The Costco Effect

Reading this interesting post led me to John Van Horn’s always provocative (for people who think parking can be provocative) blog. There, in a Shoupian riff on inefficient government-set minimum parking requirements (for so-called “free parking”), he mentioned an interesting behavioral twist he dubbed the “Costco Effect” (implicit in this is the assertion that Costco somehow has parking lots that tend to fill up quickly; I don’t know if Costco as a policy builds smaller lots than, say, Wal-Mart):

As I read through the original report one comment stood out. It mentioned that by having fewer parking spaces, even in smaller cities and towns, people would begin to change their habits and, for instance, make fewer trips to the store and stock up when they did go. This is sort of like leaving a pile of stuff at the bottom of the stairs and then carrying it up when you got a complete load rather than making numerous hikes up and down.

It occurred to me that Costco is a perfect laboratory to test this hypothesis. Out local Costco, in an area of Culver City near Venice and Marina Del Rey, is among the top ten grossing stores in the chain. It’s always busy and if you don’t get there when the store opens, its parking lot is always full. Although I find going to Costco is fun, just to look at all the “stuff” and revel at the quality of the meat and variety of wine, there is no way in hell I’m going to fight that parking lot simply to wander as I would at the mall.

Hence, R and I have a list and when we discover items we need that would be a good “Costco” buy rather than buying it at the “store” (toilet paper and vitamins for instance), we put them on the list. When the list is of a certain length. We get up early on Saturday, drive to the store, stake out a parking spot and get in line with the 300 or so others that are jockeying shopping carts waiting for the big red doors to roll up.

Our behavior has been altered by the lack of parking. Costco’s sales aren’t. This is a rocking store, among the top in the chain. They have limited parking, but it doesn’t seem to hurt business. And we smart shoppers still buy the same amount we always would. However , dare we say it, the parking, or lack of it, has caused us to think more clearly about how we go about shopping.

This is an interesting corollary to another “Costco Effect” that’s been identified by
Michael I. Norton of Harvard Business School and Leonard Lee of Columbia Business: Essentially, that people spend more at discount clubs with fees than those without. I’ll leave it up to you to draw any linkages between the two effects.

This entry was posted on Monday, August 31st, 2009 at 7:42 pm and is filed under Parking. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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Traffic Tom Vanderbilt

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August 2009

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