Photo by Jingming Pan on Unsplash
Costco Wholesale Starts a Gold Bar Shopping Trend
Costco Wholesale is known for its diverse range of products, including everything from bulk groceries to electronics and home furnishings. The retailer has consistently proven that it leaves no stone unturned.
This statement is now resonating more than ever. Venturing into new territory, Costco has introduced gold bars for sale on its digital platform, marking a significant and influential ingress into the world of precious metals trading.
During the company’s recent earnings call, Costco’s Chief Financial Officer Richard Galanti revealed a surprising trend. The wholesale retailer has sold over $100 million worth of gold bars in its first quarter alone, which ended on Nov. 26. This golden venture has proven highly popular among Costco members, with the 1-ounce gold bars typically selling out within mere hours of being listed on the company’s website. As stated by Galanti back in September, the demand for these gold bars is incredibly high. The trend seems to have persisted, with the PAMP Suisse Lady Fortuna Veriscan series appearing to be unavailable as of last Friday.
Costco Wholesale Gold Bars & Other Options
Costco currently has two gold bar options available: a 1-ounce gold bar from PAMP Suisse, which has a design of Lady Fortuna, and another 1-ounce gold bar made by South Africa’s Rand Refinery. Both of these options come from well-known companies. Each gold bar is being sold for approximately $2,000. However, it’s important to know that these gold bars aren’t being sold at Costco’s physical stores. You can only buy them online through Costco’s website.
Costco’s gold offers an easy, affordable entry into gold investments, backed by quality assurance due to their reputable sources. However, their limited availability and additional premiums can be hurdles. Alternatives to consider for consumers who want to invest in gold include buying gold bullion from reliable online gold dealers, investing in gold stocks tied to mining companies, or opting for gold ETFs and mutual funds.
The ability to amass gold via Costco is limited — each Costco membership is restricted to the purchase of only two bars. While this might deter those hoping to build a large position in the precious metal, the overall reception toward this limit has been positive. Almost 800 reviews have given the gold an average rating of 4.9 stars on Costco’s website, although there have been a few complaints about the heavy state sales taxes on the purchase.
The Impact of Costco’s Gold Bars
The gold bars have been very popular since they were first listed online. In fact, they’ve been selling out within just a few hours each time they’re listed, which has made it hard for some people to buy them. It’s important to note that despite the hype and potential benefits, gold purchases from Costco are nonrefundable.
Gold is not only a practical investment but also a symbol of wealth and stability, and there’s been a growing enthusiasm for gold among Costco members. Reddit communities focused on gold investment have been buzzing with threads discussing the gold bars being sold at Costco. One Reddit thread that was posted after Costco first started selling gold noted how the company’s Costco Visa card and executive membership give the consumer 2% cash back points, improving the deal overall. Additionally, another Reddit user mentioned how other sellers charge a significant fee when purchasing gold with a standard credit card.
With spot gold prices witnessing a 12% jump this year, J.P. Morgan has forecasted a peak of $2,300 an ounce by 2024 as interest rates fall. Even as the investment bank predicts a potential dip to $1,900 an ounce in the coming months, it suggests that this could offer investors an opportunity to prepare for a mid-year rally.
As of the morning of Dec. 15, gold was trading at $2,036.19 an ounce, with prospects of another weekly gain boosted by a weaker U.S. dollar and lower Treasury yields. This rise in gold prices came after the Federal Reserve signaled three rate cuts for 2024 last Wednesday.
Costco’s one missed opportunity should not be overlooked — if its gold was branded “Kirkland,” then demand from loyal customers for these bars might be even more of a success, as one Reddit user jokingly put it.
Discussion Questions
Given Costco’s success selling gold bars, how might this trend shift the retail industry’s approach to product diversification, particularly into nontraditional sectors? What challenges and opportunities does this present for industry leaders, and how does it contribute to academic discourse on e-commerce and unconventional retail offerings?
Poll
Loading …BrainTrust
Jeff Sward
Founding Partner, Merchandising Metrics
Neil Saunders
Managing Director, GlobalData
Just in time for the Holidays (hit it Burl!)
Silver and gold
Everyone wishes for silver and gold.
How do you measure its worth?
Just by the pleasure it gives here on Earth.
Altho I think the investment value of this is limited, the PR value isn’t.
Costco’s unique business model and customer base afford them to experiment where others dare not tread. Before Costco’s foray into gold bars, those serious about purchasing the one-ounce bars could do so at some banks, jewelers, and online licensed retailers like the American Precious Metals Exchange (APMEX) and JM Bullion. With the price of gold readily available to a serious buyer, it’s easy to calculate the markup and make a purchase decision. Costco’s pricing is highly competitive with the online exchanges and better than banks or jewelers. When you add the 2 percent rebates that members receive on purchases, you’ve discovered why these gold bars sell out in no time at Costco.
