Seven brand strategies for creating shopper impact at this unique retailer
By Jennifer Shaw, Mars UnitedSM Commerce
Costco is one of Canada’s largest retailers, with an online ecommerce platform and over 100 brick-and-mortar stores that serve 10 million-plus paying members across the nation. Anyone familiar with this retailer can immediately envision huge warehouses, bulk purchases, and great deals on products that consumers love.
It’s also one of the most unique retailers, operating under a business model that puts membership at the core. As Costco members, consumers gain exclusive access in stores and online (at Costco.ca) to products from trusted brands that have been vetted by the retailer. This has created an environment of trust and value among Costco shoppers.
However, this uniqueness presents challenges for brands who need to activate within such a distinct retail model. In this article, we’ll first present a brief overview of Costco’s retail strategy and how the retailer works within the Canadian market. We’ll then dig into the key marketing opportunities available for consumer packaged goods brands and the strategies that may be most effective for engaging Costco shoppers.
The Secrets to Costco’s Success
Costco’s number one commitment is providing value to its members. And it’s no secret that the retailer delivers on this objective year after year judging by its loyal membership base: According to Costco’s latest annual report, membership renewal rates in North America are nearly 93%.
Here are the key pillars in Costco’s business model that have made this retailer a staple in the shopping journey for so many Canadian consumers:
1. Membership fees keep prices low: The revenue generated by memberships (C$65 for basic and C$130 for executive) contributes significantly to Costco’s net income, which allows the retailer to invest back into its operations without having to increase prices on products or services — thus providing members with greater value for their money.
2. Bulk buying delivers big savings for members: At Costco, many products that are typically purchased individually at other retailers come either in much larger sizes or are packaged in bulk. By purchasing its inventory in bulk, Costco can negotiate better prices with suppliers and pass the savings onto customers.
3. High supplier standards build trust and loyalty: Costco vets suppliers using strict standards for quality, reliability, and ethical business practices. By prioritizing quality over quantity, the retailer gives current members peace of mind about the brands they buy and paves the way for attracting new, loyal customers.
4. Pricing strategy and customer service are unmatched: By building strong supplier relationships and aggressively negotiating prices, Costco satisfies price-conscious consumers by providing quality at discount rates — not just on products but also on services such as insurance, optical, and travel. The retailer also delivers consistent, high-quality customer service (like hassle-free return policies) that increase the value of membership even more.
5. A curated and limited-time assortment drives urgency: Costco carries a relatively small range of products that have been carefully curated to meet the needs and desires of members.
This includes the highly regarded Kirkland Signature private label, which has contributed significantly to Costco’s success by earning a powerful brand presence and reputation. The retailer also presents many limited-time offers that create a sense of urgency and prompt quick action on purchase decisions.
6. The “Treasure Hunt” shopping experience builds baskets and advocacy: The assortment strategy is a big part of the “Treasure Hunt” shopping experience that Costco has created, never letting customers know from one visit to the next what they’ll find. Other key aspects of this strategy are a robust sampling program and the extremely limited signage at the shelf and elsewhere; this “clean” store policy might be most interesting for brands because it limits the advertising opportunities they have in stores.
Costco’s intended goal is to give consumers an experience that inspires them to visit every aisle to find what they might need rather than simply coming in to pick up a few specific products on their list. This not only helps to build larger baskets, it also has engendered strong word-of-mouth marketing by turning members into vocal brand advocates.
As a result, Costco is able to spend little on traditional advertising and can instead let the brand, the shopping experience, and the members do much of the work. Through the key pillars above, Costco consistently motivates user-generated content from members naturally expressing their brand affinity and loyal behaviour.
Opportunities for Brands
Given these factors to Costco’s success, what methods for connecting with Costco shoppers are available to brands? Although the retailer doesn’t offer many traditional advertising opportunities, there are still plenty of options that can be leveraged to create impact. Here are seven strategies to consider:
1. Costco Connection Magazine
Advertising within the print and online versions of Costco Connection magazine can give brands prime placement in front of members who are beginning their shopping journey and building their carts. Ads here are also visible to non-members browsing the Costco website.
2. On-Site Display and Search
Brands can also tap into Costco’s robust first-party membership data to target members with onsite display banners and sponsored search ads. These options let brands activate full-funnel marketing strategies and secure a leading presence on the digital shelf.
3. In-Store TV
Brands that have in-store distribution are able to leverage the Costco TV network, which is showcased on 24 or more large-screen TVs in the technology section that is typically positioned at the front of stores. This gives brands a chance to influence shoppers with compelling, action-oriented messaging at the start of their journey — especially the 25- and 54-year-olds who make up the primary viewer demographic. It is a great option for brands looking to drive awareness or educate consumers about their products.
4. In-Store Sampling
In-store sampling is a staple of the customer experience. Costco’s well-executed strategy puts the product directly into the hands of potential buyers, allowing them to physically interact before purchase. This creates a more memorable, impactful experience with brands and fosters loyalty among members who can learn about and try items before they buy. Sampling has great benefits for brands, letting them stand out from competitors, giving shoppers immediate reasons to believe, and increasing sales.
5. Ads on Flipp & Costco Flyer
With its vast user base, third-party digital flyer platform Flipp lets brands reach highly engaged shoppers in buying mode. Through Flipp’s engagement opportunities — display, search, brand landing pages, push notifications — brands can geo-target 1.8 million Costco shoppers with ads that drive consideration and discoverability, inspiring them to add products to their list and visit the store. Flipp also curates a weekly Costco Flyer on the platform that further connects brands to shoppers on their purchase journey.
6. Instacart Advertising
Brands looking to grow market share along with sales should consider working with a grocery delivery partner like Instacart to target Costco shoppers as they build their orders with sponsored product ads that ensure top placement in search results. Other opportunities in the Instacart app are display ads equipped with “add to cart” functionality and full brand pages that provide a shoppable destination at the point of purchase.
7. Costco Finds Canada
This is an online network of Costco shoppers who share content to help each other discover new and exciting products at the retailer. The network has evolved over the years into a substantial fan club (120,000 followers) of extremely active and engaged shoppers whose posts influence and drive urgency for store visits.
Another exciting platform on the horizon is Costco’s retail media network, which launched in the U.S. last year. We suspect it’s only a matter of time before Costco Canada follows suit, unveiling more opportunities to reach members. In the meantime, these six strategies will help get your foot in the door to start engaging with Costco shoppers.
Looking for more strategies to connect with Canadian consumers? Download our Canadian Retail Media Report Card to find key insights on other leading retailers in Canada — Walmart, Loblaws, Amazon, Canadian Tire, Instacart, and The Home Depot — that can help shape your commerce marketing strategy in 2025.
About the Author
Jennifer Shaw is Manager, Client Leadership on the Campbell’s Canada account at Mars United Commerce. She has over seven years of experience in various disciplines spanning experiential, digital and shopper marketing.
