Costco Needs More than Grocery Shoppers

Where else can you buy groceries for the week, shop for Kirkland jeans and buy a new computer? Only at Costco.

The wholesale store has always offered a wide variety of products, but it seems like shoppers know what they want. Last quarter Costco sales rose 6 percent, but profit dropped 15 percent because customers indulged in meat products, not electronics.

For some reason customers did not seem to want a new flat-screen TV to go with their rotisserie chicken.

Costco sells some groceries, specifically meat products for small profit margins. Sometimes they offer the products at a loss just to get customers in the door. But this strategy only works if customers purchase more expensive goods with higher profit margins, like flat-screen TVs.

Rotisserie chickens are a prime example. Costco sold 70 million birds last year at $4.99 each. They have the price point set in stone despite rising chicken prices. In the past year the profit margin on each rotisserie chicken sold has dropped 20 cents because of rising chicken prices. Thats $14 million that Costco misses out on for not adjusting it's chicken price.

And it would all be worth it if shoppers' attention spans were shorter. Perhaps the firm needs to reorganize stores to distract grocery shoppers with expensive electronics.

Mickey Gorman