9 times when Costco is better than Amazon
Private-label goods
Costco's low-cost private-label Kirkland brand is one of its most valuable offerings. It has been around since 1995 and accounts for about 25% of Costco's $118.7 billion in annual sales.
Kirkland is not only cheaper than other national brands, it also has a reputation for being good-quality.
"I am not sure there is another [private-label] brand that has established this level of trust," Timothy Campbell, a senior analyst at Kantar Consulting, told Business Insider.
Private-label brands have increasingly become a more popular choice as the stigma of "generic" goods has lifted. These brands have better margins for retailers are they are buying goods directly from the supplier and cutting out the intermediaries, which can drive up costs in the supply chain.
Amazon is also looking to grow its private-label offering across different categories. It currently has nearly 140 private-label brands and 406 exclusive brands, according to TJI Research. However, it doesn't have the history that Kirkland has just yet, Rachel Dalton, director of e-commerce at Kantar, told Business Insider.
"They've had a lot of misses and some hits," Melissa Burdick, president at Pacvue, told Business Insider.
She continued: "Amazon has taken its typical approach to things to private label – iterate, launch fast, fail fast – which sometimes comes at the risk of one of their coveted leadership principles of 'earn trust.'"
Generous return policy
One of the biggest perks of a Costco membership is its generous return policy. The warehouse chain allows members to return almost any item at any time if they're not satisfied with it.
"We guarantee your satisfaction on every product we sell and will refund your purchase price, with the following exceptions," the company states on its website.
Some shoppers have taken this to the extreme — returning things like a Christmas tree in January, an already-eaten steak, and an empty bottle of wine — but despite this, it stands by the policy in almost all circumstances.
Buying in bulk
If you are buying in bulk, Costco and other warehouse stores are the best places to do so, given that bulk shopping is their main premise.
Cheapism recently did a price comparison of 100 Amazon and Costco items across the household staples, baby and pet, beauty and toiletries, and health categories. The test revealed that Costco was cheaper on 79 of the 100 items. The greatest savings could be seen in the household staples category, which was, on average, around 25% cheaper at Costco.
But while Costco wins on savings in bulk purchases, Amazon reigns supreme on convenience. With Amazon, shoppers can get nearly anything they want and get it quickly, Campbell said.
Consistent deals
Costco is "consistently reliable" when it comes to deals, Campbell said, comparing it to other retailers where you might need to hunt to get the best deal.
Costco is able to be consistent on prices as it can afford to have low margins on what it sells. It makes most of its profits off membership fees, Campbell said. Meanwhile, you could see more fluctuation at Amazon. Recent price increases at its Whole Foods stores are a good example of this.
"Costco members trust that they are going to get a good deal on whatever they buy," Campbell said. "I think the fact that it has been doing that for decades has enabled to withstand the online onslaught."
"You know you'll always get a low price," Burdick said. "And you might find a surprise such as something new, a one-time buy, or local to your market."
The treasure-hunt experience
Costco prides itself in offering a treasure-hunt experience, which is hard to replicate online.
"Every time you go into a Costco, you are not sure what you are going to see," Campbell said.
By swapping items in and out, it keeps inventory fresh.
Cheap gas
One of the biggest benefits of having a Costco membership is getting access to its perks, which include being able to fill up your car for a fraction of the price.
The store offers two types of gas that are exclusive to its members or anyone with a Costco gift card: premium, top-tier gas and standard gas from its signature label, Kirkland. Diesel is also available at some locations.
In a survey done by Oil Price Information Service (OPIS) in March 2017, Costco beat out major gas chains, as well as warehouse-club rivals such as Walmart-owned Sam's Club and BJ's, to rank as the cheapest place to buy gas in the US.
And it has its benefits for Costco. As gas is a recurring purchase, it's an effective way to drive foot traffic to stores. It is also a good way to attract members and keep them loyal.
Read more: Costco offers gas for cheaper than anyone else — and it's paying off
Booking vacations
Since 2000, Costco has been offering members deals on hotels, flights, cruises, and rental cars.
And customers can't get enough of it — including Business Insider's Kate Taylor, who booked a seven-day trip to Puerto Rico for just over $800, including flights, transportation, and a hotel stay.
This business has high margins because of the few administrative costs associated with it.
Meat selection
Costco is well-known for its meat selection, not least of all its famous $4.99 rotisserie chicken, which hasn't changed price since 2009.
Last year, consumers bought 625 million rotisserie chickens in US supermarkets, according to Costco and the market-research firm Nielsen. Costco sold 87 million rotisserie chickens in fiscal 2017, an increase of 36 million over fiscal 2010.
Despite the rising costs related to labor and preparation, Costco hasn't budged on price.
"When others were raising their chicken prices from $4.99 to $5.99, we were willing to eat, if you will, $30 [million] to $40 million a year in gross margin by keeping it at $4.99," Richard Galanti, Costco's chief financial officer, said in a 2015 earnings call, according to The Seattle Times. "That's what we do for a living."
Samples
Costco fans wax lyrical about its free samples, which, if you're crafty enough, can even be combined to be an entire meal.
While some customers might think that Costco is just doing them a favor by offering them free snacks, there's a solid business strategy behind it. By offering free samples, Costco makes the shopping experience in its stores more appealing and, therefore, its customers more loyal.
Read more: People are obsessed with Costco's free samples — but it's actually a brilliant business strategy
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