After a moment’s thought, most of us would say that Target Corp.’s (NYSE: TGT) 1,948 U.S. stores, which far outnumber Costco Wholesale Corp.’s (NASDAQ: COST) 591 stores, must rake in more revenue than Costco. We would be wrong. Costco’s revenue for its most recent fiscal year topped $242 billion to Target’s $108 billion.
Target, however, is more profitable. Its gross margin last year was more than 26% compared to Costco’s 12.4%, and net income margin at Target was 3.12% compared to Costco’s 2.6%. Costco has to sell a lot more and the way to do that is with low prices. (Check out: Costco Celebrates 40 Years of Savings: The Evolution of Bulk Shopping.)
One last difference between the two stores is that Costco requires a membership fee of $60 or $120, while Target requires no such fee. Instead, the company offers a store credit card (RedCard) that rewards customers with a 5% discount on purchases. Costco’s $120 membership gives its customers a 2% rebate at the end of the year.
Where Costco Beats Target on Price
One issue when comparing product prices between stores is that Costco typically sells only large quantities. We’ve compared unit costs for several store brands of typical household products. Target’s RedCard discount is not figured into the prices.
Dishwasher Detergent
- Costco price: Kirkland Signature Platinum, 115 pacs: $13.99
- Target price: Up & Up, 78 pacs: $12.99
Costco’s Kirkland brand costs about 12 cents per pod. Target’s Up & Up brand costs nearly 17 cents per pod. This higher-package-price-but-lower-unit-price comparison is not uncommon when matching large packaging units to smaller ones. Costco thrives on its customers’ belief that bigger is cheaper.
Kitchen Aid Stand Mixer
- Costco price: 6-qt bowl size, lift stand: $399.99
- Target price: 5.5-qt bowl size, lift stand: $409.99
Costco offers just one model of the popular Kitchen Aid brand. The company just ended a special price promotion of $299.99 for Costco members only. (Many Costco items are available to non-members.)
Men’s Flannel Shirts
- Costco price: Weatherbeater brand: $15.99
- Target price: Wrangler brand: $34.99
Costco does not have its own clothing brands, so we’ve compared two national brands. Target owns house brands Goodfellow & Co. and Hope & Henry. Comparable Goodfellow & Co. flannel shirts range in price from $25.00 up.
Air Purifier
- Costco Price: Shark MAX, NanoSeal HEPA: $249.99
- Target Price: Shark MAX, NanoSeal HEPA: $279.99
The comparison here is not exactly apples to apples. The Costco version is rated to provide coverage for up to 1,350 square feet. The Target version is rated to cover up to 1,200 square feet.
Cotton Sheets
- Costco price: Kirkland Signature 680 Thread-Count Queen Set: $79.99
- Target price: Casaluna 300 Thread-Count Queen Set: $85.00
Casaluna is a Target-owned brand created in 2020. Thread counts typically indicate softness and smoother textures, but that is a matter of personal choice. Both sets come with a flat sheet and a fitted sheet. The Kirkland set includes 4 pillowcases; the Casaluna set includes 2.
Bluetooth Speaker
- Costco price: Bose Soundlink Flex: $129.99
- Target price: Bose Soundlink Flex: $149.99
This national brand speaker is waterproof, wireless, and has a 12-hour fully charged playing time. In all respects, the speakers appear to be identical. However, Costco’s version is available only to Costco members.
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