Costco VS The Mcdicktator

By Aria Novosedlik

If there’s such a thing as capitalism with a human face, Costco is the brand that delivers it. 

But Costco’s not happy. So much so that it recently decided to defy the status quo and sue the Trump administration for its asinine tariffs. Costco’s position is that despite the higher cost of goods imposed by the tariffs, it refuses to pass the increase on to its customers. And that noble decision is shredding its bottom line.

Costco is a brand built on a foundation of carefully balanced contradictions. It offers wholesale pricing without compromising on product quality; it prioritizes employee engagement by paying its people decent wages and sustaining its commitment to diversity, equity and inclusion; and it offers exclusivity to customers through its membership model. 

It is a growing brand that operates without debt.  

This provides the brand with a degree of financial stability not enjoyed by competitors like Walmart, Sam’s Club or BJ’s Wholesale Club (U.S. only), all of which are much more highly dependent on debt financing – and are therefore less financially stable.

Being debt-free affords benefits for customers, employees, shareholders and ultimately the brand itself. Take private label and product quality. Unlike retailers with multiple house brands (Loblaws comes to mind), Costco takes a more focused approach. It has one house brand and one only: Kirkland. Some people may think that sounds like a Soviet-era retail strategy, but that focus allows Costco to walk away from any product development if it can’t crack the code and exceed the quality of the leading competitor. That's why you won't see Kirkland mayo. Costco tried to improve on the Hellman's formula but couldn't, so it left the mayonnaise category to the category leader. 

Remove the Kirkland logo and you’d never know by these pack designs that these products come from the same place.

It certainly doesn't bother with any marketing tools, which can typically account for 11-12% of operating costs. No commercials, alluring displays, or pretty pack designs. In fact, it wouldn't be a surprise if its visually unappealing labels and utilitarian logo are attempts to communicate that it doesn't waste money on aesthetically appealing design, preferring to spend it on what’s inside the pack instead. 

It's been able to avoid debt and sidestep stock market volatility by using a membership model that was virtually unheard of back when its stores first opened. That financial stability has paid off in spades, creating more runway for product development. 

It meant it never had to raise the price of its legendary hot dogs from the 1985 $1.50 mark. Famously, co-founder Jim Sinegal told then-President Craig Jelinek that he’d "kill him" if the price was raised. Jelinek took the threat seriously and built Costco's own hot dog factory to avoid an untimely death. 

The famous $1.50 hot dog: It’s probably the cheapest and most effective marketing tactic in Costco’s toolkit

Employee engagement is another important part of the story. When nearly every other competitor bent the knee to Trump by abandoning their DEI programs, Costco defiantly left its program in place. One of the most unique values Costco holds – and one that's entirely antithetical to anything Trump could ever conceive of – is employee satisfaction. It’s declined to reduce wages and has proven that employee satisfaction trumps (oops sorry) everything. If employee satisfaction leads, happy customers will follow. Not only has it managed a balancing act that most companies will have you think is impossible in an end-stage capitalist world, it’s done it while expanding into Asian markets.

Unlike expansion attempts by Walmart and Tesco, Costco has become a beloved brand in Asian countries (understatement of the century). It actually bought its licence to operate in Japan 20 years prior to even opening its first location there. It wasn’t a huge financial burden, and it granted time to consider the purchasing habits of a population that lives in conditions opposite to those enjoyed by suburban Americans. Its spatial constraints would have you think that any company with a warehouse model would be out of business before even opening. But that wasn’t the case—not even close.

Japan’s Costco sold what Japan’s Walmart didn’t. It capitalized on its western origin, as opposed to Walmart’s attempt to exactly emulate what already existed in Japan. Over in China it pulled a ‘same same but different’ approach in its 2019 unveiling in the Minhang district of Shanghai by offering several western items with a hint of Chinese flavour (think ‘match tiramisu’). Any good marketer knows the fine balance between moving a consumer just out of their comfort zone so that they’re excited, but not so far that they’re scared. In China, Costco nailed it. 

In fact, they nailed it so well that on its first day of opening, Costco had to close. Lineups had people waiting for over two hours just to get in, and an additional 3 to pay. People fought over pig carcasses with knives taken from hapless butcher counter employees. 

Asia’s Costco is showing no signs of slowing down—if anything, quite the opposite. China, Japan, and a host of other Asian countries are well aware that Costco’s customer-friendly model is to accept that its profit margin for individual items will be low, but will allow it to deliver quality and ensure customer loyalty. 

As mentioned, Costco’s not a crappy one-night stand. It’s in it for the long haul. Costco’s a commitment – its membership model proves that. But Gen-Z is sick of getting scammed by aesthetically appealing bullshit that doesn’t deliver. They haven’t got the spare change to test out products; they need the guarantee that Costco’s Kirkland brand provides.

And let’s not forget how alluring it is for younger generations to be a member of a club that’s not trying to be cool. Groucho Marx once retorted: ‘why would I want to be part of a club that wants me as a member?’. Well Costco? It doesn’t care. It mightn’t have been pleased when mocked in Mike Judge’s cult-classic ‘Idiocracy’ (see below), but it didn’t throw a fit like Walmart, who director Mike Judge originally intended to parody. In fact, while all other aspects of ‘Idiocracy’ have become reality, Costco has completely contradicted its dystopian portrayal in the film. It’s somehow now more symbolic of a desire to return to a time when there was a middle class and social mobility within reason. It’s a capitalist brand with a bit of socialist spice.

The Republican-stacked SCOTUS will ultimately determine whether Trump will be crowned McDicktator and defeat Costco in court. In the meantime, Costco’s brand will remain a beloved symbol of trust; the most priceless attribute any brand can achieve. Regardless of how butt-ugly its logo is (sorry, Costco!).

Aria Novosedlik is a Toronto-based designer, writer and researcher.