Is This Costco's Biggest Competitive Advantage?
There's no doubt that one of Costco Wholesale's (NASDAQ: COST) defining traits is its super-successful membership model. Customers must pay $60 a year (for the basic Gold Star plan) to be able to shop at one of the company's 847 warehouses. In the quarter that ended November 20, the membership renewal rate in the U.S. and Canada was a superb 92.5%.
Paying a yearly fee certainly creates high switching costs for customers, who will prefer to shop at a Costco because of the sunk cost of the membership. By helping to drive repeat visits, it provides an important benefit to the company.
But I think Costco's biggest competitive edge is something entirely different. Let's take a closer look at what exactly this is.
Source Fool.com
