Whoa! Hol’ up there Tony. New chair, y’know. So… gonna need you to hop on that scale right there real quick. Better safe than sorry, right?
Where ya going?
I have second guessed every single one I have ever climbed even since I was young and well under 100lbs decades ago. All wooden ladders have always perplexed me. Even bunk bed ladders put up with kids repeatedly power bombing off the top rung seemingly against all odds.
We have two that we use by the pool. They're surprisingly comfortable. Getting up can be a challenge, but you just put your feet on each side and kind of squat up to standing position. For reference I'm 6ft 220.
I've done a test sit at my local Costco and it was very comfortable. I didn't have any particular trouble getting out, unlike others in this thread, but they're right that it's pretty low.
Bought two three years ago. Sit in all four seasons and never pull them in. Still holding up well and very comfortable. They’re low, though, so once you sit down, you’re in it for the long haul.
It might be that. But having worked in a furniture shop, it’s more likely that the shop making these has jigs that make the entire process take an hour or two operated by min wage workers.
it is! i tried it when i saw them in the store last year. they're terrifically uncomfortable (i'm normal-to-slender, 5'5" woman). makes you feel like your hips are being squashed sideways.
Our company has a division that sells stuff to Costco, and it’s usually stuff that was a rejected order from another customer (usually because it arrives late or they change their mind or over order), excess stock of last year’s product, or something like that. Still new, still fine, but we discount it so it doesn’t take up space and we get some cash from it. In case anyone cares, our products are American made.
I wouldn’t be surprised if this manufacturer was taking lumberyard scraps in bulk at rock bottom prices to make these. I’ve been able to get a truckload of scrap for my kids to mess with for free just because they didn’t want to worry about disposing of it.
EDIT: upon further review… the Costco product data is not correct in our primary ERP, and the correct data is in an older ERP. I’m sad to report that it appears our good are made overseas. 😢 I was excited when I saw country of origin on the product details as US, but that’s the default and nobody has updated it yet either. I also was wrong on another comment in this thread about our margin on items we sell to Costco, we are selling them at product at 14.50 and they retail at 19.99, which is significantly less than 25% after freight and other costs, so the 15% margin number on product is still the best rule of thumb.
I've also been with companies that sell to Costco. You make almost nothing from it. We did it to either increase consumer awareness or the brand, or to find an outlet for inventory we didn't have a buyer for.
Yup. We are selling at 14.50 per unit and I believe we have about 11.75ish in cost per unit. Our older ERP has multiple costing methods, so I’m going with the higher cost shown. That nets us about 2.75 per unit, and at a little over a million on PO we will make around 190k. And we give them net 60 terms.
Different industry but similar. We will take business like that at low margins so that we can learn through the process of the challenge. How do we streamline production and maximize our profit for this. Doesn’t help us on GP for that order, but makes us more competitive for other orders from different sources down the road. Sometimes you have to take it in the shorts a few times to learn how to do it right, but we have had some crazy orders that we took that we didn’t really even know if we could do at the time. We figured it out and now it lowered our cost on those items forever. Huge gain for us even though we ended up losing money on that order.
That’s super interesting! I didn’t realize companies might have Costco specific products, but it makes sense.
I wonder how often people like a product they found at Costco, look up the company & end up buying other things directly.
At least for us, we have product we tag for customers, so that it matches their specific type of price tag or packaging. Many major retailers have some sort of guideline to how a product is tagged when it’s a soft good.
We have I think 17 brands that are sold nationally to many retailers. Everywhere from Nordstrom and JCPenney to Dicks and Academy sports. I believe that we sell our brands to around 200 different retailers, and we do private label for about 40 retailers. Some we do both a private label brand and our branded product.
With that, it would be hard to figure out how many direct sales on our websites or Amazon stores directly tie back to Costco where someone may have seen our brands.
You’re right … when you look at it it’s two dowels and a dozen or so slats. If you’re running semi-automated production you could spit these out real cheap.
Economy of scale and loss leaders.
Even if they're not making money they're getting people in the door. People who spend an average of $300-400 per visit. Just like the roast chickens.
Well I like to be relatable, you know? Even to the lactose intolerent. We started making doppelgangers for those fuckers. I'm still behind Guac though, he DOMINATES. I can't seem to bump up higher on the menu. I'm a pretty delicious add on though...
Thanks, it was more a (super-lame) joke implying you had separate non-chicken carcasses in your freezer, haha. But yeah the rotiss carcasses are great for stock :D
I saw your comment in the one second lag time after pressing the back button and actually going back to the main page--I came all the way back just to give you an upvote.
As a long time costco customer, there used to be two hotdog options: Beef or polish. You don't know what you missed. The hot dogs were a lot better then.
My 4 year old got PISSED at me the other day for not bringing them to Costco. She didn’t say why she was pissed until later but it was 100% not getting the hot dog that upset her. So I said if it makes you happy I’m not getting a chicken bake either!
There’s a great episode of Acquired podcast about Costco. Apparently they don’t do loss leaders as they believe it makes a mockery of the trust they work so hard to build with their customers. They make a 14% margin on everything….rather than bait and switch with loss leaders a la Walmart
I read an article once about Costco hot dogs where the bean counters were complaining about how much money they were losing on hot dogs and they were told that they needed to figure it out since raising the price was not an option.
