Costco's average customer is definitely higher income than the average American, although I've seen different attempts to quantify this. The first result from a Google search gives me this: https://www.fool.com/investing/2016/06/17/who-is-costcos-fav...

A couple of factors act as a "filter" that makes Costco less worthwhile for lower income shoppers:

- Buying in bulk requires a bunch of cash up front, which not everyone has.

- Buying in bulk normally works best for families, and individuals with families have higher average incomes than those that don't.

- Costco stocks almost exclusively mid- to high-quality food and products. Shoppers may be able to have a lower grocery bill by buying lower-quality store-brand products elsewhere.

There are obviously individual exceptions, but these factors drive up the average income of a Costco shopper.

In Chicago a Costco membership is worth it just for the gas. It's usually at least 50 cents per gallon less expensive than nearby stations. I have no idea how they do that.

Also, for new parents: you can easily save the cost of the membership on diapers and wipes for the year or so your child wears them.

They always have a car parked in front or by the customer service center to advertise their auto purchase program. It has almost always been a Lexus, but for the past few months the one near me is a Maserati. I think this may be their signal on who their ideal customer is. Yet my parents used it to buy a Subaru and it was a good deal.

Costco loves the concept of price anchoring. That's why the diamond rings and tvs are right near the front, and their liquor isle has $1,000 bottles.

The concept is that when you decide against buying the $1,000 thing, the $50 thing seems a good comprise. If all you had were $10 things, the $50 thing would seem to be 'too much'.

Costco makes ~75% of their profit from memberships, gas is like their iconic $5 rotisserie chicken - sell it at cost or a small loss as a incentive to buy and maintain membership. Gas prices are posted outside so it's a particularity public ad for costco membership and as such they have a strong incentive to push the price as low as feasible.

> A couple of factors act as a "filter" that makes Costco less worthwhile for lower income shoppers:

You missed a big one in many areas: buying in bulk requires facilities for storing inventory.

With sufficiently stable social circles (also not available to everyone, but at least not an identical requirement) you could replace storage with distribution.

Sure, but the poor are less likely to have stable social circles for shared purchases and distribution as well as less able to afford storage.

Certainly. I'd meant to imply as much.

Thanks for the fool.com article it was a very interesting read.

People on food stamps can buy in bulk since they get a bulk distribution once a month but the $50 membership is likely a deal breaker for them.

This was years ago so I don’t have a reference. But one of my business professors in college assigned a case study that contained the memorable (to me) stat that the average Costco shopper had a higher net worth than the average Nordstrom shopper. Something to do with small business owners vs people going into debt to look more affluent than they really are...

Net worth, versus annual income.

Shopping at Costco is often a wise financial decision, and hence people who shop at Costco tend to be the type of people who make wise financial decisions, and the net result of making wise financial decisions is a higher net worth.

Costco does sell in bulk but it's not a Family Dollar. It's for the middle class to save some on their name brand groceries because they can afford to pay more at the register to go a little longer between trips to the store. It's not really aimed at people that can barely afford to shop at the discount Aldi every few days because they can't pool enough money together for a biweekly Costco trip.

They are. You need to have a good amount of extra money to afford the membership and the cost of buying 6 months of toilet paper in advance. Those are cheap items that you will need, if you are not poor you probably don't even think about it. However when you are poor it doesn't matter if it is cheaper or not to buy in bulk because you don't have the cash to afford it. (you also are unlikely to have the storage space for all of that)

Costco serves the upper class.

Do not forget about ALDI - it is cheaper than Costco, does not require buying in bulk, but the quality is stable and generally well worth the money. ALDI is the place to go for the working class.

Upper class? It's true that those living in poverty often don't have the means to buy in bulk or pay a Costco membership, but I don't think the designation of "upscale" describes the store either. Many working class and middle class people shop there.

Upper class is a bad descriptor, and many working class people do shop there, but I think Costco does have a bit of an upscale connotation. A different one than whole foods or a natural food co-op, but I think it still has one. It's not the "normal" grocer.

The poorest people in the US are still upper class. Except for a few homeless who refuse all support services perhaps.

This basically renders your point meaningless, since now literally all businesses in the US are servicing the upper class.

