Costco has built some of its business around the treasure hunt aspect of its warehouse clubs. Some merchandise changes regularly, and customers may find themselves buying something completely unexpected.
You may have visited the chain to pick up some groceries and household items and leave with a new winter coat, a kayak, or maybe a giant teddy bear. It's a fun part of being a member where even if you don't buy something, it's fun to see it and maybe imagine what it would be like owning it.
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Of course, that does mean some people who planned to spend $100 on groceries come home with a pricey, unexpected item. That can be a good thing if you buy something you had planned to purchase elsewhere at a higher price, or a budget buster if you now own a $600 espresso machine even if it was sold at half the price other chains offer it at.
In recent months, however, Costco has extended the treasure hunt to its website where it has made some interesting sales, according to former CFO Richard Galanti.
"We sold a Babe Ruth autographed index card for $20,000. And in addition to eGift cards on everything from restaurants to golf to airlines, we just, in the last couple of weeks, launched a Disney eGift 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," he said during the warehouse club's first-quarter earnings call.
The chain has also been selling gold and silver.
"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 added.
That's an unexpected item, but it's Costco understanding the market and its customers. Genesis Gold Corp. CEO Jonathan Rose explained why he thinks the membership-based warehouse club made the move in an email interview with TheStreet.
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Costco finds a goldmine
TheStreet: Why was Costco's gold bar such a popular product, and why did it also move into selling silver?
Rose: Costco found instant success selling gold bars because concern is growing among more Americans about their financial future. It makes sense that they'd expand into silver because it's more attainable for the masses. Americans want physical precious metals in their possession just in case the disasters they keep hearing about on the news get far worse.
Physical precious metals in someone's safe or secured through a Genesis Gold IRA are both becoming increasingly popular because they represent the financial higher ground. Gold and silver are seen by many as safe havens against economic turmoil and market turbulence.
Americans want peace of mind with so many threats agonizing them today. They have real anxiety over what's going to happen to their wealth or retirement, so gold and silver deliver the stability they desire.
TheStreet: Why are Costco customers buying gold bars and silver coins?
Rose: The real differentiator that gold and silver delivers over other investment types is that they are viewed by many as 'disaster-proof.' Crypto is inherently volatile.
Treasuries have similar hedge qualities to gold and silver but they have limited upside, and as we've seen in recent weeks the sky's the limit on physical precious metals. As for mutual funds and the market in general, who knows if and when the bottom will drop out?
Costco is appealing to those who want to put gold and silver in their safe but the bigger play for most Americans is securing their retirement accounts. Rolling over or transferring portions of their IRAs into physical precious metals is trending because it's the easiest way for people to achieve the higher financial ground during tumultuous times.
Costco customers (and many Americans) see gold as 'safe'
While gold provides a level of safety, it generally does not perform as well as simply investing in the S&P 500 and leaving your money there.
"Though gold can and has outperformed the S&P 500 for short periods of time, in the past 10, 30, 50, 80, and 100 years, the S&P 500 has significantly outperformed gold. Long-term investors should remember this when investing and, I believe, allocate most of their hard-earned dollars to an index ETF, like the S&P 500 ETF Vanguard, rather than the precious metal," Barchart shared.
That's logic shared by Warren Buffett who has not been a fan of owning gold.
"What motivates most gold purchasers is their belief that the ranks of the fearful will grow. During the past decade that belief has proved correct. Beyond that, the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As 'bandwagon' investors join any party, they create their own truth – for a while" he shared in a 2011 letter to Berkshire Hathaway sharholders.
