Most retailers make money by selling products. That’s basically their business model. Get customers in the door, squeeze out the highest profit margins possible, and repeat.
Costco is a business that tends to do things differently, though.
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Costco aims to make money on most of the products it sells (though some, like the famous $1.50 hot dog and soda combo, are loss leaders aimed to get people to come to the store).
But Costco doesn’t have to worry about profit margins as much as other retailers for one key reason – it gets a lot of its revenue from membership fees.
During Costco’s most recent quarter, the company reported membership fee income of $1.24 billion, an increase of $117 million, or 10.4%, year over year.
Clearly, those are some impressive numbers. But that doesn’t mean Costco lets itself grow complacent. The company, as a general rule, consistently looks for ways to improve the membership experience.
Costco makes a great offer to Apple fans
Apple products don't tend to come cheap. And unfortunately, they also have a limited life span.
Trading in old Apple products is a great way to recoup some of your costs and pocket some money to put toward a new device, or another needed purchase. And now, Costco is making it easier than ever for Apple users to trade in older devices.
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Costco's Apple trade-in program is simple. You tell Costco what Apple device you have, answer some questions on its condition, and get a quote on its value.
If you're happy with the number, you get a prepaid shipping label to send your device in. Once received, Costco sends you a Shop Card, the store's version of a gift card, for the value.
Here's the payday you may be looking at based on the device you're trading in:
- Tablet – up to $550
- Phone – up to $700
- Desktop – up to $1,205
- Laptop – up to $1,500
Once you get your Costco Shop Card, you use it online or in stores on almost any item Costco sells.
Apple trade-in program is strategic move for Costco
Costco knows that its great prices and fantastic selection of products are enticing to members. But to get them to spend money, the company needs them to come to the store. And to keep customers happy so that they renew their memberships, Costco needs to continue offering unique benefits that other retailers don’t.
Costco’s Apple trade-in program is just one example of how the company goes the extra mile to bring people into the store and keep members happy.
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Someone who shops at Costco on occasion may only visit their local warehouse club store a few times a year. With a Shop Card in hand, they’re likely to visit more often, see the value, and keep coming back.
Even though Costco is generally pleased with the way its membership base is growing, the company cannot afford to grow complacent – especially as it faces mounting competition from retailers like Walmart and Amazon.
During the company’s last earnings call, CFO Gary Millerchip said, “Overall, on membership, I'd say we're very pleased with the metrics…we're pleased with the overall direction that we're seeing.”
But that doesn’t mean Costco won’t continue to find ways to boost sales and membership numbers.
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In addition to offering Shop Cards for Apple trade-ins, Costco also offers them on a host of other purchases – notably, vacation packages. It’s a strategic move for a company that already does a lot of things right, but stands to boost its profits tremendously if it can encourage more frequent shopping.
Maurie Backman owns shares of Costco.
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