Costco

Since Costco came on the scene in 1983, it has grown into the largest membership warehouse club chain in the U.S. A new business documentary by CNBC that first aired Thursday night profiles the retailer and the consumer "craze" it's ignited.
Nearly 90 percent of Costco customers renew their memberships yearly, each time for between $55 and $110. Costco breaks even on most of what they sell, which means that most profits come from membership fees -- roughly $1.5 billion a year.
Products are sold at bargain-basement prices, which is the main reason they're not money-makers. Costco has to sell tons of them to keep the model viable, so the store is designed to boost a customer's willingness to spend.
In an accompanying article, CNBC speaks with Cornell University professor Brian Wansink, an expert on consumer behavior.
“Shopping at a warehouse club gives us license to spend like we otherwise wouldn’t if we were in a normal store. We are motivated to save money, we are motivated to recoup our membership fee, and as a result, we might even end up spending a bit more.”

Popular food items sold at Costco include cashews (the retailer snatches up half the world's supply of the most popular kind) and salmon. Also big with consumers: The hotdog and soda combo for $1.50 in its accompanying food court. About 100 million of them are sold a year.
Costco is famous for turning the experience of warehouse shopping into an adventure. Costco, one of the nation’s top three retailers and the world’s largest membership warehouse chain, has thrived by turning convention on its head. The company never advertises, charges its 64 million members to shop there and doesn’t mark up any product more than 15 percent. It’s a business model that works, generating $93 billion in annual sales.
Correspondent Carl Quintanilla shows how Costco has grown to 600 stores, attracting loyal and affluent customers. They return repeatedly for the treasure-hunt thrill of constantly changing inventory, including diamond rings, steaks, wedding dresses and caskets. This CNBC Original documentary also explores a “Costco Effect,” the routine tendency of its members to succumb to the store’s discount-chic allure and spend more than they expect, often buying more than they need.
A powerful customer focused culture.
Jim Sinegal, Costco’s former CEO, in a recent CNBC documentary on the “Costco Craze” described the secret of Costco’s success was its culture. Jim has created a culture where there are no divisions between leadership and staff, everyone is on the same page when it comes to understanding Costco’s customers and what makes their model work. Every employee knows their role in creating the right environment for customer’s to have the “Costco experience”. Employees are paid fair wages (higher than competitors) that reflect their importance in contributing to the customer experience.
As CEO he is constantly on the move visiting Costco’s 580 stores across 9 countries every year, getting direct feedback from customers and his employees as to what’s working and what is not. Remember this is a $89 billion business.