At a California Costco Wholesale (NASDAQ:COST) store recently, a fight broke out after an older man scolded a younger one for taking too many Nutella samples, and the young man responded by hitting the older one in the face.
The ugly incident underscores one of the surprising draws of the warehouse retailing giant: free samples. Costco has taken the age-old merchandising practice and made it a trademark of its retail experience. The giveaways have become such a staple of a store visit that an unwritten etiquette has grown to accompany taking the samples, including prohibitions against hovering over the counter before the samples get put out, taking too many, or picking over the back of the samples attendant.
The power of samples
Everyone loves free food, and Costco samples are widely acknowledged by its members as being their favorite part of shopping there.
My cheat meal = Costco samples— Jbazzi (@JBazzi1) September 20, 2015
Costco free samples and chill— Ava Sectomy (@rawsquih) September 21, 2015
WHEN YOUR PARENTS GO TO COSTCO AND BRING YOU BACK FREE SAMPLES😂😂😭— queen bea (@asianpenguin_) September 21, 2015
Not only is it a win for customers, but it's a great business driver as well. Samples have been shown to drive sales increases by as much as 2,000%, and it's a much better promotional tool than nearly any other at getting consumers to purchase things they ordinarily would never have considered.
Costco's sample tables are actually outsourced to a company called Interactions, which staff the tables and handle the vendor relationships. Some of the most successful categories for sampling include frozen pizza, makeup, beer and wine, and packaged cheese, which have seen sales increases ranging from 71% to 600%. Psychologists explain that sampling succeeds in large part due to reciprocity -- the idea that the gift of a free tasting should be returned with a purchase. Samples can drive purchase rates above 50% for some items like yogurt.
The samples strategy also ties into Costco's food court deals with offers like a hot dog and a soda for $1.50, cheap pizza, or the $5 rotisserie chicken. All of those deals engender a positive feeling about Costco, especially the samples, which create a sense of fun about a visit to the store, and those experiences are a major part of what makes Costco such a strong brand.
Finally, the success of the sampling program makes Costco a highly desirable partner for food companies looking to launch or grow a product.
The advantage over Amazon
As an online-only retailer, Amazon is unable to match many of the tactics Costco has used to establish customer loyalty. All of its purchases take place over the web, and there are no free samples online. Although Amazon's Prime membership program is similar to Costco's in many ways, and both retailers are known for offering rock-bottom prices, Amazon can't deliver the joy of Costco's samples or the satisfaction of a hot dog and a soda for $1.50.
Even as consumers slowly shift to shopping online, those advantages make Costco the best positioned brick-and-mortar retailer to withstand the growth of e-commerce. And that's important for Costco since its buy-in-bulk model is not so well suited to online shopping.
Amazon's sales will continue to grow as the company speeds up its delivery and stuffs its Prime loyalty service with more benefits, but Costco's success with its samples program is a reminder that a bricks-and-mortar retailer that can provide an outstanding in-store experience will be best positioned to grow in the mobile era.
Jeremy Bowman has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon.com and Costco Wholesale. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.