The Cathedral of American Capitalism

God how I love Costco.

Costco

Longtime readers are aware that for a spell in the middle nineties the hard-working staff here at Drezner’s World spent some time teaching in Donetsk, Ukraine. It was an interesting year to spend there, what with the hyperinflation and immiseration and regional tensions and all. It was nevertheless an extremely rewarding experience and I am glad I did it.

When I finally returned to the United States, at some point in my first week home I entered a Costco for the first time as an adult. And I remember having two distinct thoughts:

1. This is what I had missed while I was in Ukraine; and

2. American capitalism is awesome.

After a year in which trying to buy even basic foodstuffs proved to be a challenge in scrounging, Costco was a shopping dream. So much quantity and quality! So much variety! So friggin’ cheap! The first time I got a Costco card, I thought it was the greatest investment decision I had made in my twenties.

Costco even played a small but telling role in my love life. The very first time my wife and I ever went shopping at a Costco — less than a month after we had started dating — we debated whether we needed so much ketchup for a cookout we were hosting. Another shopper leaned in and whispered, “that will come in handy once you have children.” I suppose the fact that this statement did not really freak either of us out was a sign that we were both in this relationship for the long haul.¹

Unfortunately, both Ukraine and American capitalism has taken some hard knocks in the ensuing years. But I will be damned if I lose my faith in Costco. Because that institution has endured. Consider, for example, the first-season Modern Family episode when Mitchell the snob was converted by Cam to the church of Costco:

Thank goodness a better writer than myself, like the Washington Post’s Catherine Rampell, finally wrote the column she’s been training her whole life to write about Costco:

In this polarizing moment, when Americans have been worn down by inflation, Costco’s commitment to low prices should warrant praise from all political corners.

Curiously, some Democrats still consider Costco a useful whipping boy, because they’ve decided any corporation that’s “big” must automatically be bad. At a recent hearing, Sen. Elizabeth Warren (Mass.) named Costco as among the “giant grocery stores and massive food conglomerates” responsible for “ripping people off.” One of her star witnesses, the owner of a gourmet market in Brooklyn, then confusingly testified that the real problem was that Costco wasn’t charging consumers enough….

Look, if you’re blaming Costco for inflation, you might have lost the plot. The company has famously low pricing, with among the lowest product markups of any major retailer out there, according to TD Cowen Managing Director Oliver Chen. That’s why the company enjoys an almost cult-like following.

An economist recently sent me pictures from his family photo shoot, staged at the store’s entrance shortly after his son was born. (“Costco has been with us every step of the way,” he explained.) Last year, I attended a wedding at which the couple featured the store in their vows. (“I vow to push your wheelchair through Costco if you ever become too frail to walk.”)….

Costco’s customer base skews higher-income but is diverse in other ways. For instance, Asians and Hispanics are overrepresented among Costco shoppers, according to consumer analytics company Numerator. The store is also beloved among immigrants, whose home countries often lack the sparkling abundance displayed on Costco shelves.

The chain “epitomizes the American dream,” explains Numerator’s chief economist, Leo Feler. “When my family immigrated to the U.S. from Brazil, we were awed by Costco. And when we would get visitors from Brazil, they would want to go to Disneyland and Costco.”

I share Rampell’s enthusiasm for the warehouse shopping behemoth, and it has never wavered since returning from Ukraine. Indeed, living seven years in the south side of Chicago, a rather different retail desert at the time, just made me want to live within reasonable driving distance to a Costco even more.

In contrast to many, I have never had Costco’s beloved and ridiculously cheap $1.50 hot-dog-and-soda deal; like Rampell, my family is a fan of their rotisserie chicken. At this point, however, what I like most of all about Costco is that it is an organization that demonstrates competency in the face of disruption. Maybe that is the best one can hope for in 2024.

1. Ironically, neither of our kids really likes ketchup.