Costco is different from most other retailers in that it doesn’t just make money by selling products.
Costco makes a lot of its money from membership fees. And for this reason, the store’s Executive membership base is extremely important.
Costco sells two membership tiers:
- A basic Gold Star membership for $65 per year
- An Executive membership for $130 per year
For many years, the main benefit of the Executive membership was the ability to earn 2% back on most Costco purchases. But recently, Costco made a big change that improved not just the Executive membership experience, but also the Costco experience as a whole.
That change was allowing Executive members to enter the store one hour ahead of regular opening hours.
At first, there was a lot of backlash in response to that change from members and Costco employees alike.
Gold Star members expressed frustration over being treated as second-class citizens. And Costco employees made it clear that opening early would give them less time to manage inventory.
But Costco’s big change has already had a very positive impact on all of its members. And there’s new data to prove it.
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Costco’s new operating hours have reshaped store traffic patterns
Since implementing early store hours for Executive members, there’s been a change in the way people shop at Costco — and a positive one at that.
Placer.ai studied foot traffic patterns at Costco and found that since extended Executive member hours were introduced over the summer, more people have been hitting the store early.
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That, in turn, has reduced foot traffic during the late morning and afternoon hours, leading to fewer crowds.
The data also found that the number of Costco visits lasting 30 to 45 minutes increased over the summer (when extended Executive member hours were introduced), while the share of visits taking 45 to 60 minutes decreased.
What this tells us is that Costco members are able to get through their shopping trips more efficiently now that the store’s hours have increased for Executive members.
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That’s a huge win, because Costco members universally tend to gripe about:
- Crowded stores
- Long lines
- Long waits at customer service
- Packed parking lots
By extending shopping hours, Costco has helped create a more even distribution of visitors. And that’s a huge win for everyone.
Costco should build on its momentum
Since Costco relies so heavily on membership fees for revenue, it makes sense for the company to constantly reevaluate its policies and tweak them accordingly.
That’s something CEO Ron Vachris pledged to do during the company’s most recent earnings call.
“We continue to increase the overall value of our membership, including extended gas station opening hours and lowering prices on some key items,” Vachris said.
In addition, Costco may be eying other changes.
Costo is considering these ways to improve the member experience:
- Extending warehouse club hours so stores are open later
- Using “scan and go” technology to get members out the door faster
- Expanding same-day delivery services
- Growing the Kirkland Signature brand, which has become synonymous with quality
Placer.ai also reports that Costco traffic has increased every single quarter since the second quarter of 2021.
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Over the summer, for example, Costco saw a 5.5% year-over-year boost in August traffic. And that came at a time when retail traffic shrank broadly.
It’s therefore very clear that Costco is doing a lot of things right. And if the company’s management team continues to make positive changes, it could lead to an even more improved shopping experience for members across the board.
Maurie Backman owns shares of Costco.
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