Costco shares rose last week on the news of an uptick of Q3 same-store sales, despite lower fuel prices.
Deutsche Bank retail analyst Paul Trussell has now deemed the retailer “Amazon-proof,” thanks to its membership model and physical-store advantage. That is, members tend to be “stickier” than other shoppers because they’ve already invested in a retailer. And many go to a Costco store with a grocery list, but leave with many things not on the list.
Costco’s move to more organic grocery items and its shift from American Express to Visa for its own credit-card are also seen as competitive strengths.
But Costco has broken away from that pack, pleasing investors with its recent report and outlook. The news comes as membership programs continue to be popular with consumers, with Amazon Prime and membership-based delivery services expanding. Costco currently counts 44.6 million households as members, bringing in $785 million in sales in Q4.
The warehouse-style retailer has several benifits, including the browse-and-buy advantage of its brick-and-mortar locations. The retailer offers many products that consumers need or prefer to buy in-person, like gas or food, thus driving foot traffic to its stores.
It has also long paid its workers well above minimum wage and provided them with relatively good benefits. That means that Costco is already at a competitive advantage, better able to attract workers at a time when unemployment is down and workers can be pickier. And it doesn’t have to invest heavily to play catch up, either, as Wal-Mart does, because it has already long had more employee-friendly policies in place.
Wal-Mart’s plan to increase wages and improve training, by contrast, will cost the retailer at least $1 billion.