Costco - Stack it high and sell it cheap!

Costco - A Cathedral of Consumption

Costco stacks it high and sells it cheap! Well, some people consider it cheap. I find the prices to be fair, comparable in price to what you may come across on sale at your own super market. But truly, Americans are obsessed with consumption. They love to shop and find every occasion to do so. They are also obsessed with saving money. Many people purchase items simply because they are on sale. They may not know if they will ever need the item, all they know is that it is cheap so they better buy it before someone else does.

It is very obvious that Americans are caught up in what would now be called “hyperconsumption,” and that Costco is a perfect example of this. In Juliet B. Schor book, The Overspent American: Upscaling, Downshifting, And The New Consumer (1998), Schor states:

Americans spend three or four times as much time shopping as Western Europeans. Yet, many middle-class Americans feel materially dissatisfied. They walk around with ever-present mental "wish lists" of things to buy or get. Even a six-figure income can seem inadequate. This country saves less than virtually any other nation in the world (p. 28).

Schor speaks about the ways in which, for America's middle classes, "spending becomes you," and it flatters, enhances, and defines people in often-wonderful ways, but it often takes over their lives (1998).

A Little Background on Costco

The company's first location, opened in 1976 under the Price Club name and was in a converted airplane hangar on Morena Boulevard in San Diego. As of September 3, 2000, Costco operated 313 warehouse clubs, consisting of 237 in the United States, 59 in Canada, 10 in the United Kingdom, three in Korea, three in Taiwan, and one in Japan. Next year Costco Wholesale will celebrate its 25th anniversary and the beginning of the warehouse club industry. As of September 3, 2000, the Company also operated (through a 50%-owned joint venture) 18 warehouses in Mexico (Nasdaq, Yahoo!).

In the beginning Costco served only small businesses. Later, the company felt they could offer better prices if they served a greater number of people. They would have more buying power if they also served non-business members. Because of that change, the advancement of the warehouse club industry was on its way and ready to change the way Americans shopped. In 1983, the first Costco warehouse location was opened in Seattle. In less than six years Costco went from being worth zero to $3 billion dollars, the first company in history to grow that rapidly (Nasdaq, Yahoo!).

When Costco and Price Club merged in 1993, the combined company, operating under the name PriceCostco, had 206 locations generating $16 billion in annual sales. Since resuming the Costco name in 1997, the company has grown to more than 300 locations worldwide with total sales in its most recently concluded fiscal year of more than $30 billion (Nasdaq, Yahoo!).

Costco has three types of membership: Gold Star, Business, and Executive. Gold Star membership is $45 per year and includes a spouse card. The Gold Star Membership is valid at any Costco worldwide. With the Gold Star membership an individual can come into the store during regular business hours and purchase any products. Business members qualify by owning or operating a business. The annual fee for Business members is US $45, which includes a spouse card (Costco.com, 2001).

A Business membership allows the member to shop for resale, business, and personal use. Business members may also add up to six additional membership cards at US $35 each, which includes a free spouse card. A transferable company card may be purchased also. Business Membership is valid at any Costco worldwide (Costco.com, 2001).

Executive Membership is a new level of membership designed to save the member even more money. According to one Costco representative: “Executive members save hundreds of dollars a year on an entire menu of business and personal services.” Executive Membership provides the member a complete line of business and personal services, in addition to all the usual Gold Star benefits, Executive members become eligible by being current or retired employees of select employers, members of approved associations, and professional licensed individuals. But certain services are reserved exclusively for Costco Executive members. An example of Executive benefits is discounts on car and home insurance as well as mortgage services.

Why does Costco charge a fee? They say it is to keep costs down and pass the savings on to their members. From Costco’s web site (2001): “Our large membership base and tremendous buying power, combined with our never ending quest for efficiency, result in the best possible prices for our members.” I suppose that means they would not be able to charge such low prices if it was not for their membership fee.

