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Is Costco REALLY in Trouble?

Connect Retail is our weekly column on the sector, authored by veteran CRE writer Ian Ritter.

Most people like to complain about their shopping experiences, as opposed to saying what the upside of their transactions were. But if someone says something positive about a retailer, Costco is usually one of the first firms on the list. People I know have had full meals during a lunch break, thanks to Costco’s free samples.

Well, Costco is coming under fire for a few reasons.

First, there is the switch in the company’s credit-card acceptance, from American Express to Visa. Despite early snafus, Costco will ultimately increase its customer base with this move, as there is a four-percent cash back reward for Visa customers, as opposed to the three percent AmEx offered.

Then there is the boost in membership fees; executive memberships will cost an extra $55 per year. It’s difficult to fault the company, especially when it has to deal with its own increases in operating costs. Utilities and other expenses don’t decrease.

Still, these aren’t problems, so much as bumps in the road. There is no reason that commercial real estate landlords should be worried about having a Costco near their properties. Its stores will always get significant consumer traffic, despite these issues.

Financials are proof enough of Costco’s viability; same-store sales increased 7% over its last fiscal year. People will always enjoy their goods and services, and there is no reason to think this will change.

 Do you think Costco is facing problems, or is all of this overblown?


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