Costco is known for its wallet-and-dopamine boosts on everything from discounted frozen mango chunks and 30-roll packs of toilet paper to solid gold bars and “treasure hunt” finds, like a $279.99 patio heater.
But shopping at the giant warehouse chain has another side effect: It can make you fat.
Academic research shows that consumers who frequent the retailer buy far more pre-packaged foods per person than they would at a traditional grocery or other store without a warehouse layout, like Walmart.
“Because there is no effect on the nutritional quality of purchases, this translates into a substantial increase in calories, sugar, and saturated fat per capita,” said a recent paper lead authored by Kusum Ailawadi, a marketing professor at Dartmouth’s Tuck School of Business. Costco Wholesale Corp. shoppers haul home roughly 3,500 more calories a month per person, the study found — an increase that if regularly consumed in full, with no lifestyle changes, means 12 extra pounds each year, or 120 pounds over a decade.
That outcome is probably the opposite of what most shoppers think about the retailer’s no-frills warehouses, whose slim selection of high-quality, discount-priced goods in narrow aisles and compact, middle-of-the-store “play spaces” convey lean frugality. And that’s precisely the point.
“Costco is a masterpiece of behavioral design,” said Brian Portnoy, a co-founder of Shaping Wealth, a behavioral science coaching firm in Chicago for wealth advisors.
Consider the bundles of toothpaste and giant jugs of laundry detergent that sit on austere shelves like free goods being distributed by a relief organization. Costco’s $4.99 rotisserie chicken is a loss maker for the retailer, but a win for its hearts-and-minds business model of getting consumers to “buy more, and save,” whether it’s a 48-count box of Ramen noodles or a $399.99 bottle of 2020 Château D’yquem. Its 6.8-lb. David’s Cookies Mile High Peanut Butter Cake ($56.99 for 14 servings) may pack on the pounds, but its discount sticker screams budget-trimming deal.
In other words, Costco — the world’s third-largest retailer after Walmart and Amazon — can read your brain, especially when consumers are in holiday-spending overdrive.
“There’s a series of nudges from the moment you walk in,” Portnoy said. “It is a very carefully staged experiment in choice architecture.”
Those fancy terms come from behavioral economics, a blend of economics and psychology that looks at how people and institutions make decisions. While traditional economics assumes that humans are “rational,” the behavioral discipline looks at the way people everywhere tend to let beliefs, preferences, prior experiences and thought processes hijack their decision making. Those spoilers, known as cognitive “biases,” come in many forms for shoppers, and they’re in full play when you’re considering shelling out $379.99 for Costco’s farmed Bulgarian sturgeon caviar.
For example, the sunk-cost fallacy holds that once people open their wallets for a good or service, they’re more inclined to feel like they want to get their money’s worth. So from the moment Costco “members” pay $60 or $120 in annual fees, they’re primed to spend further. “Having spent the money up front, consumers feel that they can justify using the service more,” said Prof. Ailawadi. “‘So I’m gonna get my money’s worth by making sure I go shopping.’”
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