Costco has kept their Shopkeeper's Unit count very low

#shorts

Acquired Podcast Episode: Costco (Audio)

Costco keeps its SKU (Shopkeeper's Unit) count remarkably low, with only 3,800 items available today. This strategic choice allows for faster inventory turnover, even with a high customer volume. It's a key factor behind Costco's retail efficiency and success.

[drkroots]

People don't go to Costco to look for new products, they go because they know the stuff they want/need is there.

[arenegadeboss]

I remember trying to explain something like this to an old boss who was stuck on bringing in a certain number of new SKUs every year no matter what, without removing anything from our catalog. This problem gets significantly worse dealing with anything you carry in multiple sizes.

[deevnn]

Actually this shows what an excellent job is being done choosing the right quality products for your customers

[azarinevil]

It's not just about turnover.. it also makes stocking your products significantly cheaper. They buy wholesale and by limiting the SKUs, they are generating more space for stock and lowering the buying price per SKU. It translates to higher profits on what they are selling. It's how businesses should be raising profits, they are cutting their costs by buying smarter.

[gilapo]

I worked for an offbranch for tech support in costco and they focus heavily on quality over quantity, people want consistency more than they want options, so if all if not most your items match that you are more likely to want to spend more on the stuff you like

[j.m.]

As a trucker I love delivering to Costco warehouses. It's quick and simple and I'm sure there's cost savings to the consumer in being able to turn around trucks quickly as well

[TheRealScooterGuy]

I saw an interview some years back with one of the founders. He said, basically, that people don't need ten different packaging options for the same product. One thing you will notice in their stores is that a particular product won't have a lot of different sizes to choose from. This contributes to lower SKU counts.

[paulthough]

It’s just like having less items on the restaurant menu

[annana]

I used to have customers get angry with me that the store didn't carry such and such a product. They tell me that if I would order it and stock it, it would sell a lot. One, your basic employee has zero ordering power, we have no say in what is on the shelf. We might be able to restock, but I can't just magically aquire Granny's raspberry jam for you. Corporate doesn't let us randomly change what we carry. Two, we used to carry that jam, and it doesn't sell, you want it now, but we threw away twelve jars over two years because they sat on the shelf and expired and we never made a sale. If you love it so much, you certainly didn't show it.

[mojo]

They also have a very low theft rate due to the way they are set up which adds a huge amount to their bottom line vrs Walmart etc (hard to steal a 24 pack of toilet paper).

[brendonharadon]

Dont forget, Costco may have only 3800 SKU available at one time, but this doesn't mean that they only have that. About 1000 Sku does get cycled periodically to have seasonal and yearly variety for certain items, allowing them to have a variant SKU on rotation. In other words, their internal catalog is closer to 7000+ SKU items as a business, but you will never see more than about 3800 at a store in a given year.

[ViktorAstril]

Low sku counts are good for consumers as well by reducing decision fatigue

[twylanaythias]

One other advantage to having a low SKU count: When you're selling 1, 000, 000 items per month, that's either 5, 000 each of 200 SKUs or 100 each of 10, 000 SKUs. Volume matters when determining what you pay your suppliers. If you're paying $10 per unit when buying 100 per month, you're paying closer to $6 per unit when buying 5, 000 per month. You can sell the item for 20% less than your competitors while still making 20% more profit.

[zengeki]

But their 1.50 hotdog combo is still 🔥

[BEdwardStover]

Which means if you want say a lawnmower, at Costco you get no choice just a basic lawnmower, at Walmart you will a few choices like basic mid range and sorta good, but at hardware stores and big box construction and stuff you get a full range of choices. People who want what they want pay for more but get exactly what they want. People who want to save money go to Walmart and get something sorta like what they want. People who want to save a lot of money, but still spend a lot on a lot of things, spend for the Costco membership and then settle for what they get on everything. For those of us who remember the 60s or earlier, it seems much the same. There were very few choices on most things. In fact quality was always the difference in price between brands.

[kirkjohnson]

I started shopping there in the 80s when it was Price Club. Back then, there were no barcode scanners for checkout. Each item had a unique number on it that the register operator would key in on a number keypad. Another employee would transfer the goods from the shopper's cart to an empty cart and read off all the item numbers while doing that. It was amazing to watch because the folks doing that often knew most of the numbers off the tops of their heads.

[bodhisattvaswamigurudeva]

COSTCO's business model is not sales and inventory turnover. It is MEMBERSHIP based.

[SadSackGaming]

Don't confused a lack of variety with a lack of products. You don't need to stock 8 varieties of Raisin Bran if all you are selling is raisin bran. You don't need Raisin Bran Crunch, Raisin Bran with Almonds, Raisin Bran with Cranberries and so on. You just need to sell Raisin Bran. Maybe you offer Kellogg's, Post and Store Brand or just Kellogg's and Post. You don't need to offer 8 different brands of 55" TVs. You get 3. A top tier, a mid and a low end. You don't need the 32". You don't need a 42". Do you know what could make grocery stores better? If manufacturers would calm down and stop trying to fulfill every demented request consumers have. They are now not having to stop production or have a separate facility around to make flavor 12. They aren't having to redesign 18 labels.
I'm not saying give us one option, but stop all the flavors that cost money to produce and dilute sales. What is cheaper, making a product with 4 ingredients or making 6 versions of a product with a total of at least 9 ingredients you have to source?

[ghomerhust]

couple this to the recent "letter" sent from corporate to employees when they found out one of the stores' employees wanted to unionize. (stay with me) the letter basically was an apology that said "we are sorry that you felt you needed to unionize. that tells us as managers that we are not doing our jobs right. we're sorry. how can we improve?" absolutely epic. that is top shelf leadership right there. "we screwed up, we admit it, tell us how we can make it better for you"

[OttoBoy]

Focusing on turnover - on what sells - is what makes their business model successful. High volume sales of a much narrower range of items with minimal markups keeps inventory moving. This keeps a constant cash flow going. Keeping SKUs down also streamlines logistical issues, planning/ordering, more leverage with suppliers, etc. They do have occasional surprises as well. I shop at two local units usually twice a week looking for changes in their offerings. Each store around my area carries slightly different items that tend to reflect the local consumer demographics. E.g., if you drink booze, you know what I mean. They also offer a lot of seasonal consumer items. The only stitch is these items usually start showing up about 1-2 months before demand increases - smart. Ordering these types of seasonal items way before the other retailers gives the seasonal industries work at times that they would otherwise have little or no business.