Nov 13, 2022 | Samuel Albert

How does Costco decide what to sell

Costco is a household name in most families, and many heavily rely on it. After all, it is the second biggest retailer after Walmart. Clearly, they even have a loyal customer base. Previously, only big brands with well-established names were vendors, but now it facilitates even smaller not-so-well-established brands that look promising and show tremendous potential. So, if your small business is on the way to making it big, considering selling it on Costco is a good idea. 


Costco makes decisions about what to sell based on: 

  • Quality check 
  • Unique sales model 
  • Branded items 
  • Price
  • Compliance with general rules
  • Supplier Diversity Program 

  1. Better quality products : 

Costco is a famous platform for starters and already established vendors, which means your product has to stand out and be of the best quality. Costco prioritizes quality over the brand name, so if you are confident your product is of the best quality, take the leap and send your products in!


Costco usually brings in a team of experts of a particular product and has a set list of criteria to be met to be approved for selling. 


  1. Costco's sales model : 

Costco requires most vendors to sell in bulk, which you should consider before trading. They concentrate on selling good quality products in bulk at a lower price to its loyal customer base. This encourages more customers to come back as the prices remain less compared to other shops in general, increasing their revenue overall. However, they do not cut corners and ensure quality is the BEST.


As a vendor, make sure you have the resources to produce, package and sell in bulk as it increases your chance of Costco accepting your products. 


  1. Costco is not synonymous with luxury :

Lucky for most new vendors, Costco does not require your products to be branded. Instead, they consider the quality and value of the product. Unfortunately, this can be a problem for those who rely on their brand name and reputation. 


  1. Price comparison with other products : 

Costco's shelf space is limited and very competitive. Unlike some other popular retail stores, they do not have many brands of the same product. For example, Walmart may sell 6-7 different brands of dish cleaners, but Costco will sell only 2 or 3 maximum. 


They try to limit their products to the best, fast-selling, trending models, sizes, and colors. So, apart from the quality and value of your product, your price should be equally competitive. It's a good idea to provide at least a 15% discount compared to the other vendors. 


  1. Important Rules To Adhere To : 

Costco expects vendors to prohibit illegal trade and child labor. They also expect retailers to adhere to the environmental laws and regulations of the country where the products are manufactured. Working to improve the conditions of employees and minimizing pollution is another characteristic they look for. 


Make sure you are also involved in environmentally positive production methods such as recycling and wastewater treatment. Costco also forbids all forms of harassment, discrimination, and fundamental human rights violation. 


  1. Supplier Diversity Program: 

Is your product a woman-owned brand or a minority-owned brand? Has it faced prejudice because of these issues? Well, not to worry.


Costco's Supplier Diversity Program aims to provide opportunities for qualified minority-owned or female-headed suppliers whenever they can. Of course, this does not guarantee a definite partnership but definitely improves your chances. 


Costco Suggestion Boxes: 

Costco provides suggestion boxes that are open for customers, and they can comment, suggest or place a request for a particular product. These products are generally high in demand or highly trending items but low in produce. Understanding customer trends like these can help you decide the products you can sell, which Costco may approve of. 


Remember the Fidget Spinner trend? Making excellent quality fidget spinners at lower prices at that time would have definitely given you an edge.


Becoming a Costco Seller : 

To become a Costco seller, the first thing you need to do is to contact the regional office. You will have to pitch your product to them if you are called in (Prepare for any questions and answers, almost like a typical job interview).


After this step, your application is sent to the Category buyer, who will determine the applicability of your product. 


If you've got this far, that's great! You've almost made it. Costco would send a team to inspect your work and standards if your application was approved. If they are satisfied and find no issues, Congratulations! You can now start selling your product. You can choose to sell it online or in their warehouses. 


Online vs. Warehouses: 

Costco sells products on two bases, online (Costco.com) and warehouses. You can choose where you want to sell your products. Based on your product, it could be profitable in either place.


If you go to a store, you are more focused on buying groceries, but when online, you may look at other small items like decor pieces which you would not have when offline. 


Older people prefer shopping in the warehouse, so the products are streamlined to suit them. So, if you make an informed decision keeping these in mind, you should have a good chance. 


The disadvantage with warehouses is the difficulty in getting a space on their shelves. Therefore, it is necessary to show them that your product is worth displaying. 


The disadvantage of their online store is that they do not get as many bulk or regular sales as the warehouses do. So, the sales difference is vast.


What Can I Sell At Costco? 

It is common knowledge that Costco started off with food items and still prefers to sell more of them, but they've now widened their inventory massively. They now sell almost anything from household appliances, electronics, decor, home essentials, beauty products, and even selective medical tools like wheelchairs. 


Benefits of Selling on Costco :

I'm sure you worked hard to get this far. And you deserve to get the returns for your work. Costco is where you'll get the best advantage. Apart from giving their retailers a large, loyal customer base, Costco doesn't scrimp with their manufacturers' pricing. They only expect total commitment, exceptional packing, and bang-up deals.

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