Costco Keeps Close Eye on Recession Spending Trends

Published on January 28, 2009 | Comments: 1
The recession might mean fewer people ordering steaks in restaurants, but that doesn't necessarily mean they've given up on prime-grade meat; rather, they're buying it at Costco and cooking it at home, writes the Seattle Times. Though many customers are focusing on basic necessities, such as food staples and basic apparel (e.g., jeans, T-shirts), they're still going for the occasional luxury-item items, like Tumi luggage or Coach handbags--provided they get a good deal. "Consumers are smart, and they know when they see a value," Jim Sinegal told a group of retail buyers and wholesalers at Pacific Market Center's Winter Gift & Home Accessories Show. But the warehouse club won't turn its focus away from the tried-and-true model of mainstream brand products at low prices. The company sold 50% more TV sets last year, due partly to high consumer demand for home entertainment, but also because of the extra-low prices. And Costco's private-label brand, Kirkland, is so wildly popular that in some categories, like olive oil, the store cannot carry a name-brand alternative. Some 20% of Costco's sales are of Kirkland products, and that is expected to rise to 25% in the next few years, Sinegal said. The low prices are affecting profits, however. Last quarter, Costco reported a 3.7% rise in sales, but net income was up less than 1%. Morever, as the weakening economy hurts small businesses, which account for 25% of Costco's member base (but up to 40% of total sales), a sharp decline in sales growth will likely occur at both Costco and its competitors over the next year, according to Credit Suisse analysts (via Barron's).

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By dvd to avi on September 20, 2010

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