This UPROXX article popped up in my Twitter feed and I felt compelled to rectify, well everything.
“Prices that end in $.98 or $.99 mean Costco didn’t get a special deal from the supplier”
Costco does not deal with suppliers – they deal directly with vendors – thus cutting out the middlemen (i.e. suppliers and distributors) – hence the name Costco Wholesale!
“It also means that the product is probably the same price as any other store”
This is absurd. Costco executives have been very open that Costco will not mark up items over 14%, while the vast majority of other retailers markup their items anywhere from 30-80% and sometimes even more! When you shop at Costco its practically a guarantee that you will save money compared to “any other store.” Countless price comparisons have proven this for decades.
“Prices that end in any iteration of $0.X9 (except $.99) are manufacturer deals. This means Costco got a special deal from the distributor on those items…”
Again, Costco does not mark up more than 14% and it is because of their razor thin margins that you often see prices that end in $.59, $.69, $.79 etc. The last two digits in the price have NO indication of any ‘deal.’ The last two digits of Costco’s prices are merely the result of math and competitive pricing.
“Prices that end in $.97 are manager specific discounts”
The BUYERS set the price of items, not warehouse managers. Also, Costco does not have ‘sales.’ Items ending in $.97 are called markdowns and the warehouse managers have nothing to do with setting markdowns – markdowns, like prices, are set by the buyers.
“Prices that end in $.88 or $.00… are an inventory dump set by the store’s manager. These items are generally returned or damaged merch.”
Costco DOES NOT sell damaged merchandise. Period. Costco can resell returned merchandise if a returned item meets sellable standards (i.e. not damaged), but again managers do not set prices, buyers do. Prices that end in $.88 or $.00 are not indications as to whether or not an item is “probably never coming back.”
“An asterisk in the top right corner means the item has been heavily discounted because it was being discontinued. So this is management again trying to move product out of the store as quickly as possible.”
Asterisks at the top of price signs at Costco indicate that items are not on reorder. This could be because the item is seasonal and wont be back until next year, it could be an item that had poor sales and wont ever be back in stock at that particular warehouse, or there could be a supply issue and Costco is no longer able to obtain the item from the manufacturer. Either way – for the umpteenth time, warehouse managers have no say in which items don’t get reordered – the buyers do.
“They offer a 30-day price guarantee.”
Nope. Costco has no such policy. Costco can do price adjustments at the discretion of each warehouse, but there is no “30-day price guarantee.”
“This combined with Costco’s 90-day no questions asked return policy…”
Another Nope. No where does it say Costco has a “no questions asked” return policy. Costco actually doesn’t even have a formal return policy for the vast majority of their items. Electronics such as TVs, cameras, major appliances, computers, tablets, drones, and cell phones are restricted to a 90-day limit for returns. And the terms of that 90-day return limit are printed on your receipt anytime you purchase applicable electronic devices. Costcos full return policy can be read here.
“Costco takes a loss on certain items”
Another erroneous claim. Costco does not sell their food court hotdog combos, or their rotisserie chickens at a loss. Period. Also the food courts are not located in the back of warehouse, the chickens generally are, but only because that is where the deli is located.
Mic drop 😉
For anyone curious, here are some of the other sources I used to correct Uproxx’s claims:
Until next time,
the Costco Connoisseur
#GoingToAllTheCostcos
P.S.
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There are times when a warehouse GM or AGM will do a markdown, usually only on a perishable item. For example, if there are lots of bananas that are nearly overripe, the GM might mark them down to $.97 just to blow them out. Better than tossing them the next day. But anything more involved than something like this, and the GM will most likely work with the buyer before making a change. These are called EPCs: Emergency Price Changes, and they only last until the end of the day (but of course could be done again the next day if need be).
You might also see an individual item marked down because it is the display. Open-box returns can also be marked down occasionally. It used to be these would always be even dollar amounts: for example, a TV returned because it was too big might be marked down to $900. The idea is that the even amount indicates it is a one-off — that is, it is that one individual example that is marked down, not all of them. However, it seems like this convention has fallen from favor, and even markdowns for display items and the like end up with a .97.
Finally, while it is true that buyers set pricing, the warehouse GM does have some influence — a GM can and will contact the buyer if they buyer is way off somehow. Usually this is more about quantities ("hey we need more widgets") but if a local warehouse has a Sam's Club close by, warehouse management will talk to buyers to make sure pricing is competitive.
Fun fact: if a buyer wants to do more than a 15% markup, he or she has to get permission from the CEO. Jim straight up said don't bother asking. Rumor has it that any buyer that did bother asking, never made that mistake again. 🙂 I'm sure Craig has the same attitude.