While Costco has built its business on offering low prices, it has also embraced the treasure-hunt shopping model.
The chain's buyers scour the globe looking for interesting items they can pass on to members at a strong value.
The warehouse club always offers food and household basics, but sometimes you visit and your local store offers kayaks, huge Teddy bears, cashmere sweaters and nearly anything else.
That model also drives TJX Cos.' (TJX) -), divisions: Marshalls, Home Goods and TJ Maxx.
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Customers shop at those stores not just because they need something but because they're hoping to find something they want at a good price. That drives increased visits, which in turn leads to larger sales.
The treasure-hunt aspect may not be the main reason you'd join Costco, but it does add to the fun of shopping there. In many cases, not knowing what you might find may lead you to visit the warehouse club instead of the local grocery chain.
In many cases, it's not just about buying. People like to see new merchandise, and while they might not buy that massage chair or canoe, they enjoy both finding the products and the ability to decide whether to buy.
Now, Costco has embraced this model, especially for the holiday season, in a new way.
Image source: Xinhua/Ting Shen via Getty Images
Costco sells unique items
Costco got a lot of attention a few months ago when it began selling gold bars. Some investors consider gold safer than stocks or bonds because it's relatively rare and they can physically take possession of it.
For the warehouse club it was a gimmick — but one that worked really well. Chief Financial Officer Richard Galanti talked about the gold-bar sales during the chain's fiscal-first-quarter-earnings call.
"And some fun, wow items in the quarter in e-commerce, you've probably read about the fact that we're selling one-ounce gold bars. We sold over $100 million of gold during the quarter," he said.
The chain did not just sell gold bars. It also used unique items to drive attention to its online business. It's a variation of the treasure-hunt model designed to drive eyeballs to its website.
"We sold a Babe Ruth autographed index card for $20,000," he added. "And in addition to e-gift cards on everything from restaurants to golf to airlines, we just, in the last couple of weeks, launched a Disney e-gift card valued at $250 for $224.99.
"And for you last-minute shoppers out there, there's a Mickey Mantle autographed 1951 rookie card in nearly perfect condition, and it's on sale online for $250,000."
Costco builds its digital business
Costco has always taken a slow and steady approach to building its digital business. That's because e-commerce is a sort of added benefit for members, and the chain's core focus will always be its store.
"Good progress continues to be made with our e-comm, mobile, and digital efforts. No big enhancements and changes to the site leading up to the holidays, mostly holiday prep," Galanti said.
And since the old sports cliche says "the best ability is availability," the CFO highlighted that the chain's website has been reliable.
"We did have 100% site availability during Cyber Week. And sales for the five Cyber Days, Thanksgiving, Black Friday, Saturday, Sunday, and Cyber Monday, were up year over year in the mid-teens," he added.
Costco has also succeeded in getting more members to use the app.
"Our app downloads during the quarter were 2.75 million, so total app downloads [now] stand at 30.5 million, or a 10% increase during the quarter," the CFO said.
"And that's after [a more than] 40% increase in all of fiscal '23 versus the prior year. Our site traffic is approaching half a billion, and just under a 10% increase in the average order value being up about 2.5%. So we continue to make progress there."
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