Both companies’ ability to keep prices below most of their competitors hinges on turning over high volumes of top-selling merchandise every minute, every day.
If an item isn’t selling fast enough on the shelf at Trader Joe’s or is collecting dust at Costco warehouses, the companies need to switch to something else that customers will snap up.
“Costco would rather not sell an item than sell it at a price that’s too high,” said Chuck Howard, an assistant professor of marketing at Texas A&M’s Mays Business School. “It would be off-brand for them to be selling things that consumers think would be too expensive.” Costco’s teams buy their suppliers’ products at competitors’ stores and test them to compare the quality against Costco’s. If they find an item tastes better somewhere else, they’ll ask the supplier to improve it for Costco, Walker said — and if that doesn’t happen, Costco will look to replace it.
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