, a person didn't have to buy a membership to eat at Costco's food court, but that has since changed and if you want to snag that signature hot dog, you will need a membership

And if you just want to shop like a normal person, you can even do that without a card. Cooking Light writer Zee Krstic wrote about discovering Costco Cash, which allows you to do exactly that. Costco Cash is basically like a Costco gift card: You can get a current member to purchase Costco Cash, give it to you, and then go shopping, even if you don't have a membership card. You can't reload the Costco Cash — only someone who is a member can do that — but if you have a friend who's willing to help you out, you're golden.

The two staples of Costco's food court have always been pizza and hot dogs. While certainly delicious, one wouldn't exactly call these healthy. It seems like the retailer is trying to change that up a bit, though, by offering more healthy options at their food courts (while keeping the pizza and hot dogs, of course). In late 2018, chief executive Craig Jelinek told the Seattle Times that Costco was beginning to add on to the menu, with items such as açai fruit bowls, organic burgers, and a plant-based protein salad, which is called the Al Pastor Salad. And the prices are in line with the rest of their items — the açai fruit bowl is only $5, which is a steal compared to the price of those in many other places (they can sometimes go for $10 or more). 

It's also worth noting that both the salad and the smoothie bowl are vegetarian. The açai bowl is vegan, while AOL says the Al Pastor Salad is made of plant-based protein (soy), romaine lettuce, black beans, and banh mi vegetables. It's definitely a good way to appeal to more people. 

One of the best things about shopping at Costco is getting access to all of those little irresistible free samples. They're often placed around the store (especially in the back by the fresh food), and they're great to snack on while walking around shopping. There's also a strategy behind those samples: they make customers happy, and they result in sales. Giovanni DeMeo, a representative of the product-demonstration company Interactions, which handles Costco's samples, told The Atlantic, "When we compare it to other in-store mediums ... in-store product demonstration has the highest [sales] lift." 

DeMeo also pointed out that samples make customers more loyal to stores and brands over long periods of time. Figures in The Atlantic show that beer samples from Interactions at unnamed national retailers boosted sales by 71%, while samples of frozen pizza boosted sales by a whopping 600 percent. 

There's also an element of psychology behind the whole situation. Dan Ariely, a behavioral economist at Duke University, explained to The Atlantic, "Reciprocity is a very, very strong instinct. If somebody does something for you, you really feel a rather surprisingly strong obligation to do something back for them." In other words, when customers get samples, they want to give back to Costco by spending money. 

Another food that sells exceptionally well at Costco is its rotisserie chickens. In late 2018, NPR reported that Costco's chickens were so in-demand that the retailer had decided to build a farm-to-table production system so that it can always be sure it had enough rotisserie chickens. NPR said the operation was under construction in the city of Fremont, Nebraska. 

Business Insider reports that Costco hopes to produce 100 million chickens per year at the plant, which opened in 2019. Jessica Kolterman, a spokeswoman for Lincoln Premium Poultry (the company Costco started to build and manage the farm project), told NPR, "All of our barns in Nebraska and Iowa collectively will supply about 40 percent of Costco's needs. That will roughly cover the western half of the United States, Alaska and Hawaii."

According to Business Insider, the farm will also allow the retailer to continue selling the rotisserie chickens at $4.99. In fact, the Seattle Times once reported that Richard Galanti, Costco's chief financial officer, once said "We were willing to eat, if you will, $30 to $40 million a year in gross margin by keeping it at $4.99. That's what we do for a living." By keeping the prices painfully low on select items, like rotisserie chickens, the store lures customers in to spend more on higher-priced items. 

According to Fast Company, Kirkland Signature, which is Costco's private label, is one of the most successful brands in the industry. CNN reported that in 2018, Kirkland Signature brought in almost $40 billion, which was an 11% increase from the previous year, saying, "That's more than JCPenney and Macy's combined. Kirkland's sales also beat out Campbell Soup, Kellogg, and Hershey put together." 

One of the reasons for this is that Kirkland sells for at least 20% cheaper than national brands found in the store. Not only does this keep Kirkland's price points low, but it also ensures that those brands won't increase their prices, as they want to compete with Kirkland. 

The company is also totally aware of how important Kirkland is, although it couldn't have predicted how big it is now. Costco Chief Financial Officer Richard Galanti told CNN, "I don't think at the beginning of this process in the early 1990s we thought nearly a third of our business would be under this brand." 