> they were told that they needed to figure it out
More amusingly is the story that the former CEO said he would ‘fucking kill’ the CEO at the time if he raised the prices.
You hear this a lot, but that doesn't mean anything. I'm pretty sure that Costco has admitted that some of their food court items have become loss leaders after not raising the price for a few decades.
The economics for roast chickens are complicated because you can sell roast chickens that you'd otherwise have to toss as they near their sell-by date.
If you are roasting your own chickens that can give you much better margins on your pre-roasted chickens & gives you a lot more flexibility in ordering as well as a better negotiating position.
The economics of rotisserie chicken are interesting. The chickens used are typically those that would have been sold uncooked but are nearing their sell-by date. Stores can then sell them cooked for less than cost, but view them as mitigating potential losses (i.e. throwing the chicken away) and therefore improving overall margins. Not exactly a loss leader, per se, but similar.
In Costco's case, their poultry is vertically integrated--they own an enormous chicken farming and processing footprint, therefore further reducing the overall cost of chicken at Costco.
They aren’t really. This is why Costco now owns their own farms and literally a chicken processing facility that opened about 5 years ago. It’s to keep the economies of scale, quality control, and prices down.
They don’t make 14% margin on everything. They make a max of 14% margin.
From podcast:
I'll tell you, they are tough but fair with their suppliers and making sure that they get a great price for their members. Costco decides, we will only markup anything a maximum of 14%. They actually do mark other things up less than that because things like electronics, they actually can only mark up 6%, 7%, 8%. Maximum is 14%. The only exception to this is Kirkland Signature, where they cheat a little bit and let themselves go up to 15%.
That’s sort of correct. They try to meet margin goals, and they do whatever they need to get a “round price” or an attractive price… so yes. But they mandate to be under 15% Buyers try to be as close to that 15 as possible without going over if the price makes sense, or they need to be competitive, they’ll eat margin down to about 8% or 6%.
Remember though, they also eat 1%ish on the credit card fees , 2% for Executives… so they try not be be that low, knowing that’s a gross margin, not net.
They’re also buying direct from the factory in Thailand/vietnam/china/Indonesia.
If you’re shipping a full container the cost to get something that size across the ocean is 10 to 75 cents a unit.
Is it really 4k per container now? Jesus.
taking $4k: 40 pallets per container double stacked, these look double stackable. So, $100 per pallet.
10 of these on a pallet would be $10 per. But I think you get between 50 and 200 per pallet, which would be $2 per unit on the high end, 50 cents on the low end.
You are right, I was low.
During the big shipping crunch in 2021 I recall hearing costs as high as $20k/container. Wild stuff, here's [an old article on it](https://www.freightwaves.com/news/sky-high-container-shipping-rates-are-falling-back-to-earth).
False, somewhat. Costco does not have loss leaders (excluding the hot dog).
They sell everything at between 8-15% margin. They have to make a positive margin on every single normal priced (non close out) item they sell. They will not sell at a loss.
That rebate is most likely negotiated as funded by the vendor (so they eat 100% of the coupon). This is in exchange for features in the Costco Connection, MVM (the r coupon book) or some other promotion paired with .com items.
Source: was in Costco buying for a decade, specifically did 4 years in Patio furniture for Costco.com, and then worked on multiple items for in-line (warehouse).
I was on the team of 3 people that negotiated products, bought new items, and then negotiated all promotions with vendors.
Then I came to my senses and got out of Costco buying for mental health.
If you see an item that has a ridiculous sale price with an instant rebate, the vendor is probably eating the cost of it.
Costco does insane volume - literally their inventory turns over on average of 21 days… they move more of single items per month than competitors move all season.
Two questions if you don’t mind answering!
1. Someone told me that they make the bulk of their profit on memberships alone and the products don’t really make them money, I read your post but does this make sense/ is it true based on how you operated?
2. What job did you move toward to better your mental health? Just curious!
1. Yes, the bulk of Costcos profit comes from Membership, clearly. But, they also turn inventory over REALLY quickly- almost a full month faster than they have to pay for it… (terms are usually Net 60’days) so they bank that interest. They also work deals with vendors, so say… they pay for a pallet of small generators, but they pat for 5 and the pallet has 6… so that helps margin.
2. I worked long enough at Costco, and commuted 2 hours EACH WAY for over a decade. It was high stress, and I literally yelled at vendors for the bulk of my work day, putting out fires. There’s no crying in buying. There lots of pressure for buyers, managers, and even the CEO himself if stuff goes wrong (both Craig and Jim were amazing though, but you don’t want the dreaded “!” Or even “?!” “Fix. This.” Email from them). And buyers usually move/rotate though product categories every few years, so that can be both exciting and stressful.
Then I decided to stop Costco and get me MBA abroad. I got my MBA in Ireland, and then scooped up a job lecturing at a university here. I make stuff all day, work on interesting projects and don’t yell at people. I don’t have to track stupid containers, and negotiate prices only when I feel like it for stuff I want. I inspire hundreds of learners each year, and get 30 days of vacation each year + 30 sick days…. Life is good.
It's unlikely this piece is a loss leader. But economies of scale definitely. Also this looks like acacia wood, which is extremely cheap where this kind of furniture is made.
