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NY Times Article: Costco is now for the "Elite"

vvvindaloo Nov 26, 2007 08:51 AM

http://www.nytimes.com/2007/11/25/fas...

  1. dave_c Dec 10, 2007 04:09 AM

    From the following article:http: //seattlepi.nwsource.com/business/341749_costco30.html

    "The household income for an average customer is in the low to mid-$70,000 range."

    Also, Costco has a reputation of paying well for being a discount warehouse.

    1 Reply
    1. re: dave_c
      eatnbmerry Dec 10, 2007 05:00 AM

      this makes alot more sense. Ty for right info.

    2. Caroline1 Dec 9, 2007 04:40 AM

      The thing I find most amusing about the article is that Mr. Perle finds where he buys the ingredients for the food he's serving his guests to be reasonable dinner table conversation. I'd think a bunch of (presumably) DC power players would have more intersting things to talk about.

      1. Eat_Nopal Dec 5, 2007 08:12 AM

        I guess the saddest part of all is that the "Elites" have such bad (or at least wasted) taste that they shop at Costco without having to.

        5 Replies
        1. re: Eat_Nopal
          r
          Roland Parker Dec 6, 2007 06:06 AM

          The sad fact is that not everyone is as interested in fine cooking as we may be.

          That said, the high end Costco shoppers probably also frequent specialized gourmet stores as well. I'm sure Sally Quinn hits the Dean and DeLucca in Georgetown from time to time.

          As recent as ten years ago, I did most of my food shopping at one supermarket in Baltimore: an upscalish family owned grocery in my neighborhood, called Eddies. Best meat counter in the city, excellent wine list, good produce, nice selection of cheeses, along with all the regular potato chips and frozen tv dinners (yes, I indulge on occasions).

          But the options for food retailing has exploded dramatically since the mid 1990s. While I still frequent Eddies for some of my groceries, particularly meats, I now also head out to Wegmans (east coast based supermarket chain that represents the new level of mass market groceries) for most of my dry goods and seafood. I hit the farmer's market for produce, and drop by Whole Foods for a few specialized items or cheeses not available at other places. I go to a different liquor retail that has a larger selection of booze at better prices.

          And I do go to Costco for very large quantities of toilet paper and household goods, frozen appetizers for large parties, and if available, a good salmon.

          Final conclusion: my food bill is about the same as it was ten years ago (adjusting for inflation), but the overall quality and quantity of things I buy has increased. Savings at Costco allows me to splurge more on good meats and wines, or dine out more.

          1. re: Roland Parker
            Eat_Nopal Dec 6, 2007 07:26 AM

            Its always kind of funny when I go to some dinner party here in Sonoma County at one of the $2MM homes on a hill with a little vineyard in the front... then they serve a platter of Gorgonzola Torte or whatever purchased from Dean & DeLuca etc.,

            1. re: Eat_Nopal
              stellamystar Dec 11, 2007 06:07 PM

              That is a entirely different thread in itself! All that money - and ......have some Chicken N' Biscuit! (Okay, D&D is not Chicken biscuit, but I think you get where I am going).

              And, am I jealous - Of course! :)

              1. re: stellamystar
                Eat_Nopal Dec 12, 2007 07:52 AM

                Yeah... you should see some of the kitchens around here... chefs in NYC shoebox restaurants would be green with envy... of course not much cooking goes on.

            2. re: Roland Parker
              Bob W Dec 6, 2007 11:20 AM

              LOL an Eddie's shout-out! I love it. I'm a JHU grad, and was just up in Charles Village a few days ago. The Charles Village Eddie's is still alive and well, I was happy to see. In fact, that whole block looks almost exactly as it did when I was a CV denizen lo those many years ago.

              I live in Northern Virginia now, and shop much like you do -- Costco and BJ's for bulk items (we have three-year-old twins), Harris-Teeter for basic groceries, Whole Foods for on-the-way-home splurges, Trader's Joe's for odds and ends, farmers' markets, Asian markets, etc. It's all good. 8>D

          2. jfood Dec 4, 2007 10:42 AM

            It's a type. It should read:

            Costco is for the Elle-Eat

            BTW - $250k average is so far off it's ridiculous, and $150 is not the right number either. Besides they absolutely no data to support any claim. And if you have been in the Costco's jfood goes to, no way.

