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Costco Wholesale Corporation (COST): What Makes This Retailer So Addictive?

Warehouse retailer Costco Wholesale Corporation (NASDAQ:COST) has some of the lowest margins in the business, because the membership fees it charges shoppers allow the company to earn a tidy profit while still passing on incredible savings to its members.

Are Costco's Growth Days Over?Costco’s low prices haven’t just benefited customers: Shares have walloped the market, returning 11,000% over the past two decades. However, with prices near their all-time high, is the ride over for Costco investors? To answer that, we’ve compiled a premium research report with in-depth analysis on whether Costco is a buy right now, and why. Today, you can get a sneak peek into how this world-class retailer keeps its members happy. It’s not just that members get great deals on good products, but the shopping experience itself has been carefully constructed: There are only a small number of items, which prevents customers from feeling too overwhelmed, and store managers strive to make shopping at Costco feel like “treasure hunting.” Here’s more, from our premium report:

The decision to focus on a small number of items means that Costco’s buyers need to act not only as hard-nosed negotiators, but as curators who can make decisions about what shoppers want for them. While this could be a liability, a tight understanding of the company’s customer base has allowed Costco Wholesale Corporation (NASDAQ:COST) to turn its overall lack of selection into an advantage.

About three-quarters of what Costco sells are what the company calls “triggers,” important staples like soups, cereals, and toilet paper, of which Costco is the world’s largest vendor. Dependably low prices and high quality for these items keep members returning. Filling out the rest of Costco’s shelves, however, are “treasures”: extraordinary deals on unexpected items like cashmere sweaters, plasma TVs, prime Wagyu beef, and even diamonds. Buyers often order large quantities of these items when conditions allow for unusually low prices, but once the items fly off the shelves, they might be gone forever, to be replaced next week with whatever else strikes a buyer’s fancy. Combined with Costco’s lack of signage or obvious “departments,” wandering the store looking for toilet paper can feel like roving for treasure, and is a big part of the reason that the most common complaint from Costco shoppers is that they spent more money than they had intended.