Costco Draws New Praise for an Old Game

Simplicity and consistency may not seem like strong selling points at a time when consumers increasingly value variety and change.

That’s never bothered Costco, whose “consistency of strategy” is now being lauded as one of its greatest strengths in the latest Kantar PoweRanking research, which outlines each year how trading partners view each other.

“Costco’s strategy is clear and clean,” said one manufacturer quoted in the latest report. “They know their customer. They have a powerful yet simple assortment, and it resonates well with consumers.”

Said another, “Costco is the leader of the pack with pricing that cannot be beat in the current environment, along with great merchandising, quality and fun.”

Costco landed in the fourth position on this year’s rankings composite, which represents the “best of the best” retailers in the opinion of suppliers. Costco placed just under Walmart, Target and Kroger, and ahead of storied brands like Publix and Wegmans.

The membership warehouse club has stuck to proven strategies throughout a 30-year history, including limited number of SKUs, treasure hunt merchandising and price leadership. Costco managed to hold the line on price as commodity costs accelerated, and now that costs are starting to decline, it will use this reversal to take an even tougher stand on price, Richard Galanti, chief financial officer, said recently.

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Costco also advanced in the Kantar rankings as one of the best companies to do business with. Manufacturers praised Costco’s “demanding yet collaborative approach to supplier partnerships,” a comment also made about Safeway. It seems tough love relationships are in vogue among manufacturers right now.  

Despite its consistent approach, Costco has made some changes that aren’t necessarily apparent to customers. For example, it has increasingly embraced shopper insights as a support to its item management, said Ginny Valkenburgh, Kantar senior vice president, in an interview. 

I would further build on the Costco discussion by citing its formidable customer following and a surprisingly large number of growth opportunities. These include smaller markets, private brands and nonfood categories, according to recent SN reporting. Not bad potential for a merchant that is largely following a strategic roadmap created in a pre-GPS world.