Costco CFO Richard Galanti loves talking about that hot dog.
And it makes sense: $1.50 for a hot dog and a 20oz soda is a great deal and an even better sound bite. CNBC Make It has covered it many, many times.
However, the headlines don't totally reflect a demographic who experts say actually shops at Costco: the highly affluent.
It's hard not to notice Costco's general cachet in the world.
The warehouse chain's voracious fanbase is rivaled perhaps only by Trader Joe's. On Tiktok, #costcofinds has 2.6 billion views while #samsclubfinds has just 338.7 million views. In one Tiktok, a young woman is shown shopping the best Asian Items sold at Costco. The video has 4.9 million views.
Costco also has one of the most highly rated store brands in the country, Kirkland Signature.
Brands are elevated by the customers to whom they appeal, and rich people love Costco.
Costco shoppers, on average, are younger and have higher incomes than those of its primary competitor, Sam's Club, according to an analysis from Coresight.
You could attribute some of the income difference to the cost of Costco's membership — it's $10 more per year than Sam's Club's. However, experts say other factors add to the warehouse chain's appeal among higher income adults.
CNBC Make It reached out to both Costco and Sam's Club. Costco representatives said the warehouse club has no comment. Sam's Club has yet to respond.
'It's not random'
Location is key, says Simon Blanchard, an associate professor at Georgetown University who studies marketing strategy and research.
"The choice of where Costco and Sam's Club locate stores is probably based on accessibility and income —it's not random," says Blanchard, whose wife is a Costco member.
Costco has 584 locations, and 23% of them are in California. The California cities that house the most Costco locations include San Diego and San Jose, both of which boast sizeable household incomes.
According to 2022 census data, San Diego's household median income is $89,457 and San Jose's is $125,705.
The state with the second-most Costco locations is Texas, followed by Washington.
Sam's Club's 600 locations are a bit more evenly distributed throughout the country but 14% are in Texas.
It has the most locations in Houston and Dallas, which have median household incomes of $69,021 and $56,019, respectively. Florida has the second-most Sam's Club locations, followed by California.
Still, California has 133 Costco locations but only 29 Sam's Clubs.
Buying in bulk is for rich people
Buying in bulk, typically, is a rich people thing, says Mike Palazzolo, an assistant professor of marketing at University of California, Davis.
Palazzolo studies how income affects consumer behavior and spending, especially as it pertains to buying in bulk. He is also a Costco member.
Spending a lot of cash up front is difficult. You have to be very careful with your money if you have little of it.Mike Palazzoloassistant professor of marketing
Low-income households tend not to buy things before they need to, he says, even if it would save them money in the long run.
"Spending a lot of cash up front is difficult," he says. "You have to be very careful with your money if you have little of it."
Costco is 'more attractive' to brands that value affluent customers
Although both warehouse clubs sell similar products, Costco's big-ticket items, like electronics or appliances, tend to be higher priced, says Zain Akbari, an industry analyst at Morningstar who is both a Sam's Club and Costco member.
For example, the cheapest laptop on Costco.com is $270. Its Sam's Club counterpart is $200.
I think that Costco's reputation for serving that somewhat higher-income demographic makes the chain more attractive to brands that target those shoppers as well.Zain Akbari
Costco has merchandising relationships with brands that sell higher priced items, Akbari says.
"I think that Costco's reputation for serving that somewhat higher-income demographic makes the chain more attractive to brands that target those shoppers, as well, creating something of a self-fulfilling cycle," Akbari says.
Sam's Club is part of the Walmart family, so their merchandising relationships are with vendors who want to appeal to the Walmart customer base, which is lower or middle income.
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