Noah Brier | March 7, 2023

The Costco Edition

On packaging, strategy, and consumer love

Noah here. Amongst its devotees, Costco exists in a stratosphere that most brands can only dream of. Customers pay for the right to shop in its massive warehouses, take pride in their plain white Costco tees (hi MM!), and revel in their oversized jugs of Goldfish and Smuckers. You’d be hard-pressed to find a mainstream retailer with a more engaged customer base. 

The company is the product of an early-90s merger between Costco and Price Club. The two warehouse heavyweights came together to take on Walmart’s Sam’s Club—a task it has accomplished, reaching 55%+ wholesale club market share to Sam’s 36% according to a recent Yahoo! Money story.

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Why is this interesting?

Beyond the savings, part of what people seem to like about Costco is the unique and often strange experience of shopping in their stores. A recent Insider story covered one particularly noticeable quirk: the giant packaging. Most products in the store come in a piece of oversized cardboard, including very small items. The reasoning behind this goes back to Costco’s goal of keeping prices as low as possible. To achieve that, products are presented on pallets in their original packaging rather than needing to be unpacked from the shelf. That means less overhead for the company.

But it also leaves manufacturers with a choice: pack a 40x48-inch pallet full of whatever product (face cream in the image above) or create some new packaging specially produced for the warehouse floor. From Insider:

​​There are three key reasons a supplier would not send a tightly packed pallet of two-inch jars of a fancy cosmetic: it's less stable on display, it would contain too many units for Costco to sell quickly, and it would be too expensive to put one in every store. "Having $20,000 in high-end face cream on the pallet on the floor isn't good business," Carrier said. Big packaging lets suppliers ship a more manageable number of items to a Costco warehouse using the requisite pallet system.

I love this stuff. The backstory behind a particular quirk of commerce that we’ve all experienced but likely never given much thought to. (NRB)

Thanks for reading,

Noah (NRB) & Colin (CJN)

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