15 Tricks Costco Uses to Get You to Overspend
Here's what's behind the smoke and mirrors of the bargain brand's marketing moves.
According to the American Consumer Satisfaction Index, of all the department and discount stores tracked, Costco ranked most popular with consumers last year. With bargain bin prices and an enormous selection—of items in enormous quantities—that should be no surprise. But Costco isn't all fun and games. Beneath the consumer-friendly facade exists a veritable cornucopia of brilliant retail strategies designed to get you to part with as much cash as possible—without you even realizing it. So, before you make your next trip to the megastore, be sure you're aware of these tricks Costco uses to entice you to spend. You may even find yourself saving big bucks—just in a different manner than you originally expected.
Giving out free samples
"One of my personal favorite parts of a Costco shopping trip are those famous free samples that are offered every few aisles," says Sara Skirboll, a shopping and trends expert at RetailMeNot. And that is certainly not an uncommon opinion.
However, she warns, those free samples have been known to subtly influence shoppers to overspend. "Many studies have shown that providing free samples can boost sales by at least 30 percent, swaying you to buy things you never planned on purchasing," she says. While the samples may be free, they ultimately do carry a psychological cost.
Putting big-ticket items and deals at the front of the store
"You'll often find discounted big-ticket items front-and-center right when you walk in," says Skirboll. The flashiness of the items, plus the prominent, in-your-face placement, induces shoppers to splurge on big-ticket purchases they may not need. Unless you really need it and can't find a better deal elsewhere, Skirboll recommends walking into the superstore with your head down, only looking up when you're well past the beginning section of the store.
Selling everything in bulk
While some items make sense to buy in bulk, many others do not, says Skirboll. The trick for Costco is that the store offers literally everything in bulk, whether or not it is actually a good buy.
"Do you need to buy toothbrushes in bulk when the dentist hands them out for free?" Skirboll asks, for example. By packaging everything in bulk, Costco ensures you end up with an excess of goods that you may not in fact need.
Not having express checkout lines
One major trick employed by the retailing giant is a conspicuous lack of express lines, says clinical psychologist Julie Gurner. "Given that people have to stand in significant lines, people will tend to psychologically purchase more to make it worth their while," she explains. If you're going to have to stand in line for a half hour or more, the thinking goes, you better walk out with more than just toilet paper—leading you to overspend.
Using bigger shopping carts
A few years ago, Costco began introducing new, larger shopping carts. While the decision may have been made in part for convenience, there's also a more subtle, psychological trick at work, says Robin Lee Allen, managing partner at Esperance Private Equity. "Increasing the size of a shopping cart by 100 percent has been proven to increase sales by an average of 30 percent," he says. By expanding the size of their carts—and not offering the handheld baskets seen at most other retailers—Costco encourages its shoppers to purchase more items than they may have planned.
Having a generous return policy
Compared to most retailers, Costco offers extremely lenient return policies, and will refund the full purchase price on most items. While it may seem like merely a kind gesture, it's also an intelligent marketing strategy. According to research in the Journal of Retailing, leniency in return policies "increases purchases more than returns." In easing shoppers' sense of doubt—they can always return the item, after all—these policies encourage more mindless shopping. Most items don't ever actually get brought back.
Creating the thrill of the hunt
According to researchers from Michigan State University, "value retailers, such as Costco, have created a shopping environment that inspires a 'treasure-hunt' from its customers, because certain items are available in very limited quantities." The result of this hunt for limited, well-priced items is to "create a fun and exciting experience," they explain. When successful, shoppers feel more tied to the superstore—as it becomes a source of enjoyment—and are more likely to overspend.
Having large stores
Costco's stores are notoriously enormous. In addition to allowing the brand to house a whole lot of their wares, this architectural decision can influence shoppers to overspend. According to a 2015 study published in the Journal of Marketing, "The longer a shopper is in the store and exposed to more items, the greater the probability that the shopper will be exposed to items that cue a forgotten want or need." In other words, the longer Costco is able to keep you roaming its aisles, the more you're likely to spend.
Building loyalty through membership
According to Costco's own SEC filings, a major component of their success is "a perception among members of … consistently providing the most competitive values." While in many cases this is true, they're largely able to do so through the use of membership fees. These fees have "a significant effect on profitability," they explain, and are able to "reinforce member loyalty." Because they're incurred before the shopping even begins, most consumers don't take them into account when considering the price of a Costco item, and thus think they are saving more than they truly are.
Hyping products and deals only available for a limited-time
The fear of missing out, or FOMO, isn't merely restricted to time missed with friends. One tactic Costco uses to encourage purchases is to deploy a consistent array of seasonal, rotating items. By offering items for a limited time, shoppers feel obligated to purchase an item they may otherwise be on the fence about in order to snag it before it goes away forever.
Using "loss leaders" to drive spending
Another tactic employed by the superstore is a thing called "loss leaders"—a few items are sold for marginal gains in order to get customers into the store to then overspend on other items.
According to Investopedia, Costco makes less a profit that list less than $4 for every rotisserie chicken it sells, despite the chicken being one of its most popular items. "The idea is that no one goes to Costco just for a rotisserie chicken," the article says. The chicken, meanwhile, is placed deep in the layout of the store, ensuring consumers pass as many tempting items before reaching the prized fowl.
Offering fewer options
While it may feel as if Costco has everything, the selection is actually rather small. Compared to the 30,000 unique products offered at most supermarkets, for example, Costco offers around 4,000. According to the Harvard Business Review, the effect of this restriction of choice is actually an increase in sales: "Studies have confirmed this result that more choice is not always better. As the variety of snacks, soft drinks, and beers offered [in stores] increases, for instance, sales volume and customer satisfaction decrease
Providing on-demand delivery
A more recent trick implemented by Costco is their partnership with GoShare, a delivery truck service. "In the past, when a Costco member walked in and saw that shiny new TV in the front, they would walk by because they didn't have a truck to transport it," says Shaun Savage, founder and CEO of GoShare. Now, getting that TV home is as easy as the press of a button—yet another Costco is shortening the distance between I want that and I'm buying that.
Having a minimalist design
One of the more notable aspects of any Costco location is their minimalist decor: exposed beams, plain concrete, and, often, items still in their original delivery crates. In addition to saving on costs, this minimalist style has the effect of reinforcing shoppers' notion that Costco is the cheapest option available. It makes one feel as if they are purchasing directly from a wholesaler, as opposed to retail prices, convincing them that any purchase is a steal compared to that offered by another grocery store.
Making prices irresistibly affordable
The combination of low prices and mouth-watering foods is simply too much for most people to handle, says Nicholas Christensen, founder of Lottery Critic. "You spot the line of customers waiting to sample some new food item [and realize] not only does it taste good, it's cheap," he says. "By the time you get to the checkout line, you have enough for a week's worth of snacks and dinner!"