Discount retailer Costco (Nasdaq: COST) is giving new meaning to the term "big box" retailer.
While it's not exactly a product you'd buy in bulk, Costco is test-marketing the sale of coffins at two Chicago-area stores. The line of six caskets will be offered by Universal Casket Co. and is made of 18-gauge steel, generally considered medium weight for caskets. Priced at $799.99, they come in a variety of colors and are delivered to your funeral home within 48 hours.
Costco doesn't really have an aisle of death with actual caskets on display. Rather, it's a kiosk with pictures of the models and samples of materials.
How might a big discounter such as Costco affect the funeral home industry? Hidden Gems pick Alderwoods Group (Nasdaq: AWGI), which runs a chain of funeral homes and services, acknowledges that competition from discounters could pose a threat to margins, but they have come and gone in the past without creating a lasting impact. Already you can buy caskets directly from manufacturers, in funeral supply stores, as well as over the Internet. Costco, though, is the first general merchandise company to enter the market.
Nor are your choices limited anymore to the simple dichotomy of burial or cremation. Now, instead of residing underground or on the mantel over the fireplace, you can have your remains recycled into a work of art, turned into a carbon-based artificial diamond, or incorporated into an artificial coral reef. All at a cost, and none particularly cheap.
Earlier this year, Selena Maranjian outlined a number of ways you could save on funeral costs, including shopping around for low-cost funerals. She noted that some of the more expensive caskets offered by funeral homes may have cost them just $700. A Costco casket would indeed be like buying wholesale. However, when it comes time to actually purchase one, is the typically bereaved relative going to think of Costco first?
Of course, the best time to think about death and dying is before it is upon you. Setting up a will so that you don't die intestate, expressing your wishes, and actually discussing with your loved ones how you want preparations for your eternal rest to proceed can remove a lot of the stress and anxiety associated with funeral planning.
Some in the industry don't look kindly on Costco's entry into the market. They say that by removing the casket profit from the operator's bottom line, other costs will have to increase. They also note that funeral homes offer some caskets that are even lower-cost than those offered by Costco. The field has narrowed considerably in recent years, with death-care being concentrated in the hands of Alderwoods, Service Corp. (NYSE: SRV), and Stewart Enterprises (Nasdaq: STEI), among others.
It has been innovations such as putting coffins next to bulk coffee that has allowed Costco to return more than 11.6% since Tom Gardner first picked it for the Motley Fool Stock Advisor newsletter in the May 2002 issue compared with a return of -1.6% for the market over that same time.
Costco has no timetable for evaluating the test-marketing but could roll out the service to more locations if it is found profitable.
Here are some additional resources on funerals and estate planning:
Fool contributor Rich Duprey has a complete estate plan in place. He does not own any of the stocks mentioned in this article.
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