Costco changes a key in-store shopping experience

Costco prides itself on its no-frills shopping experience.

The company calls its stores warehouses because they're basically just goods piled on pallets and metal shelves. Essentially, the company takes the stance that any money it puts into merchandising adds to its expenses which drives up the cost of its goods.

That's something Costco (COST) - Get Free Report want to avoid because its core goal is delivering the lowest possible prices to members. Customers generally forgive the chaos of its stores and accept having to buy in bulk quantities because that's what keeps prices down.

It also keeps profits up. Costco has been a top performer among stocks in the Nasdaq-100 Index  (^NDX) - Get Free Report, up 44.6% in 2023. 

Related: Walmart makes major change affecting millions of customers

In addition, the retailer tends to pack its stores pretty densely. That's more true in areas outside of its food and home goods aisles. Those sections have merchandise piled on metal shelves with reasonable space on each side.

The areas where Costco displays its ever-changing merchandise — everything from clothes to toys, giant Teddy bears, beds, and who knows what else — tend to be packed tighter. That can create a gridlock scenario where a customer perusing a pile of books or contemplating buying a pool toy can cause foot traffic to stop.

That's a problem Costco has made worse with its latest change to some stores.

Costco creates a traffic jam  

Costco has fairly wide shopping carts. That can lead to aisles getting blocked while a customer looks at merchandise. That can be a larger problem when people stop to check out the chain's selection of clothing.

The warehouse club does not have dressing rooms. That means that when someone wants to buy a shirt, a sweater, a jacket, or any other item, they have to either try it on over their clothes, or sort of just hope it fits. 

You have to assume people aren't trying on pants in a crowded store (but it probably happens). In general, it's a system where people have to hope for the best or maybe get an opinion when holding the item up or putting it on over their clothes from a shopping companion.

Now, Costco has added a controversial new way for people to see how a potential clothing purchase fits. The chain has added mirrors in its clothing section in some stores, according to multiple reports on social media. 

“Last thing we need is people thinking it's ok to try on clothing while their cart completely blocks an aisle and half a clothing shelf,” one Reddit user posted.

It's a significant problem in that the aisles in the clothing section generally can accommodate one cart, meaning that two-way traffic already causes issues. People stopping to check themselves out wearing a potential purchase threatens to make a bad situation worse.

Costco sees the end of inflation 

While Costco may be trying a change in its stores that members won't like, it does have some good news for them. CFO Richard Galanti sees inflation as no longer being a meaningful factor in the chain's prices.

He talked about what Costco's buyers are seeing during the warehouse club's first-quarter earnings call. Galanti said that inflation has bounced between 1% and zero.

"Well, talking to the buyers, we've seen — you know, even during the quarter, we saw the trend toward that zero versus the one. But at the end of the day, we don't, the buyers are looking at three to six months. They have, on the fresh food side, commodities-wise, they haven't seen a lot. There are a few things that are up and a few things are down but no giant trend either way," He said. 

That's meaningful to customers because Costco passes on the lower prices to members.

"Look, as you know us for a long time, we want to be the first to lower prices," he added.

Galanti also made it clear that Costco has kept up the pressure on its vendors.

"We're out there pressing our vendors as we see different commodity components come down and, certainly on the non-food side, as we saw shipping costs come down, things like that," he shared.