Costco has a very different relationship with its customers than most chains.
The warehouse club has always been very transparent with its members when it comes to pricing. During its earnings calls, the company delves into the impact of inflation, how it handles rising (or falling) gas prices, and the pressure it puts on suppliers to keep prices low.
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costco (COST) has been transparent even when it is not flattering for the company. The chain's former chief financial officer, Richard Galanti, admitted that the warehouse club sometimes makes a large profit margin on gasoline sales when prices drop.
“You know, the thing about gas is that I think everyone who has gas stations, what we've found is that we've been able to see increased profitability, not just in the last quarter or two, but in the last few years, the last few years. three to five years, gas profitability improved because others are earning more and we are allowed to earn a little more,” Galanti said during the Costco 2024 conference. first quarter results call.
The chain justifies this, according to Galanti, by keeping prices low and reducing the margin when gas prices rise.
Members may have mixed feelings about that strategy, but Costco has made no secret of its pricing practices.
The company claims price transparency on its website for items that could be cheaper when customers buy them in stores, but a new lawsuit seeking class-action status says that's not the case.
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Costco has a clear pricing policy
Most people know that prices can be different online than in a store. Anyone who regularly orders food delivered by Uber Eats, DoorDash, and similar companies has typically seen that prices for delivered food can be much higher than picking it up yourself.
Food delivery companies typically don't disclose this, but some chains make it clear when they charge an additional fee for pickup. Waffle House, for example, charges 20% for takeout orders; Half goes to the person who prepares the order and the other half to the company.
Costco also appears to be transparent about potential price differences between its website and its stores.
“As you may already know, not all products sold on Costco.com are available at your local Costco warehouse. Additionally, products sold online may have different prices than the same products sold at your local Costco warehouse,” the company shared .
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Costco also explained the reason for the higher prices.
“That's due to the shipping and handling fees charged for delivery to your home or business. And when an item is available both online and in-stock, you'll see the message: 'The item may be available in your warehouse. local for a lower price', price not delivered', on its product page on Costco.com,” the company added.
A new lawsuit in the United States District Court for the Western District of Washington alleges otherwise.
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Costco Lawsuit Seeks Class Action Status
The lawsuit, which seeks class-action status, is being filed by Annie Song “on behalf of herself and all others similarly situated,” according to the June 12 report. presentation.
“This is a proposed class action seeking monetary damages and injunctive relief from defendant Costco Wholesale Corporation arising from its material and fraudulent omissions with respect to its deceptive marking of products sold online at Costco.com,” the lawsuit alleges.
Broadly speaking, Song, a Connecticut resident, has sued the Issaquah, Wash., company for what he claims is routinely omitting promised disclosures when online purchases cost more than the same items in-store.
The lawsuit says in part:
On its website, Costco explicitly promises consumers that it will report whenever a product is more expensive online than the same product offered for sale in-store, stating that “the (i)item may be available at your local warehouse for a lower price, not delivery price.”
Despite its express representation, Costco routinely omits this material message and does not inform consumers in cases where they will pay more for a product sold on Costco.com than if they had purchased the exact same product at their local Costco store. Deposit.
Song's lawsuit alleges that Costco's failure to disclose higher prices is misleading.
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“Costco's failure to deliver on its promise to consumers by fraudulently bypassing its online product markup scheme is material to consumers' purchasing decisions, tricking them into making online purchases for delivery that they otherwise would not. would do and have caused them monetary harm by paying more for the items than they would have paid if they had purchased those same items in the store,” according to the document.
Costco did not immediately respond to a request for comment on the lawsuit.
Costco shares fell 1.6% on Friday to $848.31. Shares fell 0.9% for the week. They have increased 28.5% in the year.
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