Ask HN: Why does Costco not have an express lane at any of their stores?
The CEO claims it's because:
>"Costco’s ability to sell merchandise at incredibly low prices is based on adhering to various operating disciplines at every turn. Instead of having an express line—that often would be open but without a member in line—we have invested millions of dollars to speed up the entire front-end process. Our policy is “no more than one (member) in line and two (members waiting) behind.” The average completed front-end transaction is just over 1 minute." [0]
But I think he's skirting the issue. I also think I know the answer but I'll pose the question first before muddling anybody's thoughts on the matter with my own.
[0] http://www.consumerreports.org/cro/magazine/2014/12/q-a-with-costco-s-ceo-w-craig-jelinek/index.htm
20 comments
[ 2.8 ms ] story [ 56.2 ms ] threadIf you want a store that offers a nicer, more convenient shopping experience (along with significantly higher prices), there are plenty of alternatives available to you.
Because membership fees are so important, Costco has to listen to the members so I would hazard a guess that members have not asked in sufficient numbers.
Some items or services are definitely carrying healthy profit and behind the scenes kickbacks from the vendor (small business payment systems, other recurring services sold to customers, very large price ticket items like furniture and cars)
Because of that, I think its silly to compare Costco to any other retailer in any sense. If you never even walk through the door they've made money on you. That strips away the need for a lot of things that other retailers need to do to get you in the door.
They don't care if you get in and out fast for one item, their average cart value is really high. If you know you'll need to wait anyway, you'll do all your shopping there in a large trip and there is less "between order" time spent for their cashiers (who aren't really cashiers but basically warehouse packers, and you're the picker).
This extends to everything they do:
- They don't need to carry less profitable products to get you in the door, they optimize for least products and most profit
- They pay more because these aren't store employees but a combination of store and distribution center employee. This is supported by "market salary" a bit if you compare walmart distribution center employees you'll see they're actually higher paid starting salary, Costco employees fall on the upper end of the area between walmart store employees and walmart distribution center employees
- They won't build places they can't get people to pay that membership fee. The membership fee is a bit of a means test if you think about it. Poorer people can't afford to buy in bulk even if it saves them money, if you can't shell out the money for the right to shop at their store, then your average cart receipt doesn't fit in with what they're looking for. They'd probably be able to build profitable stores in a lot of places, but the membership fee structure means less stores but very low risk. You know if your market can afford to pay for somewhere to shop, they can afford what you're carrying. And it doesn't matter at that point because you're already profitable anyway.
They really aren't a revenue optimized company, they don't care about a few missed sales that you run to Acme instead of Costco because you only need one thing and don't want to wait. That's exactly what they want - a nice big cart every time you come.
Costco's employees get paid well because it reduces costs to hire and train employees as well as pilferage.
Also, I'm not sure how it fits in, but there are radical differences in the items between costcos just a few miles away, at least in the bay area. They are more neighborhood oriented then you might think.
On your last line, my knowledge of what Costco carries comes from a CNBC doc - so I'm not arguing that you're wrong, that's weird though because they made it seem like they have the exact same product selection everywhere (except produce/meats) and it's carefully curated. One example was the sizes of Motrin they carry, they only carry one size (180).
I guess there's always the free cocktail weenies...
Eventually they got rid of them in favor of standard checkout lanes.
I never make it out of a Costco with < 20 items usually. I usually stock up for a month resulting in a $300-$400 purchase.
I do see people with 1-5 items sometimes. I let them go ahead of me.
Imho they're purposely incoveniencing small-time shoppers, in an effort to increase each shopper's purchase amount.
If you're constantly met with 5-10 minute wait times at the checkout, you're going to make sure that it's worth it (by buying a lot of items).
They probably see multiple efficiencies by customers purchasing 20+ items at once and wish to keep it that way.
With 20 or more checkout lines in most stores, I can't really justify why they wouldn't dedicate at least one to 10 items or less.
I thought about this the other day when I was contemplating going in just to get a tub of baking soda. I didn't pull the trigger. I'll go back when I have at least 10 or 20 things I really need to stock up on.
I agree with jotux though, a single queue would really be the best of both worlds imho. They get their efficiences with the big buyers, and everybody gets through the line at the same (faster) rate.