The Costco Effect

Reading this interesting post led me to John Van Horn’s always provocative (for people who think parking can be provocative) blog. There, in a Shoupian riff on inefficient government-set minimum parking requirements (for so-called “free parking”), he mentioned an interesting behavioral twist he dubbed the “Costco Effect” (implicit in this is the assertion that Costco somehow has parking lots that tend to fill up quickly; I don’t know if Costco as a policy builds smaller lots than, say, Wal-Mart):

As I read through the original report one comment stood out. It mentioned that by having fewer parking spaces, even in smaller cities and towns, people would begin to change their habits and, for instance, make fewer trips to the store and stock up when they did go. This is sort of like leaving a pile of stuff at the bottom of the stairs and then carrying it up when you got a complete load rather than making numerous hikes up and down.

It occurred to me that Costco is a perfect laboratory to test this hypothesis. Out local Costco, in an area of Culver City near Venice and Marina Del Rey, is among the top ten grossing stores in the chain. It’s always busy and if you don’t get there when the store opens, its parking lot is always full. Although I find going to Costco is fun, just to look at all the “stuff” and revel at the quality of the meat and variety of wine, there is no way in hell I’m going to fight that parking lot simply to wander as I would at the mall.

Hence, R and I have a list and when we discover items we need that would be a good “Costco” buy rather than buying it at the “store” (toilet paper and vitamins for instance), we put them on the list. When the list is of a certain length. We get up early on Saturday, drive to the store, stake out a parking spot and get in line with the 300 or so others that are jockeying shopping carts waiting for the big red doors to roll up.

Our behavior has been altered by the lack of parking. Costco’s sales aren’t. This is a rocking store, among the top in the chain. They have limited parking, but it doesn’t seem to hurt business. And we smart shoppers still buy the same amount we always would. However , dare we say it, the parking, or lack of it, has caused us to think more clearly about how we go about shopping.

This is an interesting corollary to another “Costco Effect” that’s been identified by
Michael I. Norton of Harvard Business School and Leonard Lee of Columbia Business: Essentially, that people spend more at discount clubs with fees than those without. I’ll leave it up to you to draw any linkages between the two effects.

This entry was posted on Monday, August 31st, 2009 at 7:42 pm and is filed under Parking. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

6 Responses to “The Costco Effect”

  1. John Says:

    Tom, loved the book. Also love Costco. It sounds like Costco understands its customers very well – they don’t want the occasional visitor who just needs one box of cereal to clog up the lines. Could part of the attraction also be the apparent allure of being somewhere that also looks attractive to others? For example, I hesitate to go to restaurants that have very few cars in the lot. On the other side, even though the day after Thanksgiving, Black Friday, is crowded, it seems as if the crowds are drawing even more people. Maybe people see full parking lots and crowded spaces as exciting – everyone else is here, let’s party!

  2. Vincent Clement Says:

    As an urban planner, I have always believed that instead of requiring a minimum number of parking spaces, we should be limiting parking by having a maximum number of parking spaces.

    Our Official Plan encourages public transit and other alternative means of travel (ie, walking and bicycles) but our zoning by-law continues to mandate minimum parking, even in areas where it makes no sense.

    People will adjust their habits.

  3. Victoria Gerken Says:

    Love Costco. Huge parking lots in Colorado so never a problem getting a spot. Sometimes they run out of chicken salad but that’s maybe a complaint for a different blog . . .

  4. Brent Says:

    I cannot speak specifically for Costco, but a few things to note:

    1) Typically big-box retailers have a standard parking rate that they want to achieve. Usually this is large enough that at most stores (if not all) there will always be parking available, preferably at least 10-15% of spaces will be vacant. Occasionally they will try and argue for lower parking rates, either because the rate specified in the municipal by-law is outrageously high, or because they have a constrained site and they can’t fit the municipally required parking (but presumably they can meet their corporate standard rate).

    2) The article says the Culver City store is one of the busiest (for example, because of a high density of population within its trade area). Even if Costco is designing for most stores to have sufficient parking, there will be outliers that may be at or slightly above parking capacity.

    3) There is a difference between “not having any parking” and “not having any parking within, say, 200 feet of the entrance”. A lot of time, people say the former when they really mean the latter, and in that case it doesn’t matter if you add more parking because the additional parking is usually even less convenient and goes unused.

    4) Related to the above, Costco is different from other major big box chains (Wal-Mart, Home Depot, Lowe’s etc.) in that they seem to like to have the entrance/exit in the corner of the store, rather than in the centre of the front. In theory, this should permit more spaces within a certain radius of the entrance, but it does not always work that cleanly. In the Culver City site, for example, part of this radius is taken up by an adjacent store. This can make parking appear to be more constrained or lead to it being used inefficiently.

    5) There are plenty of other things that make shopping at Costco (or Ikea, or Wal-Mart supercentres for that matter) a pain in the ass even if parking is not an issue… having to trek around a 120,000-foot store and sit in line at the cashier, to name a couple examples. It has to be worth my time and effort to go to Costco rather than a smaller store that is more convenient to get to and shop at — and that usually means large purchases. If most Costco shoppers are of that frame of mind, it becomes a self-fulling — longer time to check out and longer cashier queues, and lower parking turnover leading to more crowded parking.

  5. Dolores Carey Says:

    If you measure the size of Costco parking spaces, you will find them larger. (“Costco Sized”)
    You car is unlikely to be nicked or scratched by a fellow shopper loading their purchases into their vehicle.

  6. auto traffic avalanche Says:

    This may sound strange but I have never been to Costco. I’ve always been to Sam’s club which predominates here in the south (TN). About the parking things, one thing is for sure, we have not stopped spending no matter if parking is limited or unlimited.

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