How can a company known for its $1.50 hotdogs also make a mark by selling gold bars? For Costco, the key is to establish a consistent reputation for high-quality, appealing products at reasonable prices, regardless of where those price points fall. Thus, it appeals to people who want to enjoy an inexpensive lunch, but it also brings in affluent shoppers looking to stock up on good quality and even luxury items.

Gold bars might seem like an extreme example, but they have been a remarkably strong seller for Costco, ever since they first started appearing on its website. Priced at $2000 per ounce, the gold bars came from reputable companies that have long issued gold products. Although consumers were limited to purchasing just two bars, stocks sold out nearly immediately. In the first quarter that the bars were available for sale, Costco earned an estimated $100 million. Furthermore, because buyers could use their Costco-issued credit cards to make the purchases, and those credit lines offer 2 percent cash back, the effective price for their investment was even lower. Buyers who might never have imagined investing in gold gained a relatively steady investment option, without paying the markup often imposed by banks on precious metal purchases.

Still, for most people, gold bars do not appear on their shopping lists, but Costco holds particular appeal anyway, in accordance with its carefully designed strategy. With its Kirkland Brand for example, Costco promised and delivers high quality food items. Although officially a store brand, Kirkland ranks as a premium version, such that many consumers buy Costco memberships simply to gain access to Kirkland products, which they regard as better in quality than many name brand options.

As a result of this positioning, Costco also attracts higher-end manufacturers to sell their items through its stores. Thus, even when Costco and its competitors, like Sam’s Club, sell similar big ticket items, such as appliances or computers, the versions at Costco generally represent more desirable brands and models with more features, rather than the basic or unbranded versions that might be available at Sam’s Club.

Perhaps due to this reputation for higher quality, Costco enjoys powerful loyalty from its fans and shoppers. When the company released a simple black sweatshirt, with a white Kirkland logo emblazoned on it, people snapped them up and begged for more. One buyer dreamed of the possibility of wearing “Costco head to toe”; another noted the appeal of a novel market of “wholesale haute couture.”

Amusing slogans aside, Costco achieves remarkably high retention rates. Nearly 93 percent of members resubscribe, year after year, and they frequently mention it as among their favorite or most trusted retail brands. How could they help it, if the company gives them great hot dogs, along with literal gold?

Discussion Questions

1. How does Costco maintain a consistent brand reputation, even as it sells so many divergent products?

Sources: Dennis Limmer, “Costco Wholesale Starts a Gold Bar Shopping Trend,” Retail Wire, December 15, 2023; Dennis Limmer, “Costco Loyalty Is the Hot New Fashion Brand,” Retail Wire, September 15, 2023; Aditi Shrikant, “The Costco Customer Is Younger and Richer than Ever—Here’s Why,” CNBC, February 9, 2023.