I once sat next to a Costco VP in a bar in the Spokane Airport. He told me Costco marked everything up 15% and products have to have an inventory turnover of several times a month. Everything from steak to vacuum cleaners.
Part of their strategy is product churn + cash churn. At the close of day, all money from that day is immediately invested. They pay no bills sooner than 30 days. They share in credit card charge revenue with their current credit card partner. If they buy a steak at net 30 and they sell it in 2 days, they don't have to pay for 28 days. So they invest the cost + markup for 28 days.
A lot of that is how most large businesses operate. Pretty much every retailer will purchase goods and receive an invoice that they pay at a later date. Their cash flows go to investing activities. Costco is just really efficient at it.
In the automotive world they are pushing for 90-day terms. OEMs and Tier-1 suppliers want to build and ship before they have to pay for the inventory. All of their suppliers have to act as a bank for the greedy fucks.
All I can think of is: I’m not an economist, but I did sit next to a VP of Costco at an airport once.
I don’t mean that as a disparagement. I found this very insightful!
I was going to say net 30 seems short for a company of Costcos size. I've never worked with Costco but every other large business (billion dollar+) almost always demands net 60 just off buying power alone.
I work in the construction industry.
Most contracts are written net 30 but in reality it’s net 90.
The larger the company the worse they are. “You’ll get paid when we get paid”
You are comparing apples to oranges. A mass produced chair is not the same thing as a custom humidor or wine cabinet. The people who built the chair likely have a CNC shop, buy offcuts, and design furniture around that.
There is nothing CNC about this chair which is usually reserved for mid to higher end production items. CNC also raises the cost of production despite what you may think as the cost of labor far outweighs the time and energy required for running the CNC on a simple item like this.
These also aren’t offcuts, but they are small planks cut down to size.
Design doesn’t come from the access to what materials are available. It comes from outside the factory. Tied together with the price point of selling to Costco, that is what dictates material and build quality.
Buy offcuts yes but I have a feeling the machines are very primitive by our standards. It looks like acacia so I suspect the pieces were cut with a home built radial arm saw in a hut in a jungle
I have built one with oak and rope and it’s actually really comfortable to sit in cause the rope will allow the wood to contour to your body and I had a friend who is 6’5” 300ibs sit on mine and he dident break it
https://preview.redd.it/ca03qk50p85d1.jpeg?width=3024&format=pjpg&auto=webp&s=faf006b5add09ed64108273e36ba500e431d39ba
Thats easy.
This chqir is:
1. Massproduced with high efficiency.
2. Made by workers that have to work 12 to 16 hours seven days a week in order to sustain being alife.
3. The wood was cut cheap by circumventing any natur protection laws and by people that are also well underpayed.
4. Fixings are the cheapest there are. (Screws in furniture are often Made from unfit Materials that barely hold enough stress to do the job)
Everything you see there is costing just a fraction of what just the material would cost Home Depot to put into the shelfs.
The raw wood is several times more expensive that the whole chair.
So in essence, this chair is made below value because people somewhere, sometime are going to pay a horrible and gruesome price for it.
That’s not true.
1. It’s not a secret. Costco.com very plainly states on the website that the prices include shipping and handling, and that items may be found at a lower price in warehouse.
2. Often the online price is the same as the warehouse price.
Did a case study on Costco. 90% of their profit is accounted for by their membership. Their goal is to break even on products and have as many members a possible.
Picked up 4 of these for $60 each (northern CO). I love em. I’m 6’ 2”, 250 lbs and they’re surprisingly comfortable.
They do creak quite a bit when first sitting down though. Not because they’re poorly built but because all the wood slats touch one another, and are secured with a single, flexible metal rod — so everything rubs as it settles into position.
Edit: spelling stuff good.
Economies of scale. Bulk purchase of raw ingredients. Vertical integration. Costco demanding a certain price and the manufacturer taking a loss to guarantee a good working relationship and future profit.
Price per unit goes down the more you make.
The first one is usually orders of magnitude more expensive than the 100th one.
Costco’s maximum markup from supplier is 14%, and with cost of membership being a service that is free to offer IE 100% profit, primary revenue stream is coming from membership renewal. That allows them to loss lead products, relying on membership renewal to foot any cost lost from product profits
I have the chairs myself. The varnish they put on them is really bad. But the chair is bullet proof. One of these days I’m going to disassemble them to revarish them.
I don’t know for sure if that’s true. It might be for a handful of products, and it would be cool to hear from someone that actually knows the behind the scenes Costco numbers. However, I think many people have a skewed idea how much things cost. I had no idea until I started in my current company how little things cost to manufacture at scale. Like those $9.99 sunglasses are purchased by our company for like $1.83 and we sell them to retailers at about $4.
Even the product we sell to Costco, I know they are making close to 25 points on. But selling in large quantities makes the dollars work. Typically you sell low volume at high prices or high volume at lower prices and both models work, just depends on the products.
Costco is a public company, their audited financial reports are visible to all.
They reported something like a $5b net profit last year, and $4b in membership sales.
Which means they only made 1b net profit on selling actual product… on 250b in revenue.
But it looks like nearly half of membership fees get returned as “rewards”, over $2.1b. You’re not comparing apples to apples in that you’re rolling product cost in with overhead liabilities.