            15 Replies
            1. re: jfood
              Melanie Wong Dec 4, 2007 10:56 AM

              Where are you located?

              The median household income in the San Francisco Bay Area is ~ $70K, so it's not at all far-fetched here. Costco locations in the US are skewed toward the west coast and higher earning areas.

              A few years ago, a senior exec at Costco told me that the Costco branch in the world with the highest sales per square foot, a standard indicator of retail performance, was in Scotland.

              1. re: Melanie Wong
                Bob W Dec 4, 2007 01:01 PM

                This $250k number is beyond ridiculous. I live in Loudoun County VA, right next to Fairfax County. These two counties have the highest average household incomes for counties in the US, around $95k-$100k. There is NO WAY the average Costco customer comes from a household more than twice as wealthy. It's completely absurd.

                Even at the Costco we patronize, which is close to the Fairfax-Loudoun border, there's just no way. So for the entire chain, no way to the nth degree.

                Where did this number come from, anyway?

                1. re: Bob W
                  Caroline1 Dec 9, 2007 02:01 AM

                  Maybe Costco came up with their statistic shortly after Oprah did her show where she strolled Costco's aisles with a shopping cart dumping in all sorts of things into it and crying, "Things are so reasonable here! I can't believe how much I'm saving!" Toss her income into the averaging pot and you get a tipped scale. '-)

                2. re: Melanie Wong
                  jfood Dec 4, 2007 01:52 PM

                  MW

                  Not understanding your point but let jfood try to clear up his thoughts and maybe you are both on the same page.

                  There is a difference between the average income of the area and the avg income of the store custo. if anyone believes that the average income of the person on line in Costco is 6-figures is smokin' the wacky weed.

                  To be clear jfood would guess that the avg income of the average custo in Costco is $50-60K, not 150k and surely not 250k. The 250k places that family in the top 5-10% of income in the US. The idea that the avg in costco is this demographic subset is absolutely incorrect.

                  jfood hopes that is a little more clear.

                  1. re: jfood
                    Eat_Nopal Dec 4, 2007 02:55 PM

                    $250k is actually in the top 2.5%.... there is no way that is the Costco target market. Bristol Farms I might believe.... Whole Foods would be a stretch... Costco no way.... well maybe its not so far fetched... if Warren Buffet, Bill Gates & the Google geeks shopped there (and they probably do... or at least who ever does their shopping does).. then it could potentially skew the number that high in some stores. But if you calculate the Average by looking at the Median with a range of 5 to 10% on either side.... no way.

                    That said I do know some business owners whose annual income is well over $1MM that shop Costco (almost exclusively)... and live in an area where the average home is about $1MM and draws lots of people into Costco... so yeah for that store... I wouldn't be too surprised if the average income was that high.

                    1. re: Eat_Nopal
                      GastronautMN Dec 4, 2007 06:34 PM

                      EN is right on the money. There are lots of small biz owners that shop at Costco and by and large they are the ones who have the highest incomes in the country. Not the super rich CEOs who are raping the shareholders of their companies, the top .01%, it's the next top 4.99% So these patrons drag up the average and believe it or not Costco is very effective at placing their stores in the suburbs where there is a very high average household income.

                      There are a lot of dual income families in this country that earn more than $125k. There also a lot of people on food stamps, but they don't tend to shop at Costco.

                      1. re: GastronautMN
                        Melanie Wong Dec 4, 2007 07:55 PM

                        Also income in this country, unfortunately, is becoming bimodal. The median or calculated mean doesn't represent very many people. Eliminate the bottom levels from your customer base, and the average can become quite high. And, don't forget the Millionaire Next Door. . . people can have much more money than you'd think.
                        http://en.wikipedia.org/wiki/The_Mill...

                        That said, the $250K figure that I'm remembering could be net worth and not income. I'm certain of the dollar amount but no longer of what it defines.

                        1. re: Melanie Wong
                          psb Dec 4, 2007 10:03 PM

                          Hi Melanie, I was about to suggest "maybe you are quoting the
                          median wealth statistic" as well ... which may heavily reflect the
                          real estate values of where the stores choose to locate.

