The Costco Executive team continues to stand up for the iconic hot dog as one of their best products for decades.
A new decision from leadership has changed the terms of who is able to walk in and buy the affordable meal. Usually, any non-members are allowed to visit the food court to buy the famous $1.50 hot dog combo, but not anymore.
The Beloved Hot Dog Meal Will Remain Unchanged
Although food costs, employee wages, and transportation have all increased in recent years, Costco is still unwilling to change the cost of their most beloved item.
Costco’s co-founder Jim Sinegal has vowed to keep the price of the hot dog combo completely unchanged, possibly forever. While Sinegal was still CEO of the massive company, he promised serious bodily harm if Richard Galanti, the company’s CFO, ever changed the price of the meal.
Despite Losing Profits, Costco Still Serves up Big Deals
As the CFO is responsible for the financial health of the company, Galanti suggested raising the price of the hot dog, citing that the dog and a drink combo loses money on every sale.
The discussion took place in 2009, and the dog has still has yet to be affected by rising the cost of goods. The reason for the stagnant price is the desire of the Costco brand to remain loyal to its customers and keep a steady stream of foot traffic through the doors.
Losing Small Means Winning Big
The beloved meal deal is not the only financial loser in the store. Costco also loses profits on the famously juicy rotisserie chickens, which retail for $4.99 in the U.S.
Having unchanged products to keep loyal customers and newbies coming week after week is a smart business decision. The company made a staggering $249 billion during the 2023 fiscal year, despite the constant losses.
Smart Business Decisions
By luring in customers for cheap eats, they almost always turn a profit with the membership and other items that people stay to pick up.
The choice to take a small hit on certain items is a common tactic for businesses hoping to boost sales on other items. For instance, 2 for 1 sales are often a smart marketing tactic to increase profits and hit targets by selling more items.
Changes for Non-Members
Anyone who’s been to a Costco on a Saturday will understand the company’s concerns of overcrowding in their brick-and-mortar locations.
In an effort to combat the severe squeeze in-store, the executive team has implemented a new rule to exclude non-members from the food court.
New Ruling Begins Soon
On April 8th, 2024, customers will be required to show their membership card at the door to gain entrance to the food court, just as they need to do to gain access to the rest of the store.
Stores in California, Washington, and Maryland have all been reported to have signs alerting customers to the change.
Cracking Down on Card Sharing
In an age of subscriptions, it’s common to share passwords, points cards, and memberships to cut down on individual monthly expenses.
However, Costco has noticed an up-tick of card sharing and people sneaking in with a friend or family member’s card. These are practices they hope to eliminate.
The Company Expects an Increase in Memberships
By not allowing non-members to enjoy the food court, it will hopefully incentivize anyone on the fence about getting a card to finally sign up.
The store currently offers two tiers of memberships which are paid once yearly. The basic $60 tier for access to the store and all online sales. As well, they have a premium membership for $120 that offers a 2% cashback voucher on all purchases.
Making Big Profits by Being Exclusive
By running an exclusive club, Costco customers feel a sort of special allegiance to the company.
The membership business model is actually a smart way to get customers to choose the store that they’ve already paid to be a part of instead of other more convenient options.
Their Best Sale Will Always Be the Membership
Although customers have their favorite items at Costco and a love for bulk items, the membership itself remains to be the best money making item.
In the United States, the membership has more than a 90% renewal rate each year. This means the company only loses 10% of customers after a year but gains countless more.
The Gift Card Hack Will Continue Working for Now
A common hack that people have found online allows customers to enter the store and shop as regular members with the use of a gift card.
However, there is a caveat to the scheme: the gift card must be initially purchased by a member. But, this means you can receive a gift card from a friend or family member and go use it freely in the food court without spending any cash on the yearly membership.