In addition, Costco's has an “Unconditional Double Guarantee” on their merchandise. They will refund the full price of any product if the customer is not fully satisfied. They also guarantee their membership. They will refund the total yearly fee if at any time a member is not satisfied with Costco’s services or products.

Is Costco good for societies neighborhoods?

The only stores that could be considered competition for Costco is BJs Wholesale Club, Kmart and Wal-Mart (including Sam’s Club). However, when a Costco comes into town it usually wipes out the nearby competition. Costco mathematicians only know how to add. They never talk about the jobs they destroy, the vacant retail space they create or their impact on commercial property values.

My Experience With Costco In Modesto

Please note, the observations I made at Costco pertained no physical or verbal contact. The judgments I made as to age, ethnicity, etc., are my opinion. Thus making the research below subject to flaws. I select individuals at random on different days of the week. I observed them leaving the store after they made their purchases.

Of the 56 shoppers I observed, I found 52% to be women and 48% to be men:

I found 14% to be approximately between the ages 20-30, 38% to be between the ages 30-40, 23% to be between the ages 40-50, 14% to be between the ages 50-60, and 11% to be over the age 60.

I found there to be apx. 71% white/anglo shoppers, 4% to be black, and 25% to be other races:

Next I took note of how much an individual shopper had in their cart upon checking out. I found 38% of the shoppers purchasing what I called a “small” amount. This would consist of 1-5 items. I found 43% of the shoppers purchased a “medium” amount, which consisted on 6 – 15 items. Next I noted 20% of the shoppers purchasing a “large” amount, which I considered to be anything over 15 items :

As I did this research I noticed a few interesting points. I noticed that on the days I went to Costco there were very few Black shoppers. In fact, of all my entries, I had only logged two black shoppers. I do not think I have ever noticed that the majority of Costco shoppers were white.

I also noticed a few people come in and only purchase one item. For instance, a man came in and only purchased a watermelon. Why a watermelon? The lines were very long that day and the parking lot was jammed to the seams. I was so curious about the watermelon that I went to buy one for myself, thinking that perhaps it was a wonderfully delicious watermelon and he new something the rest of us didn’t. Needless to say it was not.

I observed some families at Costco having dinner at the snack bar. This is where Costco offers a variety of artery clogging delicacies. The snack bar includes items such as pizza (whole or by the slice), pretzels (home baked and huge!), chicken bakes (my favorite), and smoothies. But they are most famous for their foot long sausage dog and soda for $1.50.

At the end of this paper you will find my original survey material. On these notes you can see the types of items people purchased. I would have to say the most common items purchased were household items (cleaning supplies, toiletries, etc.). I also observed a number of people with what appeared to be their family and a considerable number of people who were shopping alone.

How Social Theorists Would View Costco

Costco gives individuals a “false consciousness” because it leads people into believing they are saving money by purchasing in large amounts. When reality is, if a person shops at Costco they may have fifteen tubes of toothpaste under the cupboards at any given time. Costco shoppers are spending more money now to try to save money tomorrow. The “huge size” Costco mentality simply encourages people to purchase more of a distinct item. When you buy Jolly Rancher candies at Costco, you must buy 750 of them. I know because the huge bag is setting right here next to my desk. I would have to honestly say that I have not eaten 750 Jolly Rancher candies in my lifetime, and I love them! But I couldn’t resist, I purchased the entire bag for less than 6 bucks.

A person usually works just enough to provide the necessities for his family with perhaps a little left over. Marx referred to this as “laboring power.” When a person is shopping at Costco and purchasing more items than they need at that particular time, they are giving their labor away, labor they haven’t even put forth yet. It is bad enough that the person is being exploited by the one they are laboring for, their company, now it is Costco that is doing the exploiting. Costco is convincing people they need to purchase huge sizes of items in order to do what is “right” and save their family money. People leave Costco spending large sums of money on items they will use months from now, how is this saving money?