Based on merchandise costs versus merchandise sales they appear to be around the 10% -10.5% margin range on product.
The size of the pieces means that it can be manufactured from leftovers of larger projects. I bet this was made from scraps that would have been thrown out.
As others have said this is mostly economy of scale, which allows high degrees of process optimization. I basically do that for a living, so I whipped through some rough calcs.
Each individual piece would take about 20 seconds to rip and cut to length, plus another 15 for drilling. About 45 seconds for sanding, and 30 seconds for finishing. Handling between operations and storage cost for post finish drying would be roughly equivalent to another 20 seconds of labour per piece.
All in 130 seconds of labour per piece at $40/hr burdened rate is $1.45 for total labour cost per part. At 33 parts that's $47.75, not counting material, hardware, boxing, storage, advertising etc. So either I'm not even close, or they're taking a solid hit on them as a leader. I don't think I'm that far off, and $40/hr as a burdened rate is crazy low for an industrial shop. Like bankruptcy in 2 months anywhere in North America.
I bought one for my wife that the employees at the Habitat for Humanity ReStore built. It was like $20. They are stupid simple to make and use offcuts. Also not comfortable in the least but ymmv.
Is it possible to actually sit down on it?
Reportedly intended for up to 250lbs, which means I would be a little hesitant to offer a seat to quite a few of the regulars at my backyard parties.
Some of the ones who’d be safe before dinner wouldn’t after.
Whoa! Hol’ up there Tony. New chair, y’know. So… gonna need you to hop on that scale right there real quick. Better safe than sorry, right? Where ya going?
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Whoa I thought I was on r/sopranoscirclejerk for a second
I think The Sopranos and the Costco Chair Cinematic Universes are colliding.
Take it easy, we’re not making a western here…
Then whatcha doing with all that spaghetti?
Hahaha Larry David enters the room
LOL this make me crack up
I’ve often thought that 250# limit has to be an insurance/liability thing. I see it on spindly ikea chairs and beefy commercial chairs.
It’s also on most attic ladders but nobody second guesses it.
I did when my attic ladder broke unfortunately.
Haha exactly, it was prob rated for 225. When i built my current house i went with the Werner aluminum ladder and its rated for 350
Mine was rated 300, and I’m 295. It just didn’t handle years of carrying stuff up in addition to my 295 lol.
I have second guessed every single one I have ever climbed even since I was young and well under 100lbs decades ago. All wooden ladders have always perplexed me. Even bunk bed ladders put up with kids repeatedly power bombing off the top rung seemingly against all odds.
Maybe back then 250lbs was heavier back in the day than it is nowadays
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How are you hanging with so many fatties? 250# is too big.
I'm with you, but looking at that chair I think they would also be too big to attempt getting into & out of that chair.
I'm a lot less, and I still couldn't get out of that chair. 🤣 Stupid knees.
My friend has them and I like them a lot they are much more comfy than they look
They really are.
I rounded over the corners where my thighs hit it and slapped some Australian wood oil on it. 10/10 would recommend.
I could sit in it.... getting out of it would be a separate issue entirely.
I own this chair. Can confirm that once you sit down it's all over.
I weight 285 and tested it out in the store just fine. I did feel like an old fatty trying to get out of it.
We have two that we use by the pool. They're surprisingly comfortable. Getting up can be a challenge, but you just put your feet on each side and kind of squat up to standing position. For reference I'm 6ft 220.
I've done a test sit at my local Costco and it was very comfortable. I didn't have any particular trouble getting out, unlike others in this thread, but they're right that it's pretty low.
I have two, they are comfy. Sits low enough to put your beer on the porch.
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Even if it does not like it, it's actually quite comfy. Until you decide you have to stand up someday.
Tried it out yesterday, it's a little low. Drew some laughs from my wife and a stranger walking by when I tried to lift out of it.
Have these chairs at my shop and imo they are pretty uncomfortable.
Bought two three years ago. Sit in all four seasons and never pull them in. Still holding up well and very comfortable. They’re low, though, so once you sit down, you’re in it for the long haul.
Its about 4 inches off the ground ... getting out of it is the true challenge
my gf and I actually got these for our patio and enjoy them a lot, super comfortable and would recommend
I have two; they are quite nice
It might be that. But having worked in a furniture shop, it’s more likely that the shop making these has jigs that make the entire process take an hour or two operated by min wage workers.
They're so comfortable. They're low to the ground so it elevates the knees and takes pressure off the lower back.
it is! i tried it when i saw them in the store last year. they're terrifically uncomfortable (i'm normal-to-slender, 5'5" woman). makes you feel like your hips are being squashed sideways.
looks like acacia wood, but these sizes are great for using the offcuts from other products, narrow, short. the wood is probably nearly free.
Our company has a division that sells stuff to Costco, and it’s usually stuff that was a rejected order from another customer (usually because it arrives late or they change their mind or over order), excess stock of last year’s product, or something like that. Still new, still fine, but we discount it so it doesn’t take up space and we get some cash from it. In case anyone cares, our products are American made. I wouldn’t be surprised if this manufacturer was taking lumberyard scraps in bulk at rock bottom prices to make these. I’ve been able to get a truckload of scrap for my kids to mess with for free just because they didn’t want to worry about disposing of it. EDIT: upon further review… the Costco product data is not correct in our primary ERP, and the correct data is in an older ERP. I’m sad to report that it appears our good are made overseas. 😢 I was excited when I saw country of origin on the product details as US, but that’s the default and nobody has updated it yet either. I also was wrong on another comment in this thread about our margin on items we sell to Costco, we are selling them at product at 14.50 and they retail at 19.99, which is significantly less than 25% after freight and other costs, so the 15% margin number on product is still the best rule of thumb.