Coming back to retailers and non-traditional offerings, retailing is about creating excitement and buzz, which a non-traditional product or service that captures the imagination can certainly generate. However, only some retailers can survive on Costco’s razor-thin margins, so each needs to create excitement to the extent possible without jeopardizing their margin structure.
With currency being devalued by inflation, gold is something of a safe haven. So, it is perhaps not surprising that Costco has seen a spike in the sales of bars. More interesting, however, is the fact this underlines Costco’s selling power. It is a great merchant that consumers use for all kinds of things well beyond food – including the occasional $500k engagement ring!
It’s always a positive when a brand or retailer can extend or validate their Brand Promise. And Costco has done both here…brilliantly. The sales $$$ might not move the needle in the grand scheme of things, but the marketing PR is invaluable. How many traditional retailers could go into the gold bar business without totally befuddling their customers? Costco does it and the response is, “Well, of course.” Costco continues to burnish their ‘gold standard’ reputation.
This is an interesting foray into a new category for Costco. And while there appears to be plenty of interest among Costco shoppers, the restrictions on two bars per customer, and online only option make this a limited opportunity. However, this is an excellent example of the broad range of products that Costco can sell, and this is a function of the stellar reputation and trust that Costco has built with it’s loyal membership base.
Costco is known for being quirky, offering things you would not expect to find at a warehouse store. Looking for a $330,000 engagement ring? There is one currently offered on its website.
Seeing a $2000 gold bar for sale at Costco – in-store or online – wouldn’t phase me. Part of the fun of shopping at Costco is surprise.
My problem with this foray into gold bars is that Costco offers investment-grade options to likely less sophisticated investors. How many buyers will buy just because they think it is OK because Costco is selling it? How many buyers will buy just because it must be a good price if Costco offers?
Hmmm. A unique item that is generating interest and, yes, PR, that sounds pretty good to me. Would I want one? Sure, but as more of a curiosity than anything else.
Once Costco started selling diamonds, it was just a matter of time before they started selling gold. Alert….I’m sure other precious metals are right around the corner. I love Costco’s innovative thinking!
I’m trying to imagine the shipping implications of a move like this. Do delivery drivers need to be more cautious when they’re carrying small, heavy boxes from Costco?
Here’s where I have a quibble with the picture accompanying the story and the language within. They aren’t clunky “gold bars” – they are one-ounce pieces, about the size of an SD card. You could mail it in a small, padded envelope.
Wouldn’t you want to buy something so precious that has an “investment” component to it through a source that has a long-standing reputation vs. what Costco has offered? Limit 2 per household is a smart move because it manages inventory and fulfillment while making it just as desirable as a bottle of Old Rip Van Winkle 25-Year-Old Bourbon Whiskey. Of course, the gold has more “life” than a consumable even if it is rare and highly sought after.
I’m pleasantly surprised. I would never have thought that Costco would venture into this type of retail experience; an investment in gold bars. If this works, and apparently it does, what’s next? Perhaps Costco will find its way into discount brokerage. Why not?
Costco is a clear winner with the buzz gold bars have created – not so sure about the consumer. Most retailers are not going to successfully diversify outside of their core offerings into precious metals, but it is a great advertisement for the test & learn methodology, taking a few chances with non traditional products. I wonder how long they have been planning the introduction of gold bars, the engagement ring market was decimated by the pandemic with delayed engagements/weddings.
Costco’s gold bar success signal the retail shift towards nontraditional sectors. This trend could inspire other retailers to think beyond the usual, offering unique products. Diverse product offering and unconventional markets might become a strategy, appealing to consumer interests and creating new avenues for growth in the retail landscape.
It’s not uncommon for retailers to venture into unconventional offerings to attract customers, such as luxury items or unique experiences. Costco’s gold bar success poses challenges that lie in meeting demand for unique products, while the opportunity is exploring unconventional markets. This trend contributes to e-commerce discussions, showcasing how retail innovation can reshape consumer expectations and redefine the boundaries of traditional offerings.
Costco’s unique approach is an example of taking unconventional steps to meet evolving consumer demands. The move suggests a potential shift from traditional retail offerings to unique and unexpected products. Retailers may explore new categories to capture consumer interest and drive sales, but this doesn’t come without challenges. Unconventional products, like gold bars, require a certain level of education for consumers who may be intrigued but unfamiliar with the product. In addition, dealing with nontraditional products may introduce complexities in the supply chain. On the other hand, product diversification allows retailers to differentiate themselves, and it opens up avenues for new revenue streams. From an academic perspective, it’s worth exploring the psychological factors driving consumers to purchase unconventional products online, as well as the strategic implications of diversifying product portfolios in the e-commerce era.