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Before we get started, this breaking news, link here:
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Costco has been in the news lately. It falls in the "BRK" category for me. With thousands of tickers to choose from ....
Earlier (see this blog) I suggested that of the three things consumers look for (cost, quality, convenience) when shopping from the large, big-name retailers, convenience is the most important.
Amazon and Walmart pretty much "neutralized" the cost argument.
Quality is absolutely not a factor at all. Among the three leaders, they all have the same products (with some minor exceptions -- particularly when it comes to beef and wine, where Costco excels -- for the record I can't remember when I last bought beef or wine from Costco).
It comes down to convenience.
I would add that buying in bulk to save money is now a "negative" for most folks when shopping, and even if buying in bulk is important, one can out-Costco Costco by shopping at Amazon. Not only can you buy in bulk at Amazon, products are often heavily discounted at Amazon, and one can save even more by subscribing to a product.
Instead of buying a twenty-weeks-supply of Bounty paper towels at Costco -- paying for twenty weeks all at one time, and then trying to find space at home for all those paper towels -- one can buy one or two rolls at a time at Amazon, have them delivered to your front door, and subscribe -- for which Amazon offers a discount -- and then "set it and forget it." I do that with Clorox cleaning supplies which arrives ever few weeks and I donate to the local elementary school if my wife doesn't intercept them first.
By the way, if one understands human behavior, buying in bulk is the worst way one can save money these days. Amazon subscription is without question, the best way, Especially if using the Amazon Prime credit card and getting another 5% cash back on every Amazon purchase (needs to be fact-checked).
So, now, more from over the weekend. Regarding convenience and cost.
E-commerce is growing at a rate of 10% year-over-year for almost all e-commerce retailers -- where, I assume, Gen Z shoppers make up the largest group of consumers.
All retail, not just e-commerce:
Website by number of visits:
Investors in Costco have the same problem as investors in energy and BRK: they're older investors; have held those stocks for 50 years; and, can't afford to sell the tickers for two reasons:
- capital gains would be formidable; so, they will wait to die and let their heirs take the step-up value and sell;
- for energy, the dividends are worth way more than the underlying value; cost basis is literally zero for many and they're getting 4% (and better) dividends now and compared to their original dividends 50 years ago ...
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