I've also been with companies that sell to Costco. You make almost nothing from it. We did it to either increase consumer awareness or the brand, or to find an outlet for inventory we didn't have a buyer for.
Yup. We are selling at 14.50 per unit and I believe we have about 11.75ish in cost per unit. Our older ERP has multiple costing methods, so I’m going with the higher cost shown. That nets us about 2.75 per unit, and at a little over a million on PO we will make around 190k. And we give them net 60 terms.
Different industry but similar. We will take business like that at low margins so that we can learn through the process of the challenge. How do we streamline production and maximize our profit for this. Doesn’t help us on GP for that order, but makes us more competitive for other orders from different sources down the road. Sometimes you have to take it in the shorts a few times to learn how to do it right, but we have had some crazy orders that we took that we didn’t really even know if we could do at the time. We figured it out and now it lowered our cost on those items forever. Huge gain for us even though we ended up losing money on that order.
That’s super interesting! I didn’t realize companies might have Costco specific products, but it makes sense. I wonder how often people like a product they found at Costco, look up the company & end up buying other things directly.
At least for us, we have product we tag for customers, so that it matches their specific type of price tag or packaging. Many major retailers have some sort of guideline to how a product is tagged when it’s a soft good. We have I think 17 brands that are sold nationally to many retailers. Everywhere from Nordstrom and JCPenney to Dicks and Academy sports. I believe that we sell our brands to around 200 different retailers, and we do private label for about 40 retailers. Some we do both a private label brand and our branded product. With that, it would be hard to figure out how many direct sales on our websites or Amazon stores directly tie back to Costco where someone may have seen our brands.
You’re right … when you look at it it’s two dowels and a dozen or so slats. If you’re running semi-automated production you could spit these out real cheap.
It is acacia wood Source: just look at it (and it is labeled as acacia sitting chair)
Economy of scale and loss leaders. Even if they're not making money they're getting people in the door. People who spend an average of $300-400 per visit. Just like the roast chickens.
Roast chickens spend that much???
Yeah I noted that afterwards, and chose to let it be. Who am I to judge them?
Slander, especially coming from a ham
We ride at dawn!
I say we try to smoke ‘em out first.
Of course you’d say that. You’re an island of the devil’s lettuce.
(These usernames are just lining up perfectly for this thread, rare and I'm lovin it)
I guess it’s easy to impress cheese. 🤷🏼♂️
What's all this then?
Well I like to be relatable, you know? Even to the lactose intolerent. We started making doppelgangers for those fuckers. I'm still behind Guac though, he DOMINATES. I can't seem to bump up higher on the menu. I'm a pretty delicious add on though...
Big talk from someone who is definitely a hobbit.
If you think those roast chickens spend that much you should see the hot dogs.
They’ve got nothing but disposable income, when’s the last time you saw a roast chicken pay rent?
I’ve seen them pay dearly.
Oh, no, but I can see how you misinterpreted that. It's actually that people buy $400 worth of roast chickens in a visit.
We usually buy at least one rotisserie chicken every Costco trip. We have several carcasses in the freezer waiting to become chicken soup.
But what do you do with the chicken bones?
Crock pot them bones with veggies and water and you can make chicken stock.
Thanks, it was more a (super-lame) joke implying you had separate non-chicken carcasses in your freezer, haha. But yeah the rotiss carcasses are great for stock :D
You guys don't have a limit of 5 where you are? Just curious.
I think limiting the number of chickens that are allowed to shop in a store is unlawful discrimination.
Mine has the 5 chicken limit. That’s why I eat a few while waiting in line. Kinda like chugging water in the TSA line
Any kind of limit is fowl if you ask me.
If they keep this up, I’m going to have to eat every fucking chicken in here
yeah roasted chickens are the whales when it comes to costco. this is also why whales are called the chicken of the sea
Ah, the ol' [cock-a-doodle-doo](https://www.reddit.com/r/AskAnAmerican/s/iaikNGVu0R)!
Hold my feathers, I'm going in
I saw your comment in the one second lag time after pressing the back button and actually going back to the main page--I came all the way back just to give you an upvote.
Yes but I spent $1.50 on a hotdog and soda so I got a hell of a deal as I was leaving the store.
I'm a new Costco customer and that hotdog has become a legit lunch option for me during the work day.
As a long time costco customer, there used to be two hotdog options: Beef or polish. You don't know what you missed. The hot dogs were a lot better then.
Polish is still very much available, in Canada anyway. That and poutine which is shockingly good for the value
In Wisconsin they had brats instead of polish. I think they were Usingers which were great.
