Toilet paper, giant jars of mayonnaise, enough shampoo to last a year: These are all items one might imagine being on a list for a quick trip to Costco. One thing we generally don’t expect: a new car. But that’s exactly what consumers are picking up at the warehouse store.
Bloomberg reports that Costco has quietly climbed the list of top car retailers – selling nearly 400,000 vehicles of all makes and models at its stores across the country last year – putting it right behind the No. 1 car seller AutoNation.
However, purchasing a car on your next trip to Costco won’t be the same as doing so at your local car dealership. In fact, a recent car buyer tells Bloomberg that the experience was void of the typical haggling and upselling one might expect.
The other out-of-the-ordinary aspect: the big discount. The man says he spent $39,000 on a new Toyota Highlander, about $4,000 less than the recommended price.
The relatively stress-free and discount-laden process is all because Costco’s foray into selling cars isn’t really about selling cars, Bloomberg notes.
Instead, it’s all about the members. The company moves the vehicles through an auto-buying service called Affinity Auto Group. Costco uses its massive membership to leverage local dealers selling through Affinity into offering exclusive discounts.
For example, Costco and General Motors offer buyers a store gift card of $500 and a non-negotiable price for most vehicles. The deal led to the sale of some 43,000 vehicles at the retailer in the last part of 2014.
To ensure that dealers maintain the discounts they’ve promised the store, Costco sends in a team of mystery shoppers.
Perhaps the most bizarre part of Costco’s sales strategy: Much like its unprofitable practice of selling rotisserie chickens to keep members loyal, the retailer doesn’t actually make money on the car sales it helps broker. Instead, Costco only offers the discounted vehicles to attract and keep members.
While it was once difficult to get carmakers to sell through Costco, the company says it now has a waiting list of dealers.
Costco Moves the Metal [Bloomberg]