Guest Post: Does Costco Have a Looming Problem from Millennials?

March 18th, 2014 · 7 Comments

[I’ve got a guest post today that comes in response to the articles being written in response to Costco’s recent quarterly results statement.  There’s a new favourite theory amongst some analysts that Costco is going to have problems growing in the future because they aren’t appealing to young people, specifically Millennials, enough.  For those of you that aren’t up on your generational breakdown, millennials are those born between 1980 and 2000, so people that are somewhere between 34 and 14 currently.  I agree with the take that today’s guest poster has on the subject and will be providing my 2¢ on this topic later this week.  Much like Mike, I am interested in hearing what other Costco shoppers make of this theory on Costco’s future.]

The other day I saw this article on Time’s website and while I hate to give this author’s article credibility by sharing it on AddictedToCostco.com, I wanted to share my opinions, have you add yours, and see what other viewers thought.

Despite Marketwatch.com’s report that revenue from membership is up 4.1% and same-store sales grew 5% in February, Mr. Tuttle focuses only on the negative, that Costco reported lower-than-expected earnings. They made a profit, but not as much as they hoped, but Mr. Tuttle doesn’t agree with Costco’s explanations.

From his opening salvo against the earnings report, the whole article has the argument that this earnings report is a result of not embracing the “millennial generation”, while he ignores the positive membership profile of members having an average household income of over $90,000/yr. Mr. Tuttle wants Costco to employ social media, despite the fact that Costco does not advertise and the fact that you cannot sell “Likes” on the trading floor. He claims that Costco is in trouble because millennials don’t have space for bulk purchases and are shunning cars, but doesn’t realize these issues do not affect members in the UK or South Korea, where cars and home square footage come at a much higher cost than in the majority of the United States.

That’s why I suspect Mr. Tuttle reacted to the report as an outsider, not a member, because Wall Street balks at anyone that doesn’t play by their rules (namely, shareholder profit at the top of every agenda and decision). He wants the company to be what he considers a more reliable investment that markets to every demographic, despite the fact that would change what most of us love about Costco. People like Mr. Tuttle don’t understand capping profit margins at 15% for member benefit, or only offering quality products that meet strict guidelines. He ignores the fact that Costco is still a profitable store, and instead expects that it must always be growing. He is a pessimist who doesn’t value Costco, so perhaps he would enjoy Sam’s Club more. I can only hope that the relatively-new CEO Mr. Jelinek listens to founder Sinegal rather than analysts like Mr. Tuttle.

Regards,
Mike P.

Share

Tags: Guest Posts · In the News Share

7 Responses so far ↓

  1. 1 Rebecca // 2014.03.21 at 12:58 am

    It almost seems like Wall Street pundits wants companies like Costco to fail. Capitalism is bad, if you believe some. I will take a good deal any day!

  2. 2 Jim Clark // 2014.03.19 at 9:02 am

    I find Mr. P’s remarks an over reaction. Even Jeff Bezos says change is inevitable and that he hopes it does not come to Amazon before he dies! Of course we addicts have every reason to shop at Costco, but the present does not necessarily represent the future. I worry that Costco may be getting too store heavy, making it more difficult to adjust in the future. I agree that its online offerings could be better and maybe that it is where future growth will occur. In any event, Mr. Tuttle’s piece is a wake up call to be aware of how life styles can and do change, and therefore shopping habits can and do change. With all that said, I hope Costco execs make all the right future decisions!

  3. 3 Candy // 2014.03.18 at 3:28 pm

    My daughter is 28 and loves to shop at Costco. She can only do so when we’re in Chicago or she’s down here in Texas and can go with us. But she stocks up on toilet paper, kleenex, etc. She doesn’t have that much room in her apartment but she makes room. When we first heard that Costco had a lower than expected gain, we knew what it was from. They said it wasn’t the weather but of course it was. It’s been horrible everywhere in the U.S. We were shut in for three days in December from an ice storm. Of course the first place we went was Costco. We are just two people but we still shop there. It’s not just for big families. You can shop there and find things to use for anyone. I buy parmesan in bulk and shred it and freeze it. And we live in an apartment and don’t have that much freezer space. I don’t put much value in a lot of what is written simply because they don’t know the whole story. There are lots of “millenials” who shop at our Costco here in Frisco. And they bring their kids. That to me means the next generation is being taught where to shop already!

  4. 4 Trixie // 2014.03.18 at 10:01 am

    I saw that article and it just frustrated me…I *am* of this generation, and we love our Costco membership! We also see tons of young people at both Costcos that we frequent, so I honestly don’t think he has ever really taken a look at the demographics in a Costco store.

  5. 5 sean // 2014.03.18 at 9:51 am

    I’m 31 so I guess I’m a millennial. I don’t agree with Time either. I do agree with Carlos though, that most the people I see at my Costco are in their 30s.

    The one thing I love most about Costco is keeping the quality of products so high. I’m almost certain that whatever product I buy I will like it. I bought sheets the other day on a whim and they are the best sheets I’ve ever slept on (micro fleece). I also got bangers (sausage) for St. Pattys day and made this big meal with them never having tried them. They were awesome, and I can put my confidence in Costco that they only sell the best stuff. Hopefully they never change that!

  6. 6 Carlos // 2014.03.18 at 9:13 am

    I’m in this group since I’m 29.

    I think the person that wrote the “article” on time has no idea what we want or when we want things. Saying that we don’t want cars or we don’t want to own housing while at the same time not living w their parents. All I say I’m lmao (which the author prob doesn’t understand). I also believe that however wrote this piece has never been to costco or even sams.

    Here is the reality all over the world for us young people:
    1) more are staying in their parents house due to recent economic changes, getting more advanced degree which means they join the work force later and a better sense on how and where to spend money (all you need is an app nowadays and book you can compare the same product in 20 stores and online places)
    2) if you do live alone you will prob start in a smaller place, but that has always being the norm. You never start out and buy the big house.
    3) might be regional thing, but I see MANY young people buying at Costco. I would say they are more than the 60-fwd baby boomer crowd. The main difference is that the younger crowd does more fancy, healthier and organic purchases. There are not many places where one can get many organic things w prices of antibiotic feed animals.
    4) I think the growth might not be that big in my gen simply because they are still living w the fam and just go to the warehouse w their fam.
    5) As amazon, netflix, Hulu and others can point out my gen LOVES subscription services that can give you good quality for the $ you spend (Which is why we don’t buy regular cable). Amazon has doubled their prime member because their prices are great and easy to get home and fast.
    6) you want costco to grow their young members then have warehouses in more inner city places. Here we have a SAMs club right smack in the middle of the main city area where buildings are a plenty and you see many young people.
    7) costco does need to improve their online, but I can see they are trying and improving it slowly, but almost getting there. This might make them finish their online properly now.

  7. 7 Allison Louise Turner // 2014.03.18 at 5:12 am

    Many younger people spend foolishly but as they get older, wiser, (hopefully-lol), and shop for families then they’ll understand the value of shopping at Costco. Give them time.

Leave a Reply

XHTML: You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

  Notify me when other users comment on this post.

 

Subscribe