Costco is an organization characterized by:
Walk around the Costco campus for very long and you’ll realize that nearly every employee you meet talks about their warehouses (stores). This might seem obvious, a retail organization caring about stores, but it’s a culture that has been deliberately cultivated. CEO Ron Vachris famously got his start in the warehouses pushing carts around. In Costco lore, co-founder Jim Senegal threatened to kill former CEO Craig Jelenik if he jacked up the price on their $1.50 hot dogs.
Thankfully for all of us, they’ve also not adopted the hilarious term Glizzy.
Regardless of whether or not the hot dog story is true, it’s telling that it’s become canon among the ranks. When I first visited Costco’s sprawling wooded campus in Issaquah, I called my host from the courtyard and asked him where I should go. He told me to look up for the neon hot dog sign. Sure enough, somewhere around the 7th floor of the building, I saw him waving at me next to a glowing neon hot dog. I’m pretty sure corporate didn’t place the dog there, although I can’t be sure. It seemed like an organic and unironic affection for the loss-leading item and what it stands for.
Notably, my host is not from a marketing, sales, or HR department. He is a somewhat high-ranking member of the internal audit department, which sits at the bureaucratic center of legal, accounting, and technology. A veritable ninja in the bureaucratic arts, the man could have easily spent his days in technical minutia without ever raising his head to see the forest. Coloring every aspect of our conversation were continual contextual references to the customer experience and the integrity of the brand. Maybe it’s just brainwashing, but my host was (and is) neither a conformist nor an ass-kisser.
Costco has an extensive network of vendors for its warehouses. They will sell you big ass teddy bear and gold bars and a pallet of marshmallow fluff.
But if you visit their website, you’ll find that they also offer:
And, the fringe, they partner with outside vendors to channel sales of things like Pet Insurance and Pre-Paid Caskets.
This list barely scratches the surface. But each of these areas is its own innovation center, siloed off from the rest of the organization. This comes with technology tradeoffs when one of these silos (ahem, cylinders of excellence) needs to move faster than the central organization, but this is the essence of a multi-speed business. Costco travel operates within the parameters of the brand, but is free to choose technologies without the emcumberances of the global brick and mortar. And indeed they do, much to the chagrin of the data wranglers who Just Want Structured Data in Tables Damnit.
Expansion into each of these areas is a risk, and at the fringes (Travel), you can kind of feel that they’re operating differently. It’s not always cohesive (the “omnichannel” experience), and Costco isn’t known for having a wizzy e-commerce experience (yet), but customers remain loyal and over the long haul, Costco is table.
Costco Pushes Back Hard Against anti-DEI note here that their reasoning here entirely avoids the heated politics around the issue, and takes it back to the warehouse.