Off the Press

June 29, 2010

By Warren Kagarise

Warren Kagarise Press Reporter

Go bargain hunting with a Costco newbie

Costco Wholesale spends nothing on advertising and lacks a public relations team, but the Issaquah-based retail Goliath generates buzz aplenty.

Costco instead relies on customers — and the occasional endorsement from the queen of all media — to build business.

Take, for instance, the televised trip talk titan Oprah Winfrey took to Costco in 2004. The company paid nothing for the national exposure afforded to Kirkland Signature chicken potpie and cashmere sweaters.

Such Costco lore — the stealth marketing strategy, the casual corporate culture, the bargains and, of course, the bulk — had long fascinated me, even though I had never set foot inside a Costco.

For a piece in the summertime Issaquah Living magazine inside this newspaper, I set out to chronicle how Costco continued to thrive and expand despite the recession. So, as I reported the piece, I ducked inside the flagship Issaquah warehouse with a card-carrying member.

I received no Oprah-style red carpet treatment — although, to be fair, I had not alerted Costco execs to my arrival — but I left impressed. Not just by the sheer amounts, but also by the niceties scattered throughout the warehouse — decent wines, designer jeans and the like.

I had accompanied my parents on untold trips to Costco rival Sam’s Club as a child, but I remember the Wal-Mart spinoff more as a stopping point for frozen chicken breasts and tires than for everyday luxuries.

Reporting the magazine piece also led me inside the nondescript Costco headquarters near Pickering Barn.

The penny-pinching ethos maintained by Costco CEO Jim Sinegal means the headquarters buildings lack posh executive suites.

Sinegal — much too tanned for someone working in gray Issaquah — has earned plaudits galore for his belief in generous compensation for workers and outsized deals for members.

I also learned Sinegal, leader of the third-largest retailer in the United States, enjoys lunch at the Costco food court. So, I too returned to Costco for the same lunch as the CEO, the $1.50 hot-dog-and-soda combo.

Eager to lunch like a millionaire, coworkers and I crammed into the outdoor space to dine at plastic tables and squirt mustard onto hot dogs from stainless-steel dispensers. Customers came by the hundreds for cheap eats consumed beneath Kirkland Signature umbrellas on a recent afternoon.

The huge crowd in line for hot dogs and smoothies provided another example of the Costco anti-marketing strategy: Offer big bargains, and let customers spread the word unprompted.

The ingenious — and, not to mention, cheap — media tactic works for Costco.

Go back, for a moment, to the shopping trip Winfrey made to Costco. The billionaire eyed a high-end handbag — priced for half of the retail cost.

During the hours the show aired in all U.S. time zones, Costco received 5,000 calls about items featured during the 15-minute segment, including hundreds about the bag — a deal fit for a queen and the rest of us.

Editor’s note: Due to a printing error, the Costco piece in the Issaquah Living magazine got cut short and is missing a paragraph and a half at the end. Read the complete version here.

Warren Kagarise: 392-6434, ext. 234, or wkagarise@isspress.com. Comment at www.issaquahpress.com.

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