The Sacred Aspects of Consumption

Luckmann (1967) attempted to tap some of this religiosity with his notion of "invisible religions." He argued that a enormous variety of hidden forms of religion consist in society, observed even in such things as industrial norms. When one thinks about it, it is the shopping event that the consumer experiences that Durkheimian sense of feeling connected with the broader social orders. A large shopping area, like Costco, has all the attributes of customary town centers and has become one of the most efficient forums for reaching people. They are one of the few places where one even sees one's fellow community members.

Applying the Cathedral Metaphor to Costco

The sense of vast, open, larger than life space that one receives within both cathedrals and mega-stores like Costco, induces the sense of awe, wealth and power. Some of the over 22,750 shopping centers in the U.S. exceed one million square feet of gross leaseable area (Jacobs, 1984:1). Not only is one instilled with a sense of space, but a sense of time as well. There are seasonal observances as well as observances of man-made accountability: Back-to-school, all new Christmas merchandise, After Christmas sales, and the Easter-Spring renewals of wardrobes.

The same rules of attire apply at Costco that apply when attending your cathedral; one does not show up at a Costco with dirt on their hands, grease on their clothes, nor curlers in their hair. And then before one can escape there is the actual ritual of consumption. A temple priest approaches those showing interest in the products of the establishment and asks "Would you like to try a sample?" His or her job is to help the consumer select from a seemingly infinite array of items, like Tasty Chicken Treats, Tangy Stir-Fry Sauce, or Turkey Teriyaki Jerky. These just may be the particular item(s) that he or she is presenting that day; they may be different on another day.

Finally, having waited in a very long line to conduct the formal exchange, the individual slowly arrives to the front of the line. Most people now carry insufficient currency and must use a more indirect symbol of his/her desire to partake: a Debit card, American Express Card, Costco Credit card or check. Because of the fees associated with accepting some credit cards, Costco does not accept Visa or Mastercard. This method of consumptive payment requires a test of good faith; an investigation is made to insure that one has not sinned, that is, over-extended the proceeds gained from one's labor by going over their credit limit.

Past & Present Shopping Consumption

Until the beginning of industrialization, work was saturated with the quality of the sacred as religion still being empowered within everyday life. Max Weber theorized on this merging of the two worlds, with religion providing the necessary restraints and prospects for experiences of transcendence through one's work. Yet with the loss of craftsmanship, the breakdown of individual control over the entirety of production, and the forces of secularization, transcendence became diffused and no longer possible through secular work.

The assembly line came about and produced increasing amounts of goods requiring even larger markets. Americans began to have increased amount of extra income and were now able to purchase other items besides essentials. This change in attitude included major political, intellectual and social adjustments as well as the more apparent economic realignments. Referring to the way things have changed The Birth of a Consumer Society: The Commercialization of Eighteenth-Century England by McKendrick, Brewer, and Plumb says this:

What men and women had once hoped to inherit from their parents, they now expected to buy for themselves. What were once bought at the dictate of need, were now bought at the dictate of fashion. What were once bought for life, might now be bought several times over. What were once available only on high days and holidays through the agency of markets, fairs and itinerant peddlers were increasingly made available every day but Sunday..." (McKendrick et al., 1982:1)

The "keep up with the Joneses" ethic has been a central theme in society and has helped skyrocket consumerism. And it was this philosophy that allowed retailing and advertising to become the two main points in modern consumer life, supporting a division of labor capable of absorbing all levels of the status hierarchy (Packard, 1960). Further, since the Second World War, this American middle class custom of consumption has improved both in intensity and meaning, coming to be housed in a new architectural space that symbolically dramatizes this new meaning. It was the emergence of mass consumption that catalyzed the transference of the sacred from the cathedral to the modern shopping center (Jacobs, 1984).

Costco and Ritzer’s View

Although there are some benefits of McDonaldization, in general, this process can be observed as not helpful to our society. In fact, Ritzer calls the McDonaldized society a system of "iron cages" in which all institutions come to be dominated by the same principle (Ritzer, 2000). However, this is more than a figurative device for Ritzer. Rather, he argues that the influential reason that has made the McDonalds organization such a success is succeeding in penetrating every dimension of the social and cultural life.