                          But it's impossible for this to be an income average ... that's would be
                          a "sample mean" so far off from the population mean, it would be
                          much, much, much more obvious ... let's take a fun San Francisco
                          example: On Sunday night, I parked next to Boulevard. To get to my car
                          I walked past ~15 cars which was 100% comprised of mercedes,
                          porsches and BMWs [with a Jag at the end]. So yes, I would fully
                          believe the "Avg income of the people using the valet parking at
                          Boulevard on a Sunday is $250k". What kinds of cars do you see
                          in the Costco parking lot? Those arent the cars of people making
                          $250k per year. Especially the ones buying Costco gas :-).

                          Now I would be prepared to believe the income of the Costco
                          members "on the books" is higher than what you would guess by
                          seeing who is in a Costco at any given time ... because it's relatively
                          cheap for somebody making +$100k to just "auto renew" the $50/yr
                          without worrying a lot about the "economic optimality" [i.e. their
                          calculation is convenience driven, not savings driven]. So probably
                          a fairer average would do some kind of weighting based on how often
                          you actually shopped there [or how much you spent etc].

                          1. re: psb
                            GastronautMN Dec 5, 2007 08:04 AM

                            The most popular vehicle for Millionaire's is the Ford F150. There are a lot of people who drive luxury cars who are "big hat, no cattle" and in debt up to their eyeballs.

                            In my experience at Costco you don't see a lot of beaters and you do see a lot of vehicular gratuitous displays of wealth.

                            1. re: GastronautMN
                              psb Dec 5, 2007 09:35 AM

                              A millionaire is a wealth not income measure.

                              If you see a man in a Rolls Royce [who is not a chauffer] and a man in
                              an F150, who are you going to assume is a millionaire? Yes, there are
                              probably more millioniare+F150 than millionaire+RRs, but that is because
                              there are a hell of a lot more F150s.

                              I bet more millionaires have eaten at McDonalds than The French Laundry.
                              In fact, McD may be the "most popular resto for millionaires".

                              Most millionaire dont own GulfStream jets or Yachts ... but if I see somebody
                              with a GS Jet or a yacht, I am going to assume they are a millionaire.

                              So the numbers != signaling value in the Bayesian sense.

                              If the avg household income is say $70k [Melanie's number from above],
                              and say even 20% of the Costco members were at the avg, that means the
                              avg for the rest 80% would have to be around $300k to have a overall avg
                              of $250k. This is "a priori" absurd. So again, to hit that avg, you dont just
                              need a lot of millionaires, you need to NOT have "regular people"
                              dilluting the pool. Hard to do without a condo board/yacht club/country
                              club type barrier to entry.

                              It migt be interesting to see what is the income of the costco members
                              who used their membership 0times in a year.

                              1. re: psb
                                Eat_Nopal Dec 5, 2007 12:24 PM

                                I did a quick sensitivity analysis.... lets assume a particular Costco has 10,000 regular customers... of which 9,900 are average, and 100 are wealthy.

                                > If the average income for the 9,900 was $70,000 per year... what would the average income of remaining 100 (roughly 1%) have to be to make the arithmethic mean hit $250,000?

                                The answer is $18,070,000... certainly possible BUT it would completely mischaracterize the fact that just about everyone that walks through the door on any given day averages $70k not $250k.

                                1. re: Eat_Nopal
                                  alex8alot Dec 5, 2007 10:27 PM

                                  THis is the first time in my life that I ahve found a "math" discussion entertaining and interesting! :)

                                  1. re: alex8alot
                                    Sam Fujisaka Dec 9, 2007 03:35 AM

                                    Interesting due to our lack of information. All we need are the mean, median, and standard deviation.

                                    1. re: alex8alot
                                      Sam Fujisaka Dec 9, 2007 04:01 AM

                                      According to US census data cited by Wikipedia, mean family income in the US was $60,000 in 2004. Median annual household income in the US in 2006 was $48,000. Obviously, the distribution is skewed by the higher income earners: 6.4% of families in the US earn about a third of all income. The article cited by MMRuth above claimed that Costco members had a mean income of $77,000 in 2006, placing them well above the median and mean.

