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This is why Costco only charges $5 for a rotisserie chicken
If you’ve ever set foot in a Costco warehouse, you’re probably familiar with the irresistible aroma of their famous rotisserie chickens. Priced at just $5, these plump and flavorful birds have become synonymous with incredible value. But have you ever wondered how Costco can offer such a delicious and filling meal at such a remarkably low price? In this article, we delve into the factors that contribute to Costco’s strategy and uncover the secrets behind their $5 rotisserie chicken.
The Bird Flu Crisis
In 2015, the U.S. poultry industry faced a significant challenge with the outbreak of avian influenza. This devastating epidemic resulted in the loss of countless birds and created uncertainty in the marketplace, causing prices to skyrocket. During this tumultuous time, Costco made a bold decision. While other retailers raised their chicken prices to compensate for the turmoil, Costco chose to absorb the additional costs. Richard Galanti, Costco’s Chief Financial Officer, explained that they were willing to sacrifice a staggering $30 to $40 million in gross margin annually to maintain their $4.99 price point. This commitment to delivering value to their customers is a defining characteristic of Costco’s business philosophy.
Driving foot traffic
The $5 rotisserie chicken serves a more important purpose for Costco than simply providing an affordable meal option. It acts as a powerful magnet that draws customers into their warehouses. The Wall Street Journal reported that the strategic placement of rotisserie chickens in the back of the store serves as a catalyst for customers to explore the aisles and discover other enticing bargains. By enticing shoppers with the promise of a delicious and affordable entree, Costco successfully encourages them to pick up additional items during their visit. According to Don Fitzgerald, vice president of merchandising at Kroger-owned Mariano’s, the goal is to turn a simple chicken purchase into a more substantial shopping experience. Customers who come in for the chicken may end up leaving with a salad, a bottle of wine and a cart full of other profitable items, keeping Costco’s overall sales strong.
Investing in efficiency
To maintain its low prices, Costco continually looks for ways to streamline operations and reduce costs. They have invested in larger, more efficient ovens and innovative containers that use less plastic, resulting in improved productivity and savings. Additionally, in 2018, Costco made a significant investment of approximately $300 million in a large chicken farm in eastern Nebraska. This strategic move allows them to take advantage of the region’s abundant corn and soybean production, which significantly reduces feed costs. With plans to build hundreds more chicken houses, Costco is committed to increasing its self-sufficiency and keeping production costs low over the long term.
Managing freshness and quality
One might wonder why Costco prices its rotisserie chickens lower than its uncooked counterparts, given the additional effort and resources required to cook them. The answer lies in the perishable nature of cooked chicken. Time Money explains that cooked chickens have a shorter shelf life than raw chickens. To ensure a steady flow of sales and minimize waste, Costco maintains an attractive price point that keeps rotisserie chickens in high demand. This approach not only prevents excess inventory, but also guarantees that customers can enjoy a freshly cooked, juicy chicken every time they visit Costco.
A tradition of value
The $5 rotisserie chicken is not the only product Costco is committed to offering at incredibly low prices. Its legendary jumbo hot dog and drink combo, priced at $1.50 since the mid-1980s, exemplifies its commitment to providing value to its members. By offering these unbeatable deals, Costco aims to drive foot traffic and create a compelling reason for customers to visit their stores regularly. While Costco’s locations are not always conveniently located, the promise of a quick, affordable meal or ready-to-serve dinner makes the trip worthwhile for their loyal customers.
In conclusion, Costco’s $5 rotisserie chicken is a testament to their unwavering commitment to providing exceptional value. By absorbing additional costs during industry crises, strategically driving traffic, investing in efficiency, managing freshness, and maintaining low prices on other popular items, Costco has solidified its reputation as a leader in providing affordable and quality products. So the next time you enjoy the delicious flavor of a Costco rotisserie chicken, remember that it is not only a fantastic deal, but also a testament to Costco’s commitment to customer satisfaction.
FAQS
Why is Costco’s rotisserie chicken so cheap?
Costco is committed to delivering exceptional value to its customers. They are willing to absorb additional costs and maintain a low price point to offer affordable and delicious rotisserie chickens.
Is the quality of Costco’s $5 rotisserie chicken compromised?
No, the quality of Costco’s rotisserie chicken is not compromised. Despite the low price, Costco ensures that the chicken is flavorful, juicy and of high quality. Customers can enjoy a delicious meal without sacrificing flavor or freshness.
How does Costco manage to keep the price of its rotisserie chicken lower than that of uncooked chicken?
Cooked chicken has a shorter shelf life than uncooked chicken. By pricing its rotisserie chickens attractively, Costco maintains high demand, minimizes waste and ensures that customers can enjoy freshly cooked chickens every time they visit.
Why does Costco put the rotisserie chickens in the back of the store?
The strategic placement of rotisserie chickens in the back of the store is a tactic to increase foot traffic and encourage customers to explore the aisles. By enticing shoppers with an affordable entree, Costco increases the likelihood that they will pick up additional items during their visit.
Does Costco make a profit selling $5 rotisserie chickens?
While the profit margin on individual $5 rotisserie chickens may be low, Costco’s business model focuses on generating revenue from total sales. By attracting customers with the irresistible offer of a $5 chicken, Costco encourages them to purchase other high-margin items, ensuring a profitable shopping experience.
What other products does Costco offer at exceptionally low prices?
Yes, Costco is known for offering other products at remarkably low prices. Their jumbo hot dog and drink combo, priced at $1.50, is another example of their commitment to providing value to their members.