If you’re a fan of chicken, you’re not alone. According to the National Chicken Council, the average American consumed over 100 pounds of chicken in 2022. When it comes to ready-to-eat rotisserie chicken, Costco is the go-to source for many consumers. In 2021, the warehouse store sold a staggering 106 million birds.
Costco has managed to keep the price of its rotisserie chicken at $4.99 for nearly 30 years. Despite inflation and economic downturns, the price has remained the same, with only a brief $1 increase during the Great Recession. So why is Costco so committed to offering this bargain poultry? As you’ll soon discover, it’s all part of a larger strategy to drive membership and sales.
Costco Hopes You Buy More Than Just a Chicken
Costco’s rotisserie chickens, sold under the Kirkland brand name, are priced at a below-market rate and are considered a loss leader. The tactic is used to attract new or existing customers who will hopefully purchase additional, more profitable products. That’s why these chickens are located at the back of the store. Costco planners are hoping that while you’re on your way to grab dinner, you’ll get sidetracked and wind up purchasing other items as well.
Like other stores, Costco’s loss leader strategy is not without its challenges. Cherry pickers, who only purchase the loss leader or other deeply discounted items, can be a nemesis to the stores. However, Costco’s strategy of offering high-quality products at low prices has proven successful, and the company continues to expand its offerings.
In addition to the rotisserie chickens, Costco offers a wide range of products, including electronics, jewelry, and even above-ground swimming pools. The store’s layout is designed to encourage customers to explore the aisles and discover new products. By offering a range of products at low prices, Costco hopes to become a one-stop-shop for its customers.
Outside of Costco, loss leaders are frequently apparent around the holidays, such as Black Friday specials. Regular grocery stores also employ loss leaders in the form of inexpensive essential items, such as milk or eggs. These items are typically placed in the back of the store so customers have to pass by various other items in transit to buying these staples.
Rotisserie Chicken Isn’t Costco’s Only Loss Leader
Costco may be famous for its $4.99 rotisserie chicken, but it’s not the only product the warehouse giant is willing to take a loss on to lure customers in.
In fact, Costco’s food court offers a ¼-pound all-beef hot dog and 20-ounce soda pairing for just $1.50. This makes it another famous edible loss leader.
Costco’s strategy of offering loss leaders like these may seem counterintuitive, but it’s actually a key part of their business model. By offering incredibly low prices on select items, Costco is able to attract customers who may not have otherwise shopped at their stores.
Once they’re in the door, those customers are more likely to make additional purchases. This can help offset the losses from the loss leaders.
Of course, this strategy only works if Costco is able to keep those customers coming back. Fortunately for the company, they have an incredibly high renewal rate for their members.
In fact, Costco boasts a 90% renewal rate from its members worldwide, which is even higher in the United States.
If you’re interested in trying out Costco’s famous loss leaders for yourself, you’ll need a membership to shop at the warehouse. A standard Gold Star membership costs $60 per year.
But, there are a few ways to shop at Costco without a membership if you’re not quite ready to commit.
