2houndz

Costco Not Immune to Retail Slump

I completely forgot about the mom & pop's using Costco as a supply house. You are correct. Thanks for mentioning.

Costco Not Immune to Retail Slump

Yoda is correct. The aspirational customer is changing his ways. A few years ago when I was trying to do a few real estate transactions with Costco, their RE guy described the difference between the Cosco shopper and the Sam's customer as follows:

When the Costco customer finds the Polo brand knit shirts for $20 he says "Look honey, this is 50 bucks in the department store". But if the Sam's customer sees the same shirt he says "My god, who would pay 25 dollars for a T-shirt with a collar?".

This is an excellent description and I will never forget it. Don't look now, but the suburban, 'aspirational shopper' with good credit is defaulting like never before. He was that American Express guy, who was supposed to be so solid. Thornburg Mortgage, who catered to only creditworthy 'jumbo' homeowners is closing its doors. Starbucks is demanding rent reductions from landlords. Who drank their coffee? Yep - this same aspirational customer. There was a report yesterday that people are shutting off their cable and going to free TV.

Aspirational shoppers are not just looking for cheaper nice wines than in Whole Foods, or cheaper flat panel TV's than Best Buy. They are, out of necessity, doing what it takes to make sure the family is ok, that the kids can go to college, and that they start paying down debt and have a few bucks in savings.
I can't remember where I read it, but someone recently said the motto for our economy has gone from 'a chicken in every pot' to 'two BMW's in every McMansion'. True, but now we are moving back the other way.

Of course, I am not naive enough to believe that this will last. When the next upturn comes along, they will go back to the way they were living, but for now, there's a sea change with a significant number of consumers.