Costco adds more big brands and lowers prices | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

While many Costco customers join the warehouse club for its low prices, others appreciate its treasure-hunt business model. That’s the ever-changing selection of merchandise designed to delight customers and encourage them to visit the store looking for ground beef, paper towels, and coffee, but leave with a kayak or a new winter coat.

“The treasure-hunt concept is built on the behavioral principle that people are motivated by variability. Humans respond strongly to unpredictable rewards — a phenomenon studied extensively in behavioral economics and cognitive psychology. In Costco’s case, unpredictability doesn’t cause frustration; it sparks excitement,” according to a report from Mojo Sales and Branding, a consumer-behavior consulting firm that advises retailers on merchandising strategy.

It’s a strategy that drives sales, which also makes shopping at Costco at least partly an entertainment experience rather than a traditional utilitarian one. Even if you don’t buy new skis, a six-foot Teddy bear, or some other whimsical item, it’s fun to consider it.

“Members enter the warehouse knowing that some products will only be available for a brief window. That anticipation creates a mental pattern driven by scarcity and urgency, two forces that have shaped shopping behavior for decades,” Mojo’s report shared.

Costco CFO Gary Millerchip shared during the chain’s first-quarter earnings call some of the new items Costco added recently.

Costco adds big names

Last year, Costco made big news for selling gold bars. In the first quarter, the chain played it a little more traditional.

“We added a number of new national brand partnerships across a range of non-food categories in Q1, including Gap and Ulta gift cards, Vera Bradley apparel, and Upper Deck trading cards,” Millerchip shared.

Costco regularly rotates some of its merchandise, and Millerchip explained some of the logic behind that.

“Newness has been driving growth in this category as well, with on-trend items such as Dubai Chocolate performing very well. Kirkland Signature continues to grow at a faster pace than overall sales, with KS items typically offering 15% to 20% value compared to the national brand alternative with equal or better quality,” he added.

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The chain’s house brand has done well during the current period of economic uncertainty in the United States.

“In Q1, we launched approximately 45 new KS items, including dry facial daily clean towels, caramelized blueberry croissants, and various apparel items in addition to our latest food court offering, the caramel brownie sundae,” he added.

Also Read: Costco adds limited-time food court treat to rival McDonald’s

Part of Costco’s appeal is its ever-changing merchandise.

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Costco’s treasure hunt adds to sales

As a regular Costco customer with over a decade as a member, and a seasoned reporter in the retail space, I can share that my shopping behavior at the warehouse club differs from how I shop at a supermarket or Target. Instead of just hitting the aisles containing the items I need, I usually do a full lap of all the aisles at Costco.

That’s essentially how Costco designed its stores.

“By rotating staples, or ‘triggers,’ as Costco calls them, all around the store, it purposely funnels shoppers from corner to corner, knowing they’ll add plenty of extra items to their carts as they traverse the store,” Chowhound reported.

It’s a system designed to make customers excited about what they’re buying.

“Costco enhances this psychology by rotating inventory deliberately. Even high-performing items may be temporarily replaced or moved to different sections. This constant refresh keeps the environment mentally stimulating. When shoppers discover items they didn’t expect to find, dopamine — a neurotransmitter linked to reward — spikes,” the food website added.

It’s a system that makes people keep coming back and leads to membership renewals.

“Costco has the most loyal customers of any retailer,” UBS retail analyst Michael Lasser told CNBC.

Costco has also lowered prices

While the treasure hunt drives sales and repeat visits, Costco’s core offering is low prices. Millerchip talked about that during the Q1 earnings call as well.

“As always, our goal is to be the first to lower prices where we see opportunities to do so. A few examples of lower prices this quarter include KS Chicken Pot Pie from $4.29 to $3.99 per pound; KS Bacon from $18.99 to $16.99 per packet; KS Whipped Cream 3-pack from $10.49 to $8.99; and KS Walnuts 3-pound pack from $14.49 to $12.99,” he said.

CEO Ron Vachris drove that point home.

“We will never succumb to not being the best price and driving prices down for our members. That’s what Costco is known for, and that will always be our leading mantra,” he added.