The membership model is the cornerstone of Costco's business. Different from the profit model of traditional retailers that mainly relies on making a profit from the price difference, membership fee income and member-related consumption (mainly credit cards, etc.) are the main sources of Costco's profits. The membership fee/operating profit ratio is stable at around 70%, while the goods account for only 30%. Due to the high member satisfaction, the membership card renewal rate is over 90%, and the number of member cardholders is increasing year by year, with an average annual growth rate of about 6%.

Membership card principle: There are two types of membership cards, and the consumers they target can be individuals or companies. The annual fee for non-executive members is $55, and the annual fee for executive members is $110. Non-executive members can be upgraded to executive members, and executive members are eligible to enjoy a cashback of 2% of the total consumption within one year, up to $750, and some insurance discounts. The membership price of goods in Costco is lower than that of other similar merchants, such as SAM'S CLUB. Costco's membership scale continues to expand, driving steady growth in revenue and profits. The number of members has reached more than 80 million, which is comparable to the membership scale of Amazon Prime and accounts for a quarter of the US population.

2. High quality and low price

High cost performance is achieved through high-quality and low-gross-profit product selection. The CEO team personally selects high-quality brand products, and selects 1-2 high-quality brands for each single category to check for consumers. Consumers do not need to spend too much time selecting at Costco. While ensuring high quality, Costco minimizes gross profit margins to benefit members and improves the cost performance of products. Costco's product gross profit margin does not exceed 14%, which is only about half of Walmart. If it is higher than this figure, it needs to apply for board approval.

3. Strict selection and high frequency

Strictly select a small number of SKUs to achieve a high inventory turnover frequency. Although Costco is a hypermarket, it abandons the huge "long-tail products" of traditional supermarkets and only provides 3,700 SKUs, which is equivalent to the number of SKUs in a small supermarket in a region of China. Insisting on selecting 2-3 best-selling products in each category, ensuring fast turnover and large inventory of each SKU, Costco's turnover is about 30 days, which is equivalent to the efficiency of JD.com. The selection of high-quality brands makes Costco's SKU significantly lower than its peers. In the case of a store area comparable to Walmart, Walmart has as many as 9,700 SKUs.