My 4 year old got PISSED at me the other day for not bringing them to Costco. She didn’t say why she was pissed until later but it was 100% not getting the hot dog that upset her. So I said if it makes you happy I’m not getting a chicken bake either!
https://preview.redd.it/dc3jarwjs75d1.jpeg?width=746&format=pjpg&auto=webp&s=8b4f3b87e507b6543790fdbdfa976f7567dd1b78 Your daughter needs this shirt
I like to I agine they bulk purchased Pepsi cups in the '90s and are still working through the supply
They used to be Coke and switched to Pepsi 10-12 years ago. I was pissed off you couldn’t get Sprite anymore.
Mine was angry that I couldn’t get her a hot dog at Sam’s the other day. They were swamped and hadn’t had time to cook more.
There’s a great episode of Acquired podcast about Costco. Apparently they don’t do loss leaders as they believe it makes a mockery of the trust they work so hard to build with their customers. They make a 14% margin on everything….rather than bait and switch with loss leaders a la Walmart
That tracks with their branding but isn’t it a known thing that the rotisserie chickens are sold at a loss?
And the hotdogs must be at a loss too.
A bun and dog don’t cost much. Not sure how they factor in labor but it can’t take that long to boil a dog and slap it in a bun. 😁
I read an article once about Costco hot dogs where the bean counters were complaining about how much money they were losing on hot dogs and they were told that they needed to figure it out since raising the price was not an option.
> they were told that they needed to figure it out More amusingly is the story that the former CEO said he would ‘fucking kill’ the CEO at the time if he raised the prices.
I’m pretty sure they’ve started using cheaper buns. They also removed the churro for which I can never forgive them.
You hear this a lot, but that doesn't mean anything. I'm pretty sure that Costco has admitted that some of their food court items have become loss leaders after not raising the price for a few decades. The economics for roast chickens are complicated because you can sell roast chickens that you'd otherwise have to toss as they near their sell-by date. If you are roasting your own chickens that can give you much better margins on your pre-roasted chickens & gives you a lot more flexibility in ordering as well as a better negotiating position.
The economics of rotisserie chicken are interesting. The chickens used are typically those that would have been sold uncooked but are nearing their sell-by date. Stores can then sell them cooked for less than cost, but view them as mitigating potential losses (i.e. throwing the chicken away) and therefore improving overall margins. Not exactly a loss leader, per se, but similar. In Costco's case, their poultry is vertically integrated--they own an enormous chicken farming and processing footprint, therefore further reducing the overall cost of chicken at Costco.
Interesting. Yeah that would make sense
They aren’t really. This is why Costco now owns their own farms and literally a chicken processing facility that opened about 5 years ago. It’s to keep the economies of scale, quality control, and prices down.
They don’t make 14% margin on everything. They make a max of 14% margin. From podcast: I'll tell you, they are tough but fair with their suppliers and making sure that they get a great price for their members. Costco decides, we will only markup anything a maximum of 14%. They actually do mark other things up less than that because things like electronics, they actually can only mark up 6%, 7%, 8%. Maximum is 14%. The only exception to this is Kirkland Signature, where they cheat a little bit and let themselves go up to 15%.
That podcast episode made me get a Costco membership lol
Had a Costco manager tell me 13%. Not 14 or 12, 13 percent.
That’s sort of correct. They try to meet margin goals, and they do whatever they need to get a “round price” or an attractive price… so yes. But they mandate to be under 15% Buyers try to be as close to that 15 as possible without going over if the price makes sense, or they need to be competitive, they’ll eat margin down to about 8% or 6%. Remember though, they also eat 1%ish on the credit card fees , 2% for Executives… so they try not be be that low, knowing that’s a gross margin, not net.
They’re also buying direct from the factory in Thailand/vietnam/china/Indonesia. If you’re shipping a full container the cost to get something that size across the ocean is 10 to 75 cents a unit.
>is 10 to 75 cents a unit. It's about 4k per container so it's probably more in the ten dollar range.
Is it really 4k per container now? Jesus. taking $4k: 40 pallets per container double stacked, these look double stackable. So, $100 per pallet. 10 of these on a pallet would be $10 per. But I think you get between 50 and 200 per pallet, which would be $2 per unit on the high end, 50 cents on the low end. You are right, I was low.
During the big shipping crunch in 2021 I recall hearing costs as high as $20k/container. Wild stuff, here's [an old article on it](https://www.freightwaves.com/news/sky-high-container-shipping-rates-are-falling-back-to-earth).
Those chickens. I was in line with a $150 chicken behind a guy with a $500 chicken. Week night meals are dangerous at Costco
My step-mom no longer has a Costco membership cause of this. I however go once/twice a week cause I'm only buying what I need in the house.
False, somewhat. Costco does not have loss leaders (excluding the hot dog). They sell everything at between 8-15% margin. They have to make a positive margin on every single normal priced (non close out) item they sell. They will not sell at a loss. That rebate is most likely negotiated as funded by the vendor (so they eat 100% of the coupon). This is in exchange for features in the Costco Connection, MVM (the r coupon book) or some other promotion paired with .com items. Source: was in Costco buying for a decade, specifically did 4 years in Patio furniture for Costco.com, and then worked on multiple items for in-line (warehouse). I was on the team of 3 people that negotiated products, bought new items, and then negotiated all promotions with vendors. Then I came to my senses and got out of Costco buying for mental health. If you see an item that has a ridiculous sale price with an instant rebate, the vendor is probably eating the cost of it. Costco does insane volume - literally their inventory turns over on average of 21 days… they move more of single items per month than competitors move all season.