There's relative poverty in the US still. Currency still has relative purchasing power. Saying a person living below the US poverty line should be put in the same class (upper class) as Jeff Bezos seems disingenuous as best.

Your other comments contradict themselves.

Comparing the poor of a rich nation to everyone else is an apples to oranges comparison. The poop still struggle hard in the US.

Don't know about "upper" class, but definitely middle class. A lot of things at Costco (at least where I live) are only available in organic formats, for example, which jack up the price for no real benefit (imo). The working poor don't usually have the flexibility to do these kinds of things.

I've known plenty of people on various levels of welfare support who would shop at costco/sam's club. They got their support once a month, making a big shopping trip perfectly in reach. The busiest Costco locations I've been to have been the lower income areas of town (Phoenix area).

This was the reason I asked. I’ve known of people using food stamps there.

Membership at Costco is like 60 dollars a year. Not saying it's doable for everyone but its hardly something 'you need to have a good amount of extra money' to afford.

> Membership at Costco is like 60 dollars a year. Not saying it's doable for everyone but its hardly something 'you need to have a good amount of extra money' to afford

If you are poor to the point of relying on public assistance to meet basic needs, an extra $60 up front even if it will pay off over a year means foregoing other essential expenses now.

But the bigger cost in many parts of the country is the space needed for inventory to maximize the benefit of bulk purchasing. Sure it works well for my family, but we live in a decent sized suburban home with an second refrigerator, and a storage closet converted for additional pantry space.

Why do you think I was talking about people who are poor to the point that they are relying on public assistance? Did you gloss over the part where I said 'not saying it is doable for everyone'? You even quoted it. This thread was debating whether or not Costco is an 'upscale' place that only the well to do can afford, not whether or not Costco is an option for people on public assistance.

If you look at the locations of Costcos in any metropolitan area, they will not be near the poorer areas. Walmart is more frequently located near poorer areas, and what I was getting at, was that Walmart can't just up its pay to match Costco because many people that shop at Walmart don't have any extra money, whereas Costco can afford to raise prices to help pay for better wages.

You can also get the $120 membership that gives you a percentage back. If you shop there regularly the membership becomes effectively free. But this doesn't help someone living paycheck to paycheck. Where the hell are they going to find an extra $120?

You need to be buying enough to make it work out. A single person often doesn't benefit from Costco unless they're also a small business owner.

And you can usually get a second card « for someone else that lives in the same household ».

You can also tag along with someone else that has a membership if they’re willing to offer you their time.

I never said or implied that poor people are able to shop at Costco.

Unlike other groceries, Costco isn't that reliant on low-margin, zero-margin, or loss-leader groceries (e.g. produce). They keep their costs down by having a limited selection and large, sparsely located warehouses in relatively inexpensive areas rather than traditional retail locations. Selling larger sizes and quantities of product helps to more quickly cancel out their fixed costs. They also sell much higher margin products alongside their groceries, such as electronics and appliances.

Their margins are high like the others because many households renew memberships each year but do not make much use of them. I also think their membership does skew more affluent than many other retailers.

Operating costs for a store are also significantly less than a retailer like Walmart that has many, many more SKUs to stock.

That the key. Plus their stores are warehouses, so maintaining the store is pretty much keeping product on shelves and keeping the floor clean.

Wouldn’t an unused membership be worse (for Costco) than a used membership? Perhaps barring some rare edge cases like customers who would only buy loss leaders, or stores that are congested with shoppers.

Costco actually sells most products at or near cost. Most of their profit is in memberships.

https://www.fool.com/investing/2017/05/05/how-costco-wholesa...

Interesting point, I wouldn't have guess that. Although, it sounds like they would still rather their members buy products, based on this sentence:

> If you examine the company's sales, it brought in $56.59 billion in net sales with a merchandise cost of $50.21 billion and sales expenses of $5.92 billion.

I don't think that sales expenses would vary much depending on how many members were buying products.

The membership fee keeps away many poor and lower-income shoppers. They just aren't going to pay to shop somewhere. They go to wal-mart, aldis, dollar stores, etc.

Costco is Sam’s Club, without the tattoos.

And they pay their employees well.