Costco is a wonderful place for customers, but it's just as good for employees. The retailer is consistently named one of the best companies to work for in the United States. Forbes reported that in 2017, Costco was named America's Best Large Employer, winning out over Walmart and Google. And USA Today reported that in 2018, Costco was named one of the best large companies to work for according to Comparably. Jason Nazar, CEO and Co-founder of Comparably, explained, "When you look at Costco, they overwhelm employees with benefits and employees feel like they're part of a family." 

The retailer is also known for giving employees terrific benefits. A 2018 Indeed report looked at 18 million employer reviews and found out that employees at Costco were happier with their wages and benefits than those at any other company, beating out places like Apple and Starbucks. Costco pays a living wage and gives benefits such as health care, dental care, vision plans, 401K programs, life insurance, and more.

Costco's first location opened in 1976 under the name Price Club. It originally only served small businesses before turning into Costco and taking on non-business members as well. It opened its first warehouse location in 1983, and according to the website, "became the first company ever to grow from zero to $3 billion in sales in less than six years." In an interview with CNN, Jim Sinegal and Jeffrey Brotman, two executives from the company, talked about Costco's quick success. Sinegal stated that the brand "hit the $1 billion mark in our third year of operation." He added that the first year wasn't overwhelming: in the first few weeks, sales were growing at a weekly rate of 25%. But by 10 weeks, the store had hit $1.4 million in weekly sales. 

Costco attributes this to its "simple" operating philosophy: "Keep costs down and pass the savings on to our members. Our large membership base and tremendous buying power, combined with our never-ending quest for efficiency, result in the best possible prices for our members." The hot dog combo certainly helps, too. 

Costco got its start in Seattle, Washington — the first warehouse location there was opened in 1983. Sinegal spoke to The Motley Fool about the beginning of the store, saying that when it began in downtown Seattle, it was using a building "that was 100,000 square feet." He described it, saying, "It was a pretty simple facility. We didn't have many of the enhancements that we've added to the business since then." He also added that it was basically like a warehouse, and that since then it's added on fresh food, a pharmacy, gasoline, and a food court, among other departments. 

One thing that hasn't changed: the retailer doesn't have a P.R. department and it doesn't spend money on advertising. Instead, it relies on the satisfaction of customers and employees to get the word out. In an interview, Sinegal told ABC one of the of the many benefits of treating employees right, saying, "Imagine that you have 120,000 loyal ambassadors out there who are constantly saying good things about Costco. It has to be a significant advantage for you." 

Costco sells just about every type of product under the sun (more on this below). One thing you likely won't find in its aisles, however, is tobacco. The Street reported that the warehouse chain began phasing out tobacco products, including cigarettes, cigars, and chewing tobacco, back in 2016.

Costco wasn't the first retailer to pull these items from its shelves. Pharmacy giant CVS did the same thing in 2014, citing tobacco's harmful side effects as the impetus for the decision. "Ending the sale of cigarettes and tobacco products at CVS/pharmacy is the right thing for us to do for our customers and our company to help people on their path to better health," said CVS Health president and CEO Larry Merlo at the time. "Put simply, the sale of tobacco products is inconsistent with our purpose."

Unlike CVS, however, Costco's move to rid tobacco from its warehouses was simply a dollars-and-cents decision. "Tobacco is a very low margin business, tends to have higher theft and is labor intensive in some cases (due to local municipality regulations)," a Costco spokesman said at the time. "Further, we felt we could better use the space to merchandise other items."

The chain isn't completely out of the tobacco game, however. Costco still sells the product through its Business Centers, which supply goods to local retailers and convenience stores.

In 2015, Brad Pitt penned an open letter to Costco CEO Craig Jelinek, asking the chain to stop selling eggs laid by caged hens (via USA Today). The conditions these animals live in, Pitt argued, are tantamount to animal abuse. "As you know, these birds producing eggs for your shelves are crammed five or more into cages that are not large enough for even one hen to spread her wings," he wrote. "As you know, many major corporations, from Burger King to Unilever, are getting rid of cages — and Whole Foods hasn't sold eggs from caged hens in years. Please, will you set a reasonable timeframe to stop selling eggs from caged hens?"

Pitt wasn't the first famous face to put pressure on Costco to change its ways. Earlier that year, comedian Bill Maher and fellow actor Ryan Gosling wrote similar open letters to Jelinek. "When Brad Pitt, Ryan Gosling and Bill Maher all weigh in to say that battery cages are horribly abusive of animals and should be banned, it's time for Costco to listen," said Bruce Friedrich, policy director for the animal rights organization Farm Sanctuary. "The animal protection community is laser-focused on Costco's support for cruelty to animals, and the issue is not going away."

It may have taken some time, but the message finally got across. In 2020, Costco announced it was beginning the transition to selling only cage-free eggs, according to MeatPoultry.com.

