17 Tricks Costco Uses to Get You to Overspend
Are those "free" samples really free?
According to the American Consumer Satisfaction Index, Costco ranks among consumer's ten favorite retailers from the past year. With bargain bin prices and an enormous selection (of enormous items), 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 even realizing it. So, before you make your next trip to the megastore, be sure you're aware of every move in their arsenal. Who knows: you may find yourself saving big.
"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 explains. While the samples may be free, they ultimately do carry a psychological cost.
No Express Lines
One major trick employed by the retailing giant is a conspicuous lack of express lines, says Dr. Julie Gurner, a clinical psychologist. "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.
Shopping Cart Size
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. According to Allen, "increasing the size of a shopping cart by 100 percent has been proven to increase sales by an average of 30 percent." 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.
Big Items In The Front
"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.
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 the 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."
Generous Return Policies
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."
By decreasing a 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.
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.
Costcos are notoriously enormous. In addition to allowing stores to house a whole lot of their (also notoriously enormous) wares, this architectural decision can influence shoppers to overspend. According to research out of the University of Split, "shopping time is positively related to consumer purchases." The longer Costco is able to keep you cooped up, the more you're likely to spend. Having locations that are a whopping 235,000 square feet will certainly accomplish that.
Perceived Lowest Prices
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.
FOMO of Seasonal Items
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.
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 than $4 in profit per 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," they explain. The chicken, meanwhile, is placed deep in the bowels of the store, ensuring consumers get as many items in their eye line before reaching the prized fowl.
Another way Costco gets you to wander around their store—possibly finding more and more items to purchase before making your exit—is by leaving their aisles unlabelled. As opposed to a traditional grocery store, where you may simply find the aisle with the item you need, at Costco you must search through an array of often oddly-placed goods before finding your product of choice. By the time you get there, they're willing to bet, you'll have picked up more than a few items that you merely want.
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.
"One of the amazing things about Costco is the sheer variety of products available," says Skirboll. The downside for the consumer, however, is that they're likely to get "swept up in all the goodies," she says. Instead of getting in and out with the items they need, a shopper is likely to become entranced with the selection, wandering up and down the aisles in pursuit of the next exciting product. And as you know, the more time you spend in a store, the more money you're likely to overspend.
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.
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.
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 explains. "By the time you get to the checkout line, you have enough for a week's worth of snacks and dinner!" And for more on the consummate mega-store, learn these 30 Amazing Secrets Costco Managers Don't Want You to Know.
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