Why does this giant retailer's "Treasure Hunt Economy" model keep shoppers hooked?

From the desk of Miles Everson:

Hi! How are you?

I hope you’re having a great Tuesday. I’m thrilled to share with you another useful insight for today’s  “Return Driven Strategy (RDS)!”

For those of you who may not know, RDS is a pyramid-shaped framework with 11 tenets and 3 foundations. When applied properly, these concepts help businesses and even individuals achieve their goals.

In this article, we’ll focus on RDS’ 5th tenet: Innovate Offerings.

Read on below to see how this tenet plays out through the lens of this business’ strategy.

Why does this giant retailer's "Treasure Hunt Economy" model keep shoppers hooked?

Imagine walking into a store where you don’t quite know what you’ll find. You came for groceries, but suddenly, there’s a kayak on display. 

… or maybe it’s a luxury handbag, a set of fine wines, or even a vacation package to Italy. 

Hmm.  Interesting … 

At first, it feels random. Then you realize it’s all carefully designed to surprise you, delight you, and keep you coming back for more. 

That blend of consistency and unpredictability?

It isn’t luck; it’s  strategy.

This kind of purposeful innovation is exactly what keeps a company not just afloat, but also thriving in hyper-competitive industries… and if you’re looking for a business that has mastered this art, one name stands tall: 

Costco Wholesale Corporation!

Founded in 1983 in Seattle, Washington, Costco has grown into one of the world’s largest retail giants, operating on a membership-only warehouse club model. 

Unlike traditional retailers that lure customers with endless product variety, Costco thrives on limited selection, bulk deals, and razor-thin markups. 

Today, it serves millions of members across the globe, with revenues that rival and even surpass other retail behemoths.

However, Costco isn’t just about cheap prices or oversized packs of goods. The company is also about delivering consistent value, trust, and innovation in ways that go  beyond  the ordinary.

Costco emerged at a time when discount retailing was already gaining momentum. What set it apart was its membership structure, which created both exclusivity and loyalty. 

Basically, members weren’t just shoppers—they were stakeholders, invested in the Costco experience through annual fees that provided significant recurring revenue.

Over the decades, Costco expanded globally, opening warehouses in North America, Europe, and Asia, all while sticking to its simple, no-frills formula:  efficiency ,  volume , and  value . 

The company didn’t pour money into flashy displays or marketing campaigns. Instead, it built its reputation through word-of-mouth, employee satisfaction, and customer trust.

What’s more? 

Costco’s impact goes well beyond its warehouses by:

• Redefining Value: By capping markups at around 14%, Costco reshaped consumer expectations on pricing, forcing competitors to rethink their models.
• Championing Private Labels: Its  Kirkland Signature  brand has become a gold standard in private labels, often matching or exceeding national brands in quality.
• Implementing Employee-Friendly Practices: Costco pays higher wages and provides better benefits than many retail peers, proving that profitability and employee well-being can go hand in hand.
• Making Sustainability Moves: From sustainable seafood to renewable energy initiatives, Costco has taken steps toward responsible sourcing and environmental stewardship.
• Utilizing The “Treasure Hunt” Economy: By rotating limited-time items, Costco keeps shopping an adventure, inspiring a model that many retailers have since tried to replicate.

Connecting Costco to Tenet 5 of Return Driven Strategy: Innovate Offerings

Professor Joel Litman  and  Dr. Mark L. Frigo ’s Return Driven Strategy (RDS) identifies Tenet 5 as  “Innovate Offerings.” 

This is all about continually evolving what you deliver to better meet unmet needs—not just changing for the sake of novelty, but innovating with  purpose.

Costco exemplifies this tenet in several powerful ways:

• Innovation Beyond Products

  Innovation at Costco isn’t limited to selling new items. It happens in the product, service, and psychological layers of the offering.

  • Product: Bulk-sized goods, Kirkland Signature, and seasonal surprises.
  • Service: Membership perks, travel packages, and auto programs.
  • Psychological: The thrill of the “treasure hunt,” the exclusivity of membership.
• Balancing Consistency with Surprise

  Members know they can always count on low prices and quality—but Costco spices things up by rotating unique, high-value items. This balance between reliability and excitement keeps the brand fresh while strengthening trust.

• Kirkland Signature as a Masterstroke of Innovation

  By building a private label that competes head-to-head with premium national brands, Costco didn’t just reduce costs; it redefined what private labels could mean for consumers: Quality, trust, and value in one package.

• Experimentation and Refinement

  Costco runs disciplined experiments with products and services. What works stays (think Kirkland vodka rivaling  Grey Goose), and what doesn’t quietly disappears. This lean experimentation is a hallmark of RDS’ Tenet 5.

• Sustainable Innovation

  Costco adapts to changing consumer values by incorporating sustainability through offering responsibly sourced seafood, organic options, and renewable energy practices. This ensures offerings evolve with the market, without losing the brand’s identity.

The BIGGER Lesson

Clearly, Costco isn’t just a warehouse; it’s an innovation engine disguised as a retailer. 

By continually evolving its offerings while staying true to its promise of value, it has mastered Tenet 5 of Return Driven Strategy.

The lesson for businesses? 

Innovation doesn’t always mean inventing the next “iPhone.” 

Sometimes, it’s about finding smarter, simpler, and more meaningful ways to meet customer needs—whether that’s through a bulk pack of avocados, a high-quality private label, or the thrill of finding a kayak in the middle of a grocery run.

Always take note of these insights! 

… and if you’re looking to gain a better understanding of Return Driven Strategy and Career Driven Strategy, we highly recommend checking out  “Driven”  by Professor Litman and Dr. Frigo.

Click  here  to get your copy and learn how this framework can help you in your business strategies and ultimately, in ethically maximizing wealth for your firm.

Hope you found this week’s insights interesting and helpful.

Stay tuned for next Tuesday’s Return Driven Strategy!

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