Sam's Club's "budget meal deals" have recently gone viral again. Compared to Sam's Club, which has been in the Chinese market for 28 years and frequently sparks discussions on social media, Costco, which only entered mainland China in 2019, seems relatively low-key. Despite its low-key appearance, the company has many impressive achievements. Costco is the world's third-largest retailer, after Walmart and Amazon. In the 2023 Fortune Global 500 list, Costco ranked 26th. In fiscal 2023, Costco reported total revenue of $242.29 billion (approximately 1.7516 trillion RMB at the exchange rate on March 24, 2024), with net profit of $6.292 billion. As of February 18, 2024, Costco had 130 million cardholders. When talking about Costco, one cannot avoid mentioning American investor Charlie Munger. Munger's fascination with Costco even drew a "complaint" from Warren Buffett. At the 2011 Berkshire Hathaway annual shareholder meeting, Buffett, who was "tired of hearing" Munger always praising Costco, joked: "Once there were two terrorists who hijacked a plane and were going to execute me and Munger as 'dirty capitalists.' The hijackers said they would grant our last wishes. Munger said, 'Can I give one more presentation on the virtues of Costco, with charts and graphs?' The hijackers (surprisingly) thought Munger's request was reasonable, and then asked me, 'What would you like, Buffett?' I said, 'Well, just kill me first!'" Even Costco, which is like this, inevitably receives some "criticism." Online, some Chinese consumers have shared their perceived differences between Costco and Sam's Club. A blogger said that at Costco it's hard to find what you want, while at Sam's Club, each large shelf has category labels at the top to help you find things. But to the blogger's surprise, this is not actually a "messy" display; it's intentional on Costco's part. Unlike most stores, Costco stores do not have aisle signs or store maps to help with quick shopping. Instead, Costco's aisles are simply marked with numbers, and the store regularly changes the placement of products and introduces new items. As a result, consumers must navigate the aisles to find the products they need. In the process, they are easily attracted by other products, leading to extra spending. After learning about this strategy, the blogger commented in the comments section that they felt "manipulated" into buying more. Our search found that posts "complaining" about how hard it is to find things at Costco are common both domestically and internationally. Yet Costco insists on not changing. So, what is the thinking behind Costco's design? As a retail giant that now attracts 130 million members globally, what makes it special? Costco's "Treasure Hunt" Costco is a staunch proponent of "treasure hunt retail psychology." In 2018, Thad Kleszcz, then general manager of Costco's Culver City, California store, explained Costco's store layout strategy: the store is designed as a maze to encourage customers to walk around more. This also explains why Costco does not have aisle signs like most grocery stores and supermarkets. It wants you to "get lost." Kleszcz also revealed that employees work hard before the store opens to move products around. This way, consumers have a different experience each time they visit Costco, prompting them to buy things and even look forward to returning to see what has changed. Employees never deliberately hide products to deceive customers; adjusting product placement is just to make shopping fun. If the shelves were always the same, consumers might get bored and not visit Costco as often. Of course, Costco's layout is not completely random. It is understood that Costco has an overall layout that it wants people to follow. For example, at the entrance, customers can see high-value items such as jewelry, TVs, and laptops. The famous $4.99 rotisserie chicken is always placed in a "strategic location." If consumers want to buy the $4.99 chicken, they must pass by many other products to reach the deli section. Costco's CEO Ron Vachris said that in 2023, Costco sold 137 million rotisserie chickens globally. For the company, if most consumers are attracted to buy a few more items on their way to get the chicken, these "loss-leading" chickens have done their job. Speaking of layout, one must mention the membership gas stations next to Costco stores, which are considered another "trump card" besides the rotisserie chicken. In 1995, Costco opened its first gas station, promising to provide members with quality gasoline at the lowest possible price. Costco's goal is not to make too much money from gas stations, but to attract consumers who come to refuel to enter the store and buy other products by keeping gas prices as low as possible. At the same time, the daily consumption of gasoline can also "lock in" the frequency of consumers visiting Costco. This strategy has proven effective. Many consumers are willing to go to Costco for lower gas prices, which often leads to long lines at its gas stations. It is reported that Costco operates self-service gas stations in the United States, Canada, Australia, Japan, the United Kingdom, Spain, Mexico, Taiwan (China), and Iceland. The Costco store in Nanjing will also open the first Costco gas station in mainland China. Some netizens have said that the gas station is the "soul" that Costco stores in mainland China lack. Next, Costco members in mainland China will be able to experience a more "authentic" Costco warehouse. Costco, which is keen on the "treasure hunt game," also has a "Treasure Hunt" section on its official website, showcasing the latest "good