This Is the Cheapest Item Sold at Costco

With inflation running rampant, it often feels like everyday essentials are growing more and more expensive. Costco's business model is built on keeping its prices low. You can even find great buys under $20. And the secret behind it all can be found in one of its cheapest items: Costco bananas. While the average price has skyrocketed the past year, here is how Costco has been able to continue keeping its prices low.

Going bananas!

The price can vary depending on different regions and seasons, but when I made a recent visit, Costco was selling a bundle of bananas (roughly 3 pounds) for $1.39. At about $0.46 a pound, it is the cheapest item that I found you can buy at Costco. In comparison, you'll pay $0.58 per pound at Walmart, and $0.69 per pound at Ralphs, a noticeable difference in cost.

The average price of bananas the past seven years hovered around $0.58. As inflation hit 40-year highs, the average cost hit $0.65 this past year. With prices everywhere going up, how has Costco continued to keep its prices so low?

Buying in bulk

One of Costco's main cost-saving techniques is buying in bulk. By purchasing products in large batches, Costco can negotiate better prices with its suppliers. This leads to significant savings for both the retailer and its customers, including its bananas. And with more than 850 warehouses worldwide, Costco wields significant buying power and can secure large volumes at lower prices.

Private label branding

Another tactic Costco uses to keep its prices low is through its private label brand, Kirkland Signature. By developing its exclusive Kirkland Signature line, Costco can offer more affordable alternatives to name-brand products without sacrificing quality.

No-frills warehouse

The Costco store layout is also a crucial factor in keeping its prices low. Costco warehouses are designed without the overhead of traditional grocery stores, which have high marketing and advertising costs. For example, the store shelving, product placement, and signage are all designed for practicality and efficiency rather than aesthetics. This allows Costco to lower its operating costs and pass the savings on to customers.

Limited selection

Unlike traditional grocery stores that offer a wide selection of various brands and products, Costco stocks a smaller selection of products. Costco carries about 4,000 SKUs (stock keeping units), compared to the 30,000 found at most supermarkets. Offering fewer products means that Costco can focus on bulk sales and better pricing on frequently purchased items.

Costco rewards

If you want to shop at Costco and use a credit card, you will need at least one Visa credit card. Costco offers members the Costco Anywhere Visa® Card by Citi, which allows cardholders to earn Costco cash rewards anywhere Visa is accepted. You can earn:

• 4% on eligible gas and EV charging for the first $7,000 in charges per year and then 1% thereafter
• 3% on restaurants and eligible travel
• 2% on purchases from Costco and Costco.com
• 1% on all other purchases

This card doubles as a membership card. In addition to its rewards, Costco's card also offers certain advantages, such as complimentary purchase protection, travel insurance, no foreign transaction fees, and extended warranty coverage.

Costco is known for its excellent value and pricing on everyday products, and the bananas are just one example of how the warehouse club keeps its prices low. By buying in bulk, creating its private label brand, and using plain packaging and a no-frills warehouse design, Costco can offer quality products at a lower price point. So, the next time you visit Costco, be sure to grab a bundle of bananas and enjoy a quality product at an affordable price!