The only problem with shopping at Costco is that you may need a bigger car to fit all your groceries. Fortunately, the big box retailer has you covered there, as well. Costco gives members the opportunity to buy or lease new and used vehicles through its Auto Program. The retail chain doesn't sell the cars itself. Instead, it offers discounted prices from participating dealerships. According to Business Insider, the average discount is more than $1,000. Costco doesn't make any money off the sale of the car, but it charges the dealerships a monthly fee for participating. It also uses the program to help attract new members.

Whatever Costco is doing is working — the chain is selling more cars than ever before. Members purchased 689,000 vehicles through the program in 2020, according to Yahoo! This was at a time when car sales across the country decreased. The total marked a 12% increase from the year before and was more than triple the number of cars sold in 2008 (via Business Insider).

Costco's success can be attributed in large part to one significant advantage it provides potential car buyers: fixed prices. The price agreed upon by the customer and Costco representative is the price the dealership must sell the car for. This eliminates the possibility of any negotiating and upselling that car salespeople are notorious for.

Did pacing up and down the never-ending aisles of Costco wear you out? In the need for some quality R&R? Well, as always, the discount retailer has you covered. Members can book vacations through the chain's travel service, known as Costco Travel, and save big in the process. This includes hotel rooms, rental cars, cruises, and vacation packages.

According to the Huffington Post, Costco is able to offer discounted rates by combining members' reservations and getting a group rate from the travel operator, such as hotels and cruise lines. The best deals are on Kirkland Signature and Buyer's Choice vacation packages, the Washington Post reports.

There are numerous perks to booking through Costco Travel, in addition to the lower upfront cost. Depending on the type of vacation, these can include food and beverage credits, room upgrades, and flexible payment options. "They'll give you a $250 Costco Rebate Card," one member told the Post. "The [trips] we've been on have a $100 or $200 spa credit per room. The one to Jamaica, we had a spa credit per room, plus we got $200 to use toward the local activity." Executive members also receive 2% cash back on all Costco Travel purchases.

Costco doesn't promote sale items the way other stores do. You won't find any brightly colored signs or prices with slashes through them. This doesn't mean that there's no way of discerning what products are on sale when you're perusing the aisles. In fact, the answer will be right in front of your nose.

It turns out, Costco encodes its price cards with secret information that's particularly helpful to customers on the hunt for the best deals. Most notably, a price tag that ends in $0.97 indicates that the item is on sale, according to Costco.97. These discounts are offered at the discretion of the store manager and are usually applied to low-selling or seasonal items they're looking to clear off the shelves.

As enticing as it will be to scoop up these items right away, you can look again at that price tag to see whether it may be better to wait a little longer. In the bottom right corner of all Costco price cards is the date the card was printed. If it's been a few weeks, a steeper discount could be on its way very soon. If, on the other hand, the card has an asterisk in the upper-righthand corner, act quick. That symbol indicates the product has been discontinued and no more will be restocked.

You can find pretty much everything in the aisles of Costco — even love! It's a strange but true fact that a number of couples have tied the knot at their local Costco location.

In 2014, Robert and Meredith Bonilla exchanged vows in the frozen food aisle of a California Costco, according to the Los Angeles Times. The couple met for the first time at the same spot a year prior. A few years later, in 2017, Jessica and Brandon Brown exchanged vows at a Waipahu, Hawaii Costco (via Business Insider). They, too, first met at the discount wholesaler when Brandon overheard Jessica debating the purchase of mac and cheese with her roommate. "I've literally spent the last two years responding to any compliment about Brandon with 'Thanks, I got him at Costco,'" Jessica said. The following year, Margot Schein and Julian Parris got married at a San Diego Costco, which previously served as the site of their first date, according to Today.

The Costco wedding isn't just an American trend. In 2017, a pair in Sydney, Australia got married at their local store (via 9 News). "I get to go to Costco on my wedding day, it's just awesome," bride Sue Berkeley said. "Where else can I get married to the one I love, in the place that I love, surrounded by the people I love?" The reception included a meal of 18-inch pizzas, meat pies, and hot dogs.

It might seem that everything offered at Costco comes in doomsday-sized quantities. In fact, it wouldn't be surprising if something you purchased there lasted a full year or longer. But if you really want to prepare to be hunkered down for the foreseeable future, you'll want to order one of Costco's emergency food kits.

Since Costco is always rotating its product offerings, the exact type of survival food package changes from time to time. Several years ago, it was a $6,000 meal kit that included 36,000 servings, enough to feed a family of four for an entire year (via Business Insider).