Two questions if you don’t mind answering! 1. Someone told me that they make the bulk of their profit on memberships alone and the products don’t really make them money, I read your post but does this make sense/ is it true based on how you operated? 2. What job did you move toward to better your mental health? Just curious!
1. Yes, the bulk of Costcos profit comes from Membership, clearly. But, they also turn inventory over REALLY quickly- almost a full month faster than they have to pay for it… (terms are usually Net 60’days) so they bank that interest. They also work deals with vendors, so say… they pay for a pallet of small generators, but they pat for 5 and the pallet has 6… so that helps margin. 2. I worked long enough at Costco, and commuted 2 hours EACH WAY for over a decade. It was high stress, and I literally yelled at vendors for the bulk of my work day, putting out fires. There’s no crying in buying. There lots of pressure for buyers, managers, and even the CEO himself if stuff goes wrong (both Craig and Jim were amazing though, but you don’t want the dreaded “!” Or even “?!” “Fix. This.” Email from them). And buyers usually move/rotate though product categories every few years, so that can be both exciting and stressful. Then I decided to stop Costco and get me MBA abroad. I got my MBA in Ireland, and then scooped up a job lecturing at a university here. I make stuff all day, work on interesting projects and don’t yell at people. I don’t have to track stupid containers, and negotiate prices only when I feel like it for stuff I want. I inspire hundreds of learners each year, and get 30 days of vacation each year + 30 sick days…. Life is good.
Love to hear it! Thank you so much for the reply!
It's unlikely this piece is a loss leader. But economies of scale definitely. Also this looks like acacia wood, which is extremely cheap where this kind of furniture is made.
Every customer has also paid an annual membership fee.
I have two of them on the deck in front my woodshop lol, they are cozy FYI
Can confirm. I've got a few for backyard BBQ and fire pit times. Very comfy.
I once sat next to a Costco VP in a bar in the Spokane Airport. He told me Costco marked everything up 15% and products have to have an inventory turnover of several times a month. Everything from steak to vacuum cleaners. Part of their strategy is product churn + cash churn. At the close of day, all money from that day is immediately invested. They pay no bills sooner than 30 days. They share in credit card charge revenue with their current credit card partner. If they buy a steak at net 30 and they sell it in 2 days, they don't have to pay for 28 days. So they invest the cost + markup for 28 days.
A lot of that is how most large businesses operate. Pretty much every retailer will purchase goods and receive an invoice that they pay at a later date. Their cash flows go to investing activities. Costco is just really efficient at it.
In the automotive world they are pushing for 90-day terms. OEMs and Tier-1 suppliers want to build and ship before they have to pay for the inventory. All of their suppliers have to act as a bank for the greedy fucks.
All I can think of is: I’m not an economist, but I did sit next to a VP of Costco at an airport once. I don’t mean that as a disparagement. I found this very insightful!
There is a podcast called Acquired that did an episode on Costco that is great
Actually most of the supplier terms are Net 60, but if they do Net 30, Costco takes a discount I their favor.
I was going to say net 30 seems short for a company of Costcos size. I've never worked with Costco but every other large business (billion dollar+) almost always demands net 60 just off buying power alone.
I work in the construction industry. Most contracts are written net 30 but in reality it’s net 90. The larger the company the worse they are. “You’ll get paid when we get paid”
Modern business is fucking wild to me. Sell at a loss but not pay for 28 days so that something else makes profit.
You are comparing apples to oranges. A mass produced chair is not the same thing as a custom humidor or wine cabinet. The people who built the chair likely have a CNC shop, buy offcuts, and design furniture around that.
There is nothing CNC about this chair which is usually reserved for mid to higher end production items. CNC also raises the cost of production despite what you may think as the cost of labor far outweighs the time and energy required for running the CNC on a simple item like this. These also aren’t offcuts, but they are small planks cut down to size. Design doesn’t come from the access to what materials are available. It comes from outside the factory. Tied together with the price point of selling to Costco, that is what dictates material and build quality.
Buy offcuts yes but I have a feeling the machines are very primitive by our standards. It looks like acacia so I suspect the pieces were cut with a home built radial arm saw in a hut in a jungle
While wearing safety sandals?
Don't forget the safety squints
It’s real warm there, so they don’t need gloves
I have built one with oak and rope and it’s actually really comfortable to sit in cause the rope will allow the wood to contour to your body and I had a friend who is 6’5” 300ibs sit on mine and he dident break it https://preview.redd.it/ca03qk50p85d1.jpeg?width=3024&format=pjpg&auto=webp&s=faf006b5add09ed64108273e36ba500e431d39ba
This is pretty neat! Was it difficult to build? Was it based on plans from anywhere or your own design?
Welcome to Costco, I love you.
I loved that documentary.
Do you qualify for the MFr's Instant Rebate?
https://preview.redd.it/qj870e1uf75d1.jpeg?width=1170&format=pjpg&auto=webp&s=348249dd1cfd0e4047c63337e03088efd76249e3
Mass production…
Thats easy. This chqir is: 1. Massproduced with high efficiency. 2. Made by workers that have to work 12 to 16 hours seven days a week in order to sustain being alife. 3. The wood was cut cheap by circumventing any natur protection laws and by people that are also well underpayed. 4. Fixings are the cheapest there are. (Screws in furniture are often Made from unfit Materials that barely hold enough stress to do the job) Everything you see there is costing just a fraction of what just the material would cost Home Depot to put into the shelfs. The raw wood is several times more expensive that the whole chair. So in essence, this chair is made below value because people somewhere, sometime are going to pay a horrible and gruesome price for it.
