Why is Costco so Popular?

I saw this going viral:

Or maybe it’s popular because it’s a good value, provided you don’t mind the limited selection. Costco only stocks items that have the smallest mark-ups, and earns most of its profits from memberships, not the merchandise. Similar to gym memberships or AOL, a lot of people pay without using the service often or forget to cancel, which subsidizes the minority of the most active customers.

From Wiki

One company rule states that no regular item may be marked up more than 14% over cost and no Kirkland Signature item may be marked up more than 15% over cost.[6] The company runs very lean, with overhead costs at about 10% of revenue and profit margins at 2%.[6] Costco’s annual membership fees (US$60/year for Gold Star, US$120/year for Executive as of 2024)[102] account for 80% of Costco’s gross margin and 70% of its operating income.[103] The company has no public relations department and buys no outside advertising.[6]

Costco’s sales model is to focus on limited selection over variety.[6] Although consumer products often come in many different varieties, Costco will not carry most of those variants, but instead will carry only one or two examples of what is essentially the same product and try to sell a higher volume of units at a lower price.[6] Thus, a typical Costco warehouse carries only 3,700 distinct products, while a typical Walmart Supercenter carries approximately 140,000 products.[6] If Costco feels the wholesale price of any individual product is too high, they will refuse to stock the product. For example, in November 2009, Costco announced that it would stop selling Coca-Cola products because the soft-drink maker refused to lower its wholesale prices.[104] Costco resumed selling Coca-Cola products the following month.[105][106]

Costco caters to a particular type of customer: someone who tends to buy in bulk, infrequently, for a limited range of items.

I think Rob is overreading into something that is not real. If keeping out kids is such a strong selling point, why don’t all major retailers, like Walmart and Target, also have mandatory memberships? This would imply that all these stores are leaving money on the table by not having mandatory memberships, which I find implausible given how Walmart otherwise optimizes its business for profitability in every possible respect. I am sure Walmart and Target’s executives ran the numbers and determined that requiring memberships would hurt revenue. True, as Munger notes, memberships do keep out some bad people, but are an inconvenience, too. They do impose a fiction. Just because a famous person has an insight does not mean it’s correct.