finds" to attract consumers. It is not hard to see that Costco wants to encourage "impulse buying." Through the "treasure hunt game," it hopes consumers will visit stores more often, stay longer, and buy more. How to Attract 130 Million Members Globally? When talking about its history, Costco says: "Costco changed the retail world." Costco's development can be traced back to 1976, when entrepreneur Sol Price opened a membership warehouse store called Price Club in San Diego, California. It is said that the company initially served only small businesses, but later found that by serving a selected audience of non-business members, it could achieve greater purchasing power. With this change, the membership warehouse industry began to grow rapidly. In 1983, Jim Sinegal, a protégé of Sol Price, and Seattle retailer Jeff Brotman opened the first Costco membership warehouse in Seattle. Subsequently, Costco became the first company to grow sales from zero to $3 billion in less than six years. In 1993, Costco and Price Club merged, and the combined company operated under the name PriceCostco. By 1997, PriceCostco officially resumed the Costco name. As of March 14, 2024, Costco had 876 stores. Today, Costco has 130 million members worldwide. So how does it attract consumers? In Costco's view, its business philosophy is very simple: reduce costs and pass the savings on to members. The Wall Street Journal noted that Costco marks up products by an average of only 11%, while ordinary retail stores often mark up by 25-50%. Costco's business model is to sell products at the lowest possible prices and make money from membership fees; increasing profits by raising product prices would violate company policy. Costco also places great emphasis on product selection, and its commitment to quality attracts and retains more and more members. The company's website shows that Costco has about 4,000 SKUs, while most supermarkets have 30,000 SKUs. Costco says it carefully selects products based on quality, price, brand, and functionality to provide members with the most valuable products. To offer lower prices, Costco also considers saving money in as many ways as possible. Former CEO Craig Jelinek said that to provide lower prices and higher value, Costco has eliminated almost all the frills and costs historically associated with traditional wholesalers and retailers, including salespeople, upscale buildings, delivery, billing, and accounts receivable. The company operates rigorously with extremely low overhead, bringing significant savings to members. What if no brand can directly meet Costco's required selling price? In such cases, Costco chooses to do it itself. In 1995, Costco launched its private label, Kirkland Signature. The name was inspired by Kirkland, Washington, the original location of Costco's headquarters. The company's slogan, "Kirkland Signature means quality and value," offers many low-priced, high-quality, high-value products that are popular among Costco members. Data shows that Kirkland Signature's sales increased from $35 billion in 2017 to $39 billion in 2018, a growth rate of over 10%, slightly higher than the overall sales growth of Costco's products. Kirkland Signature has become a special factor for consumers choosing Costco over other retailers. By offering good products at good prices, Costco attracts more people to become members and expands its brand influence. At the same time, these members have high loyalty, driving Costco's continuous growth. "Do the Right Thing, and Good Things Will Happen" It is understood that since its founding, Costco has followed the guiding principle of doing the right thing for members, employees, suppliers, communities, and the environment. Costco believes that "when we do the right thing, good things happen." Costco's CEO Ron Vachris emphasized that Costco thrives thanks to employees with diverse perspectives, experiences, and ideas. Despite its size, Costco still wants to provide a family atmosphere where employees can thrive and succeed. For example, the company has a "College Retention Program" that allows employees to keep their positions while pursuing a degree. Speaking of which, one must mention a small story about Costco's current CEO Ron Vachris. In 1982, at the age of 18, Vachris worked as a forklift driver at Price Club while studying at Glendale Community College. At the time, he certainly did not expect that more than 40 years later he would run the company (Vachris officially succeeded Craig Jelinek as CEO on January 1, 2024). In addition, the US Costco website shows that the company provides employees with a paid floating holiday in addition to regular paid holidays, allowing them to celebrate a day that is meaningful to them, such as Indigenous Peoples' Day or Veterans Day. The website also offers a dedicated job application process for veterans, hoping to help them find new career possibilities. "Undoubtedly, the most important factor in our success and our greatest strength is our employees," emphasized former CEO Craig Jelinek. Conclusion Finally, let us return to the 2011 Berkshire Hathaway annual shareholder meeting and use Munger's brief evaluation of Costco as a summary. "This is an example of having the right management system, the right people, the right ethical standards, the right diligence, and so on. This is quite rare. If you have been associated with such a business once or twice in your life, then you are a very lucky person." PS: Click Read Original to view more about the 9th China FMCG Innovation Conference and the 2nd China FMCG Hard Discount Conference & the 2nd China FMCG Distributor Conference...