Costco's current emergency food offering is slightly more affordable — a mere $5,000. The XMRE BlueLine Emergency Food Pallet provides customers with 576 fully cooked meals. Each meal, which range from 800 to 1,200 calories, consists of an entrée, side, bread item, and even dessert. To comply with any doomsday scenario, no appliances are needed to reheat the food. Instead, food pouches are placed inside a heating bag along with a heating pouch and a few ounces of water or any non-flammable liquid. In just a few minutes, your food is steaming hot and ready to eat.

In addition to the benefits and camaraderie, there's another big reason why people love working for Costco: the pay. According to CNN Business, the warehouse chain has one of the highest minimum wages in the country compared to other large retail companies.

In October 2021, Costco announced it was raising its minimum wage to $17 an hour. At the time, that pay rate was $2 more than Amazon's and Target's, and $5 higher than Walmart's. "These increases are part of Costco's continuing efforts to ensure our hourly wages remain extremely competitive in the retail industry," Costco CEO Craig Jelinek said in a memo to employees. This isn't the first time Costco has raised its minimum wage in recent years. In fact, it has done so several times. The chain bumped up its starting pay to $14 an hour in 2018, $15 in 2019, and then $16 in early 2021.

Costco employs roughly 180,000 people, 90% of whom are hourly workers. Not surprisingly, the chain has one of the lowest turnover rates in the entire retail industry. According to Business Insider, the average Costco employee has worked for the company for nine years, and a majority of the company's employees make more than $25 an hour. "We're certainly not perfect, Jelenick said, "but we try to take care of our employees, because they play such a significant role in our success."

If you had to guess what the most popular magazines in the country are, one published by Costco probably doesn't come to mind. Heck, you likely didn't even know the store had a magazine. Well, it does — and it is one of the most-read in the country.

Costco Connection is a monthly magazine mailed to the retail chain's Executive members (others can download digital versions). According to Magazine Line, it has the third-highest circulation of any magazine in the country, behind only AARP The Magazine and AARP Bulletin. This circulation includes 15.2 million copies mailed to members' homes and another 1.2 million digital issues accessed online. The magazine also comes in nine international editions, including two Canadian versions (one in English, one in French).

The publication serves, in part, to promote the chain's merchandise, which it does particularly well. CNN reported that, according to a 2017 reader survey, more than half of Costco Connection's subscribers purchased a product because they saw it in the magazine. The magazine also features more editorial-focused articles, such as celebrity interviews and travel features. "The celebrity covers resonate with our readers: Elton John, Rachael Ray and Henry Winkler," said Costco Connection's then-editorial director Tim Talevich. "Travel Connection, highlighting places served by Costco Travel, is one of our most-read features."

Those who believe Costco only sells food are seriously missing out. If you can name it, the big box retailer probably offers it. In fact, Costco has you covered for every stage of your life. Need a 75-inch flatscreen TV for that new apartment? The chain has plenty to choose from. Ready to pop the question? Do your engagement ring shopping at Costco. The store has options for every budget, from a couple hundred dollars to a couple hundred thousand. Have a little one on the way? You can outfit your entire nursery, including the baby crib, through the retailer. Ready to splurge on a backyard swimming pool or home sauna? Once again, Costco comes to the rescue.

Maybe the most surprising thing you'll find in the halls of Costco is the store's wide selection of caskets. According to NBC News, the chain began testing the sale of caskets in 2004. The results must have proven worthwhile as the products are still offered today. It shouldn't be too surprising that loved ones are searching for cheaper alternatives considering the high cost of funeral expenses. According to the Federal Trade Commission, the average casket costs more than $2,000. None of the caskets listed on Costco's website, however, cost more than $1,500.

If you've seen one Costco, you've them all, right? Well, not until you've visited the location in Lancaster, Pennsylvania. According to Reddit users, this store has a particularly unique feature just outside the its front doors: horse and buggy parking.

Lancaster County is located in the heart of Amish Country, where many people still get around on horse and buggies (via Discover Lancaster). According to Redditors, these stalls are actually quite common in and around Lancaster. You can find them at other big retailers like Target and Walmart, and even at local banks.

If you think Costco is too modern-day for the Amish, think again. Turns out they enjoy giant tubs of Cheese Balls just as much as the rest of us. "The Amish buy all sorts of Costco foods," one Reddit user commented. "Sometimes they have trailers that are pulled behind the buggy full of Reese's Puff cereal, thin pretzels, soda, Doritos, pretzels. I am talking about 10+ bags of some of this stuff in their carts (and kids sipping food court sodas in the buggy)."

So, next time you're trying to safely navigate through a chaotic parking lot, just be glad you don't have to attempt to safely pass a wild animal.