- Tension: Retail brands say loyalty is earned through relationships, but Costco keeps proving that it can also be engineered through price, access, and scale.
- Noise: We tend to over-credit tech innovation or media buzz when analyzing retail success, overlooking the compounding power of membership models.
- Direct Message: Costco’s continued growth isn’t just about value—it’s about building a system where consumers are emotionally and economically invested in returning.
To learn more about our editorial approach, explore The Direct Message methodology.
Costco doesn’t advertise much. It doesn’t have sleek influencer campaigns or hyper-targeted digital strategies. Yet it continues to outperform expectations, growing net sales by 7.5% in Q1 2025, with e-commerce alone surging by 13%.
So what’s driving the momentum?
The answer lies in the kind of loyalty Costco creates. Unlike traditional loyalty programs built on points or perks, Costco’s loyalty is structural. You pay to be part of it.
With 138.8 million cardholders and a 90.4% renewal rate, Costco has created a customer base that’s not just satisfied—they’re invested.
That emotional buy-in creates behavioral stability. When people commit up front—even $65 for a Gold Star membership—they frame future purchases as part of getting their money’s worth.
This isn’t just about low prices or big packs. It’s about a psychologically savvy ecosystem of perceived value.
During my time consulting for retail brands, I saw how hard it was to maintain repeat customer behavior without resorting to discounts. Costco doesn’t need to discount. Their entire model is the discount—and the locked-in behavior that comes with it.
Why we miss what makes it work
Retail commentary often focuses on what’s visible: product categories, e-commerce growth, maybe even buzz around retail media.
That matters—and Costco’s digital performance is indeed impressive. But if we only watch the headlines, we risk misunderstanding the foundation of its success.
What’s happening underneath is quieter: a brilliant use of behavioral economics.
The membership model creates sunk-cost commitment.
The scarcity of selection—far fewer SKUs than typical big-box competitors—reduces decision fatigue.
Even the warehouse layout guides shopper behavior with subtle precision.
When CFO Gary Millerchip notes a “bifurcation” in consumer food choices, he’s pointing to something many miss: Costco isn’t just selling food. It’s selling a strategy for how to shop under economic uncertainty.
That duality—luxury meats for some, affordable poultry for others—isn’t a contradiction. It’s the model flexing to serve two behavioral states: aspiration and pragmatism.
And let’s not forget the company’s private label, Kirkland Signature. It outpaced overall business growth this quarter, showing that trust in the Costco brand can override traditional brand preference. That’s rare. That’s earned. But it’s also engineered.
Loyalty that doesn’t need reminders
This model is working across dimensions. E-commerce growth, nearly 1 million large-item deliveries, and double-digit increases in home goods, jewelry, and health items all suggest Costco is moving well beyond the “bulk groceries” stereotype.
Membership income rose nearly 8%, aided by the September fee hike—and yet, renewal rates remained above 90%.
Compare that with other retailers who push rewards via email, ads, and app nudges. Costco doesn’t need to chase. Its best customers are already bought in—literally and psychologically.
That investment builds over time. People shop differently when they know they’ll be back. They discover more, trust more, spend more.
And as Costco expands internationally, its core strength travels with it: a consistent proposition that transcends product categories or cultural borders.
Retail media may be its next frontier, as Millerchip hinted. But unlike other platforms that start with media and layer on loyalty, Costco is starting from embedded trust—and monetizing from there. That’s a very different starting point.
The Direct Message
Costco’s real innovation isn’t in tech or marketing—it’s in how it engineers emotional and economic lock-in through simple, stable structures.
The takeaway for the retail world
For all the excitement about data, digital, and disruption, Costco offers a grounded reminder: systems matter.
When you design an ecosystem that people opt into and feel rewarded by, you don’t have to push them to return. They come back because it makes sense—financially, logistically, even emotionally.
Other retailers can chase short-term share. Costco is compounding long-term value.
And in a noisy, fast-moving sector, that might be the clearest signal of all.
