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CFO Notes Costco’s Secrets to Customer Service Success

The formula for Costco’s lofty customer service score is rather simple, in Richard Galanti’s eyes. “We take care of the members, even during these times of inflation,” Galanti, Costco’s CFO, told The Food Institute on Tuesday“We’ve had inflation too, but we think we’ve done a good job of mitigating it as best we can.” After taking steps like working with suppliers to keep prices relatively in check, Costco was recently named Yahoo Finance’s 2022 Company of the Year.

Yahoo said the warehouse club operator helped “Americans stretch their paychecks more than any other company.” In a year that featured rampant inflation, Costco kept prices of food relatively low compared to competitorsThe Issaquah, Washington-based company saw its sales increase 16% in the last fiscal year.

Among the best performing categories were candy, frozen, bakery, and deli.

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Costco also reported a record 92.6% membership renewal rate in the U.Sand Canada, noted Supermarket News. Galanti told The Food Institute that his employer focuses on providing the best value possible. “It starts with our basic framework, with the extreme value proposition,” Costco’s CFO said.

“On average, we mark up our goods around 13 or 14%; If you think about it, supermarkets are in the mid-20s.

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… So, we have great value.” Earlier this year, Costco was the highest-rated grocery brand in terms of net promoter score (scoring 79 out of a possible 100) according to Seeking AlphaNet promoter scores, often referred to as “NPS,” are based on surveys that ask how likely customers are to recommend a company or product. OFTEN-OVERLOOKED SECRETS An underrated key to keeping shoppers happy? A great return policy.

Costco features a 90-day return policy for electronics and some big-ticket items.

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For items like clothing, the retailer’s return policy is, essentially, in effect “forever,” Galanti said. “Even with the 90-day (policy), compare that to the return policies of other electronics retailers or general broad-line discounters – the Targets, the Walmarts, the Best Buys – I believe you’ll find our return policy is extraordinary,” Galanti said. A larger key to Costco’s success might be its compensation package for employees.

Since the company pays its employees well by industry standards – with an average hourly wage slightly more than $25 per hour, per Galanti – staffers tend to be motivated, according to Brian Hawkins, marketing manager of mattress brand GhostBed, which is sold at Costco. “Costco sets itself apart from the competition with its customer service by providing their employees with competitive wages, which helps ensure a higher caliber customer experience,” Hawkins said. Costco’s employee healthcare plan includes medical, dental, and vision.

And, Galanti, noted, the company offers a 401K plan and contributes 3-9% of employees’ annual wage, based on their years of service. “Not only do we pay well to start with, but we pay very well over time,” the CFO said“And it’s a career.” RECESSION CONCERNS? Even with a possible recession looming, Galanti feels Costco can weather virtually any economic storm.

In 2023, he said the big-box retailer plans to “still drive market shares; In other words, do a little better than the rest.

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And we seem to have been able to do that for the last several years.” He also noted that it’ll be important for Costco to continue to drive value in items that customers shop for on a regular basis, like groceries. “Concerning the inflationary and recessionary environment, it rains on all of us,” the CFO said.

“But we think that the values that we bring – particularly our strength in fresh foods, and even the sale of gasoline – those things continue to drive more people into our warehouse.”

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