McDonaldization can certainly apply to Costco. If you were to go into a Costco in Kansas chances are it would look very similar to the one in California. However, Costco, and other wholesale warehouses, have been hitting the world market for the past few years. Their recent emergence into different countries has created the need for them to adapt to the shopping differences of each country. For instance in China: “The Chinese Typically live in small apartments, which means that ‘huge American-sized packages and cases are out; smaller, compact sizes are in.’ Customers usually bike or walk to the store, which limits what they carry home” (Ritzer, 1999).

Costco – The American Way!

What's more, I can instantly sense when I am in a house equipped by Costco. All their household items and much of their food are in economy size packages. And when a friend hands me a soda labeled “Kirkland” I know they too have been sucked into the Costco phenomenon. Costco is where market research rules. Where products that made USA great come to show America what they are made of. So I go. I buy. I feel like I am saving some of my hard earned cash. I search for that wedding gift I need to buy and those socket wrenches my husband said he couldn’t live without. Then I think of what the place would look like if an earthquake hit.

Surprisingly, despite the huge super stores, like Costco, and the obsession Americans have with consumption most people do not feel they are spending too much. In fact, according to Juliet B. Schor, many Americans feel like they are barely able to purchase necessities:

Oddly, it doesn't seem as if we're spending wastefully, or even lavishly. Rather, many of us feel we're just making it, barely able to stay even. But what's remarkable is that this feeling is not restricted to families of limited income. It's a generalized feeling, one that exists at all levels. Twenty-seven percent of all households making more than $100,000 a year say they cannot afford to buy everything they really need. Nearly 20 percent say they "spend nearly all their income on the basic necessities of life." In the $50,000-100,000 range, 39 percent and one-third feel this way, respectively. Overall, half the population of the richest country in the world say they cannot afford everything they really need. And it's not just the poorer half (p. 19).

Conclusion

But the scariest thing about going to Costco is realizing the major damage it can inflict on my pocket book. I can buy toilet paper, batteries, and milk, some socks for the kids, bread, toothpaste, film, and a vegetable platter and walk out spending $200. And as I walk out they stop me at the door and analyze everything in my cart to assure that I have not stolen from their establishment. What is even more surprising is that I continue to come back.

If I was to go to a friends house and they stopped me at the door and checked my bags to see if I had stolen from them I do not think I would come back and visit them again. But at Costco there is a 100-foot line of people waiting to exit the store with receipt in hand to be checked for theft. None of them are offended, they all wait patiently for their turn with the security guard and they will return again next week.

References

• Costco Wholesale Corporation Official Website. http://www.costco.com. 1998-2001
• Durkheim, Emile. 1947. The Elementary Forms of the Religious Life. Glencoe, Ill.: The Free Press.
• Jacobs, Jerry. 1984. The Mall: An Attempted Escape from Everyday Life. Prospect Heights, Ill.: The Waveland Press.
• Luckmann, Thomas. 1967. The Invisible Religions. London: Macmillan.
• McKendrick, Neil, John Brewer, and J.H. Plumb. 1982. The Birth of a Consumer Society: The Commercialization of Eighteenth-Century England. Bloomington: Indiana University Press.
• Nasdaq - Yahoo! Website. Profile - Costco Wholesale Corp. (2001) (NasdaqNM:COST) http://biz.yahoo.com/p/c/cost.shtml
• Ritzer, George. 1999. Enchanting a Disenchanting World – Revolutionizing the Means of Consumption. Thousand Oaks California: Pine Forge Press
• Ritzer, George. 2000. The McDonaldization of Society. Thousand Oaks California: Pine Forge Press.
• Schor B., Juliet. The overspent American: Upscaling, downshifting, and the new consumer. New York: Basic Books, 1998
• Williams, Rosalind. 1982. The Dream Makers: Mass Consumption in Late Nineteenth Century France. Berkeley: University of California Press.