                                      1. re: Sam Fujisaka
                                        psb Dec 9, 2007 04:48 AM

                                        1. i believe some of us were making the point the $250k income
                                        figure could be ruled out without knowing anything detailed about
                                        costco.

                                        2. re: costco being "well above the mean" ... i dont think that is surprising
                                        considering they have a "barrier to entry" of $50. i would guess the mean
                                        income of the subscribers to a magazine that cost $50 a year is above
                                        the population mean too. [when The Economist (~$110/yr) surveys its
                                        readers, i think the income bands go up to $250k]. or take CA personalized
                                        lic plates ... those appear to be $50/yr as well. i bet people with
                                        personalized plates is also above the mean.

                3. m
                  ML8000 Dec 3, 2007 05:25 PM

                  BFD: the elite are tight with a buck and stunned by massive quantities like everyone else. BTW, if they were truly elites, someone else would be doing their shopping...like the people in the articles.

                  1. GastronautMN Nov 28, 2007 01:46 PM

                    Costco has always been for the elite. A rich man's Sam's Club. Their target market is households earning over $150k and small business owners. I work with a financial services firm that used to cross market in their stores because that's where all of the millionaires shop.

                    This may be news to the NYT, but it's not to anyone else.

                    7 Replies
                    1. re: GastronautMN
                      Chew on That Dec 3, 2007 01:33 PM

                      Ummm I don't agree! Our family shops at Costco and we definitely aren't even close to that income bracket...we find they have good quality products at decent prices!

                      1. re: Chew on That
                        Zucumber84 Dec 4, 2007 07:48 AM

                        I agree with Chew on That - a bargain is a bargain. But how much is a Costco membership these days?

                        1. re: Zucumber84
                          MMRuth Dec 4, 2007 10:05 AM

                          I think it's $50.

                          1. re: MMRuth
                            SweetPea914 Dec 5, 2007 01:16 PM

                            It is $50, I just renewed. However, that $50 is easily recouped in 1 month given what I save on formula and diapers alone. Having shopped at Sam's and at Costco I mst say I don't see THAT much of a difference between the 2 and never really understood the idea that Costco was "for the wealthy".

                        2. re: Chew on That
                          Melanie Wong Dec 4, 2007 10:05 AM

                          That's just the target. The range of incomes is quite large. That said, the average household income for Costco members is over $250K.

                          Just saw the new Costco cookbook, and the foreword is written by proud Costco member and hometown favorite, Mario Batali.

                          1. re: Melanie Wong
                            MMRuth Dec 4, 2007 10:09 AM

                            That sounds really high to me .... this article from last year says $77,000:

                            http://findarticles.com/p/articles/mi...

                            1. re: Melanie Wong
                              eatnbmerry Dec 9, 2007 08:30 AM

                              If $250k is right then there would not be the checkout lines I experience LOL!

                        3. jfood Nov 26, 2007 11:15 AM

                          When jfood sees articles like this he thinks

                          "Good news. If the NYT is printing this it's a slow news day."

                          Jfood found the article a big yawn. jfood could not care less where people buy their food and if their saving a couple of bucks thats great. Now if he saw one of his favorite chef's in costco at the meat counter then he would go over and strike up a conversation.

                          And to think that Sally and Benny actually cook their own food for the shin-digs is fairly comical. "Oh Ben dear, does the meatloaf need more salt?" yeah right.

                          They need to buy staples like anyone else. Does anyone think it was a coincidence that the NYT photographer just happened to be at Costco at the exact same time as the wife of the former EIC of the Washington Post? Another yeah, right. Jfood guesses the old Pentagon Papers battle is still being waged. What's next, the Washington Post running a story that the Ochs buy their detergent at Wal-Mart?

                          1. b
                            Bunson Nov 26, 2007 01:00 PM

                            The point of the article is to show that the elite shop at Costco, and tries to use people with high powered political ties as being the "elite" to validate it. Two people mentioned in the article as being ones that shop at Costco are tied to Rumsfeld and Cheney, another pair of people are both tied into Bill Clinton. All four use Costco as a resource for their dinner parties. I think it's going to be more commonplace especially for large functions. I mean look at Robert Irvine on Dinner Impossible, he seems to be a big fan too.

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