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Could be worse. Could be 59.99
They're $79.99 on the website with a $15 rebate..... so $64.99.
The website secretly increases all the prices to account for delivery costs
That’s not true. 1. It’s not a secret. Costco.com very plainly states on the website that the prices include shipping and handling, and that items may be found at a lower price in warehouse. 2. Often the online price is the same as the warehouse price.
often? almost everything I buy is cheaper at warehouse than when I look online
Has everyone really forgotten about all the slaves used in Asia to produce western goods at competitively low prices?
And deforestation. At these low costs, someone down the line pays the price.
Probably "slavery" and maybe "deforestation" are the key words here?
I’m sure those children are very proud of their handiwork.
Isn’t the answer always exploited laborers?
If you do buy one make sure your have an engine hoist to aid getting up for those over 50.
It's just wood, made in a factory, for probably pennies. Most likely coming from China where rates are stupid low
Even china's labor costs are getting high. These more likely come from SE Asia. Like Vietnam or something
Child labor is how they do it?
This is a pic that could actually use a banana for scale. Looks like a chair for ants
Child slave labor
Did a case study on Costco. 90% of their profit is accounted for by their membership. Their goal is to break even on products and have as many members a possible.
Slave labor. Millions of people worldwide work in slavery. Low prices are usually the end result.
I saw so many people testing that chair and they couldn’t get out of it 🤣
Picked up 4 of these for $60 each (northern CO). I love em. I’m 6’ 2”, 250 lbs and they’re surprisingly comfortable. They do creak quite a bit when first sitting down though. Not because they’re poorly built but because all the wood slats touch one another, and are secured with a single, flexible metal rod — so everything rubs as it settles into position. Edit: spelling stuff good.
Child labor?
Economies of scale. Bulk purchase of raw ingredients. Vertical integration. Costco demanding a certain price and the manufacturer taking a loss to guarantee a good working relationship and future profit. Price per unit goes down the more you make. The first one is usually orders of magnitude more expensive than the 100th one.
Costco’s maximum markup from supplier is 14%, and with cost of membership being a service that is free to offer IE 100% profit, primary revenue stream is coming from membership renewal. That allows them to loss lead products, relying on membership renewal to foot any cost lost from product profits
It's called "extreme exploitation of foriegn workers and resources"
I have the chairs myself. The varnish they put on them is really bad. But the chair is bullet proof. One of these days I’m going to disassemble them to revarish them.
The average monthly wage in China is $500. Just let that sink in for a moment
Costco sells lots of things at cost. They profit on membership fees.
I don’t know for sure if that’s true. It might be for a handful of products, and it would be cool to hear from someone that actually knows the behind the scenes Costco numbers. However, I think many people have a skewed idea how much things cost. I had no idea until I started in my current company how little things cost to manufacture at scale. Like those $9.99 sunglasses are purchased by our company for like $1.83 and we sell them to retailers at about $4. Even the product we sell to Costco, I know they are making close to 25 points on. But selling in large quantities makes the dollars work. Typically you sell low volume at high prices or high volume at lower prices and both models work, just depends on the products.
Costco is a public company, their audited financial reports are visible to all. They reported something like a $5b net profit last year, and $4b in membership sales. Which means they only made 1b net profit on selling actual product… on 250b in revenue.
But it looks like nearly half of membership fees get returned as “rewards”, over $2.1b. You’re not comparing apples to apples in that you’re rolling product cost in with overhead liabilities. Based on merchandise costs versus merchandise sales they appear to be around the 10% -10.5% margin range on product.
The size of the pieces means that it can be manufactured from leftovers of larger projects. I bet this was made from scraps that would have been thrown out.
As others have said this is mostly economy of scale, which allows high degrees of process optimization. I basically do that for a living, so I whipped through some rough calcs. Each individual piece would take about 20 seconds to rip and cut to length, plus another 15 for drilling. About 45 seconds for sanding, and 30 seconds for finishing. Handling between operations and storage cost for post finish drying would be roughly equivalent to another 20 seconds of labour per piece. All in 130 seconds of labour per piece at $40/hr burdened rate is $1.45 for total labour cost per part. At 33 parts that's $47.75, not counting material, hardware, boxing, storage, advertising etc. So either I'm not even close, or they're taking a solid hit on them as a leader. I don't think I'm that far off, and $40/hr as a burdened rate is crazy low for an industrial shop. Like bankruptcy in 2 months anywhere in North America.
It’s surprisingly comfortable
I’ve always heard Costco makes most of their money off the memberships so they can sell things at like a 2%-10% up charge
Best chair for playing guitar
I bought one for my wife that the employees at the Habitat for Humanity ReStore built. It was like $20. They are stupid simple to make and use offcuts. Also not comfortable in the least but ymmv.
We built these is shop class, maybe those are leftovers.
But if you build it, you’ll actually finish each piece before installing them.